26th Oil Show, a Step for Development

Ali Forouzandeh
Director General of Public Relations

Iran's oil industry has always been in a defense position against oppressive sanctions over the past few decades, but thanks to active planning against the sanctions, today Iran has become a formidable ecosystem of capable companies in various parts of the upstream and downstream oil industry for major oil contractors, exploration and production companies, oil and gas field developers, service enterprises and manufacturers of sophisticated oil industry equipment, and is ready to embark on great cross-border and international projects thanks to the active energy diplomacy in the 13th administration.

This can be regarded a new step and a paradigm shift in the Iranian oil industry

Iran’s 26th annual Oil Show, the first one hosted by the 13th administration, was held while more than 1,200 local and foreign companies were in attendance. Due to the decline in the incidence of COVID-19 and the Petroleum Ministry’s focus on engaging local and knowledge-based companies, the exhibition received warm welcome. About 23 universities and research centers, more than 70 knowledge-based companies, startups, technology parks as well as scientific parks participated in the event, some of which have had global activities in the oil and gas sector.

On the sidelines of the exhibition, important programs were held, including a specialized workshop by Mohamed Hamel, secretary general of Gas Exporting Countries Forum (GECF); and OPEC’s specialized seminar with senior managers and foreign experts in attendance.

Minister of Petroleum JavadOwji said Iran had activated its energy diplomacy particularly at the level of Latin American nations. He said the ministry would start operating more than 40 new projects, worth $30 billion, with priority given to local firms in equipment supply. During the exhibition, about 100 agreements and memorandums were signed betweenstate and private companies. 

As part of energy diplomacy, Minister Owji met with foreign ambassadors and representatives of foreign companies to discuss joint projects. Iranian petroleum industry officials welcomed foreign investment in Iran’s oil sector, saying Iran’s oil industry remained open to foreign investment. Given the fact that Iran sits atop the world’s largest oil and gas reserves combined, investors can be assured of a good rate of return on investment.

Iran proved during sanctions that it can enhance its oil and gas production capacity. Iran’s gas production capacity has exceeded 1 bcm/d, while the country’s oil output capacity has reached 3.8 mb/d. Furthermore, Iran’s refining capacity stands at 2.2 mb/d and Iranian petrochemical plants can now supply 90 million tonnes a year of products.

As Iran’s upstream oil and gas industry needs to attract $160 billion in investment over 10 years, local and foreign investors are faced with a unique opportunity in this sector.

GECF Secretary General Optimistic About Gas Market Future

The recently-appointed Secretary-General of the Gas Exporting Countries Forum (GECF), Mohamed Hamel, was officially invited by the OPEC &Int’l Energy Division of Iran’s Petroleum Ministry to attend the inauguration ceremony of the 26th International Oil, Gas,Refining& Petrochemical Exhibition, which was held 13-16 May 2022. The GECF Secretary-General tells Iran Petroleum in an interview thatworld gas markets will remain stable despite Russia-Ukraine tensions, but cautions about possible disruption in global gas supply. He also shares his views about short- to long-term outlook of natural gas.

The following is the full text of the interview Mr.Hamel gave to “Iran Petroleum”:

Mr.Hamel!It is a great pleasure to have the chance to interview you. As you are fully aware, the ongoing tensions between Ukraine and Russia have affected world energy markets. How do you see the short-term and long-term impacts of Kiev-Moscow tensions on the energy market?

Well, I thank you very much. I would like at the outset to reiterate how much I am pleased to be once again here in Tehran in this beautiful city, and under its sunny skies. So I’m really delighted to be here. I also had the opportunity yesterday (May 13) to visit the Oil and Gas, Refining and Petrochemical Exhibition. And I have had the opportunity to visit this exhibition a few years ago. And I was really impressed by the progress made by your esteemed country in the science and technology related to oil and gas. And this progress was made despite the economic restrictions that are imposed on your country. So, I would like at the outset to congratulate you for this remarkable progress. With regard to the recent developments and geopolitical tensions, I believe that it is still too early to assess all the implications of these events. Clearly, there are going to be lasting consequences in the short, medium and long-term. For natural gas, we may see a reconfiguration of the natural gas physical flows, likely more investments in natural gas upstream and downstream, expansion of LNG trade, an increase in supply costs, and maybe more importance given to investments in natural gas. We are, at the GECF, monitoring these developments and I hope Inshallah (God willing) that in our upcoming Global Gas Outlook, which is going to be published by the end of this year, we will be in a position to better assess what the future consequences are.

So you think that ongoing developments would be affecting GECF’s future decisions.

Well, you may be aware, the GECF is an intergovernmental organization comprising 19 member countries. I am optimistic that this organization will expand its membership in the future. The GECF member countries represent around 70% of global natural gas reserves. They contribute currently to around 55% of the supply of natural gas. So these are very important countries for the global energy systems in general, and natural gas systems in particular. The Global Gas Outlook, which we have published in 2022 [after it had been] finalized in December of last year, clearly shows that there is going to be a sharp increase in the demand for energy in general by around 29%, and natural gas in particular. And the contribution of the GECF member countries is expected to increase further to reach 48 to 50% of the global supply.

Is it in the mid-term or long-term?

In 2050. And so we remain very optimistic. We believe that natural gas demand will continue to increase and in fact natural gas will play a pivotal role in fuelling world economic growth, eradicating poverty, and also contributing to the protection of the environment, both at the local level in improving air quality in megacities, as well as at the global level in mitigating climate change.

So what do you think would be the biggest potential threat to the gas market in the future?

Well, I think for all energy systems, risks are stemming mainly from the economy, policies, technology and consumers’ choices. And all these drivers are, in fact, interdependent. But since you asked me about what the main threat is, I would say it is a risk, not a threat. And it is underinvestment. We have seen since 2014 that a combination of low natural gas prices as well as this, I would say, misleading narrative that natural gas is not consistent with climate change, as well as these Environment, Social, Governance (ESG) pressures on some financial actors and companies, exacerbated, of course, by the adverse impact of the coronavirus pandemic, has led to underinvestment. And we

have seen in the fourth quarter of last year the impact of such underinvestment with the sharp increase in natural gas spot prices. So, I believe that it is important to invest. Of course, our industry is very capital-intensive. It is upfront loaded with long lead times, and therefore it requires policy stability, predictability and support. And I think we need also from the GECF side to strengthen [the] role that natural gas can work in conjunction with renewables. Natural gas is a partner of renewables. So in conjunction with renewables, it will play an important role, in particular, in the developing countries. I believe that at the moment, coal-to-gas switching in the developing world is the most realistic and cost-effective mitigation pathway.

So what are the most important steps GECF members intend to take to enhancetheir role in the gas market?

Well, I will not speak on behalf of the member countries, but on behalf of the Forum. So clearly, and this has been underlined and stressed in the Doha Declaration of the sixth GECF Summit of Heads of State and Government, that the GECF as an organization needs to strengthen its advocacy role, improve its global visibility, expand its membership, improve and strengthen the dialogue with both producers and consumers, as well as international and inter-governmental organizations. And we have started to work on these priorities. Recently, we have established an ad hoc working group on the long-term strategy with the participation of all member countries to review the strategy of the organization and see what plan of action we need to put in place in order to satisfy the requirements, resolutions and the guidance we have received from the leaders’ summit held in February.

Oil prices have peaked overrecent months. Do you predict any energy transition, from oil and gas to other categories??

Well, in reality, it is spot gas prices that have increased. They have started increasing since July of last year and, as I said earlier, mainly due to underinvestment, the post-pandemic recovery, and other weather-related factors. But in fact, [the] prices of all commodities have increased, and not only natural gas. And it is maybe important to recall that since 2014, natural gas prices were very low and this was detrimental to exporting countries. But, I believe it is also detrimental for the gas companies and in the long-term, even for consuming countries. In addition, today, if spot prices are maybe relatively high compared to the past, long-term contract gas prices are much lower. In addition, if you look at the prices in the US, they are also not as high. So, this perception that natural gas prices are very high, in fact, is driven by the spot prices. But it’s not the reality for all gas prices. As far as the impacts [are concerned], we believe that this will help drive more investments. The tightness we are seeing in the market may continue in the short-term and the medium-term, because the new wave of LNG projects will come on stream mostly around 2026-2027. And, therefore, I would say all contributions to supply are welcome and I am optimistic about the state of the natural gas markets in the medium-term as well as in the long-term. Because it is a reality that natural gas, being a clean fuel, brings stability to power systems when they are depending on intermittent renewable sources of electricity. Natural gas is key to supplying and to satisfying world energy needs. So, I am very optimistic about the future of natural gas. Natural gas demand has increased by 26% since 2010. It was the highest growing hydrocarbon in the last decade. And I am convinced that its future is even brighter.

Iran’s Minister of Petroleum Javad Owji has said that sanctions imposed on the energy sector is in violation of international law and can affect all GECF member states regarding their role in market. What do you think?

In the Doha Declaration of the sixth GECF Summit, the GECF leaders expressed their concern in regards to the imposition of unilateral economic restrictions without the approval of the United Nations Security Council, because these have an adverse impact on natural gas supply. They have an adverse impact on the trade of natural gas, on market stability, and in reality, in the long term, it is detrimental to not only the producers, but also to consumers.

Massive Presence at 26thOil Show

The 26thInternational Oil, Gas, Refining & Petrochemical Exhibition was held during 13-16 May 2022 with more than 1,200 Iranian and foreign companies represented. Italy, Spain, the United Arab Emirates, South Korea, Switzerland, Germany, Ukraine, South Africa, Belgium, Russia, China, Iraq and Azerbaijan were among nations represented at the exhibition held on the Tehran International Permanent Fairgrounds. About 100 memorandums and agreements were signed during the event.

President EbrahimRaeesi, visiting the exhibition, described the 70% share of domestic manufacturing in supplying petroleum industry needs as promising, noting nobody should stop at this point.

Noting that good measures have been taken in recent years in the petroleum industry in line with technology and science-based activities, he said such work could be presented to local and foreign markets.

Raeesi said the annual oil show was a key industrial event in the country, adding: “Islamic Republic of Iran is one of the major exporters of oil, gas and petrochemical products in the world. In addition to qualitative development, quantitative development of oil, gas, refining and petrochemical industries, the country's specialists may help create employment, especially in the field of knowledge-based activities, and on the other hand, increase the country's export capacities.”

Knowledge-Based Industry

Minister of Petroleum JavadOwji said at the inauguration of the oil show that the 13th administration welcomed much-needed investment in the oil sector.

“Investors are well aware of how profitable it will be to invest in this sector given the energy crisis. The Oil Show is an annual pact and a place for interaction and gathering of domestic and foreign activists in the Iranian petroleum industry and one of the largest exhibitions in the world oil industry,” he said.

Owji described the 26th oil show’s slogan of “Knowledge-Based Petroleum Industry, Iranian Production, Global Exports” as highly inspiring, saying: “Giving a knowledge-based nature to the petroleum industry and paying attention to domestic manufacturing are the main priority of the Petroleum Ministry under the present circumstances. That is the same all across the globe. The petroleum industry is a venue for development of many modern technologies.”

He said the presence of 23 universities and research centers, more than 100 knowledge-based companies, startups, science parks and scientific research parks at the exhibition showed the Petroleum Ministry’s seriousness in this regard.

Owji said Iran’s approach in making the petroleum industry knowledge-based and paying attention to domestic manufacturing would not be a mere slogan.

“Petroleum Ministry has devised a plan in collaboration with the Office of Vice President for Science and Technology for knowledge-based production and job creation in the petroleum industry, which will be soon adopted by the Cabinet,” he said.

He said the second step in that direction was to engage knowledge-based companies in the prioritized sectors of the petroleum industry during the first months of the 13th administration. He added that more than 300 companies had volunteered to get involved in this process.

Noting that the completion of the oil technology ecosystem is another priority that the Petroleum Ministry has on the agenda, he explained: “The Petroleum Ministry seeks to activate innovation centers in universities, establish knowledge-based companies and startups in Innotech Park and develop these parks.”

Providing arrangements and supporting knowledge-based companies to manufacture first-time commodities and equipment needed by the oil industry focusing on basic items and commodity groups that have considerable value and are now highly dependent on imports are other measures on the Petroleum Ministry’s agenda, the minister said.

Investment a Must

Owji also laid emphasis on the necessity of attracting investment to develop Iran’s petroleum industry. He said: “Until there is investment, the manufacturing sector, knowledge-based companies and builders will not be dynamic and the business environment in the petroleum industry will not improve, so the stimulus for the various contractors, builders and service providers is an important investment issue.”

He said that nine months into office, the Petroleum Ministry has signed more than 50 agreements and memorandums worth more than $16.7 billion.

“The priority of these projects included the development of joint oil and gas fields, flare gas gathering, the development of the refinery value chain, and the utilization of the potential of knowledge-based companies and domestic manufacturers,” he said.

Owji said the priority was to complete half-finished projects as required under the principled policies of the government.

“We are trying to bring into operation 48 incomplete prioritized projects in the petroleum industry by the end of the current [calendar] year with an investment of $13 billion. Meantime, we would start work on 25 megaprojects with an investment of $30 billion,” he said.

“These projects have been prioritized and selected using indicators such as increasing oil and gas production from joint fields, ensuring the country's energy security, using the capacity of knowledge-based companies, creating employment and completing the value chain. The downstream of the industry will be such as gas transmission lines, petrochemical projects and the construction of new petroleum refineries using feed-in advantage,” added the minister.

Strong Diplomacy

Owji also touched on the issue of sanctions and the necessity of countering them by adopting a strong energy diplomacy.

“Under the present circumstances, Iran’s petroleum industry is on the frontline of economic combat and countering enemies,” he said. “The fact that despite the continuation of sanctions, domestic capacities in all areas, including equipment manufacturing, design, engineering, contracting and execution are growing, and hopefully planning for the future, shows the failure of the sanctions policy.”

The minister said sanctions had failed to bring any halt to Iran’s petroleum industry development and oil exports. “We have taken the initiative and been able to diversify our markets and increase oil exports and facilitate our financial channels, which has led to a dramatic leap in revenue collection,” he said.

Owji said Planning and Budgeting Organization, Ministry of Economy and Central Bank of Iran had confirmed the Petroleum Ministry’s success in fulfilling its obligations, particularly with regard to oil and condensate exports as predicted in the annual budget.

Owjidescribed the presence of 44 foreign companies in the oil show as a manifestation of the importance and priority of discussing energy diplomacy and foreign interactions for this industry,saying: “We activate energy diplomacy to attract foreign investment, especially from friendly countries. We have signed important contracts and memoranda in this regard.”

“Due to the heavy need of the oil industry for investment, we welcome all investors from neighboring countries in various sectors of the Iranian oil industry. Investors are well aware of how profitable it will be to invest in this sector given the global energy crisis and the dramatic increase in energy demand,” he said.

Oil Sales Up

Owji said Iran had increased oil exports and received money by launching an active energy diplomacy despite restrictions by most imposers of sanctions.

“Iran has also been provided with a return to regional energy exchanges through the revival of the gas swap, the discovery of new markets for oil and petroleum products and petrochemical products, and the export of technical engineering services,” he said.

Emphasizing that effective cooperation with countries whose capacities were not previously considered, including Latin American countries, has provided tremendous opportunities to Iran’s oil industry and national economy, Owji said: “For the first time in decades, the dream of oil industry experts to acquire offshore refineries through active energy diplomacy has been realized and new and attractive markets for Iranian oil, condensate and petroleum products have been achieved, which we have achieved great success in this field, which shows the PetroleumMinistry is committed to using all available capacities in the world.”

Oil Exports Up 40% Under Sanctions

The CEO of National Iranian Oil Company (NIOC) Mohsen Khojasteh-Mehr has said that Iran had raised its oil exports 40% despite tough sanctions targeting the country’s petroleum industry.

“Once international pressure is removed, we are ready to double our exports,” he said.

Referring to measures undertaken by the 13th administration in recent months, Khojasteh-Mehr said: “In line with the plan for maximum recovery from oil and gas fields and using maximum capacity of Iranian companies, the second development phase of the North Azadegan field as well as the second phase development of the South Azadegan field is expected to be agreed upon with a consortium of E&P companies under a $7.5 billion deal in coming months.”

He said that $16.5 billion worth of agreements had been signed under the 13th administration, adding: “NIOC has a $4.5 billion share of finalized agreements and $9.6 billion share of memorandums.”

Referring to the development of the Arash field, Khojasteh-Mehr said: “For the development of the Arash gas field, there is an NIOC decision allowing for the transfer of jacket and platform and rig to start drilling.”

He said that investment was the most important requirement for Iran to reach 5.7mb/d output. “We have two methods, i.e., bottom up and top down. Details for planned output hike from this field have been specified.”

Noting that oil market is competitive, he said Iran should do its utmost to take back its share of the market. “NIOC is seeking maximum sales and we are ready to double oil exports.”

Regarding investment envisaged in the upstream sector, Khojasteh-Mehr said: “We plan to invest $160 billion in the upstream sector, $90 billion of which is for oil and $70 billion for gas.” He added that the sum would be provided through NIOC’s sales of liquids, as well as domestic and foreign investment. 

Gas Output Set to Rise

Majid Chegeni, CEO of National Iranian Gas Company (NIGC), said Iran’s gas production would increase 45 mcm/d in the current calendar year (to March 2023). He said that natural gas coverage would reach 99% for cities and 89% for villages.

He said that Iran was consuming on average 250 bcm a year of gas, adding: “Iran is among the world’s largest natural gas producers, standing third. Totally, 269 bcm of gas was fed into national grid last calendar year, 122 bcm of which was consumed in the household and commercial sector and 71 bcm in the power plants.”

Chegeni said that Iran’s gas exports to neighboring nations totaled 17 bcm last calendar year (to March 2022), up 2% year-on-year.

“Last calendar year, we exported on average 20 mcm/d of gas to Iraq, which is currently standing at 35 mcm/d. Our exports to Turkey totaled 9 bcm last calendar year,” he said.

Chegeni said that Iran was committed to exporting 10 bcm/yof gas to Turkey, which should not fall below 8.5 bcm/y.

Laying emphasis on energy diplomacy, he said: “Gas trade is not limited to exports. Gas swap and transit are also part of gas trading. We have good relations with our neighbors now and we are exporting gas to Turkey and Iraq. We are also targeting commercial ties with other nations.”

Refining Sector Ready for Services

Jalil Salari, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said that the company was ready to transfer technical services and refining equipment to other nations. He also said that a project was under way at Bandar Abbas oil refinery to reduce fuel oil production.

Referring to the capacity of the refining industry, he said: “The refining capacity in the country currently stands at 2.2 mb/d on average. We are supplying 260 ml/d of refined products.”

“Converting crude oil into products would generate high value-added and we are eying both local and foreign markets,” he said.

Salari said: “In the energy sector, we need to enter into cooperation with Latin American countries in order to exchange technical knowledge and manpower. During a recent visit to Venezuela, agreements were also reached in the field of energy. There is capacity in the country to enter the international arena in the field of contractors, equipment suppliers and engineering studies. Agreements have also been reached and a working group has been set up in this regard.”

On exporting products, he said: “We shape the market in compliance with demand. In the first two months of the year, we had about five product export ships, so the volume of exports will depend on the need and price competition. In addition, according to the geographical location of the country, we can provide market conditions in the field of transit and swaps. In the area of swaps, good capacity has now been provided, which will lead to the continuation of storage in the northern part of the country.”

“Our target markets are diverse, including East Asia and India,” said Salari.

Petchem Investment Package

Morteza Shah-Mirzaei, CEO of National Petrochemical Company (NPC), said that packages were ready for investment in the petrochemical sector.

He said Iran’s petrochemical production capacity would jump to 200 million tonnes a year from the current 90 million tonnes over 10 years. “The difference would be that products would be in the value chain with much higher value.”

He said that investors would have the option to choose between packages of investment in the petrochemical sector.

88 Gas Transmission, Compressor Projects Under Way

CEO of National Iranian Gas Company (NIGC) Majid Chegeni said 88 projects related to 19 gas pipeline and gas compressor station projects are under way.   

“Some of these projects, which are entirely operated by Iran Gas Engineering and Development Company (IGEDC), includes construction of urban gas pipelines, completion of gas trunklines and compressor stations on Iran Gas Trunkline (IGAT) 4, 6, 7, 8, 9 and 11,” he said.

Chegeni said the total budget allocated to these 88 projects amounted to over IRR 16,000 billion, adding: “Gas supply to Hormuzgan Province, infrastructure and construction facilities, optimization of pipeline installations and stations under operation, four refining projects related to the Parsian gas refinery, the Ilam gas refinery and upgrading metering equipment in the Hormuzgan gas export station as well as five storage projects in the Shourijeh (second phase) and Sarajeh (second phase) storage facilities are among other major projects under way by NIGC.”

Iran Wins Case Against France’s Sofregaz

CEO of Iranian Gas Engineering and Development Company (IGEDC) Reza Noshadiannounced the €40 million ruling of the International Court of Arbitration in favor of Iran, and added that Iran has won a legal lawsuit with the French company Sofregaz.

“For years, they were speaking about a missing rig, worth €40 million, which did not belong to the Petroleum Ministry. It was owned by a private company,” he said.

“After the reinstatement of sanctions, Sofregaz did not honor its agreement with Iran. It had signed a contract with the Gas Storage Company, which was dissolved, and the agreement was transferred to IGEDC,” he added.

He stated: "The French company, Sofregaz, claimed €26 million against Iran in the International Court of Arbitration, and while we are more familiar with losses in international arbitration and the media and press also deal with them in detail, this time we claimed the opposite."

Noshadi emphasized: "The result of the follow-up in the initial ruling of the International Court of Arbitration, which was announced in February,

Self-Sufficiency in Turbine Combustor Construction

The acting manager of the South Pars Gas Complex (SPGC), Ahmad Bahoush, has said that for the first time in Iran, the combustor of Siemens gas turbine has been manufactured and installed.

“Over two years and thanks to research by SPGC experts and technicians and benefiting from the potential of domestic knowledge-based companies, the Siemens gas turbine combustor was manufactured for the first time in Iran and installed successfully on a turbine at SPGC,” he said.

“Combustors are installed on the turbines feeding refined gas into National Trunkline or compressor stations. It is among strategic and vital items that had been slapped with sanctions. Non-supply of combustors had caused challenges to gas production,” said Bahoush.

“Currently, about 130 Siemens turbines are operating in Iran. On average, they need 18 combustors a year,” he said.

“In addition to easy accessibility, the domestic manufacturing of combustors would save Iran €10 million a year,” he said.

Minister Owji Visits LatAm, Signs Deals

Minister of PetroleumJavadOwji led a 12-member delegation to Venezuela, Nicaragua and Cuba to meet with officials and sign several agreements and memorandums of cooperation.

Venezuela was the petroleum minister’s first destination in Latin America. With more than 300 billion barrels of proven reserves, it claims the world’s top spot in terms of oil deposits. In 2011, Venezuela overtook Saudi Arabia as the holder of the largest oil reserves and stood at the top. However, development of these huge reserves has slowed down in recent years due to civil unrest and US sanctions. Iran, however, has stood by this country all these years and has delivered large shipments of gasoline and gas condensate thereeven under the toughest conditions.

Under the 13th administration, Iran and Venezuela have embarked on a new phase of cooperation. Venezuelan President Nicolas Maduro tweeted on Owji’s visit, describing their meeting as “constructive aimed at deepening brotherly ties and cooperation in the energy sector”. 

In reaction, Owji tweeted that in the light of Iran-Venezuela deep-seated ties, Tehran was willing to benefit from all capacities for developing ties and cooperation.

After Venezuela, where visited oil installations, Owji departed for Cuba where he met with President Miguel Díaz-Canel and Deputy Prime Minister Ricardo Cabrisas Ruiz.

Nicaragua was Owji’s last destination. The Iranian minister met with President Daniel Ortega and parliamentary speaker Gustavo Porras Cortés among others.

In the meeting with Ortega, Owji said Iran had stood by Latin American nations, particularly Nicaragua, during sanctions days. He noted that Iran respected the independence of other nations while condemning any interference with Nicaragua’s internal affairs.

Achievements

During Minister Owji’s Latin American visit, Eight agreements and memorandums of understanding were signed with the three Latin American nations for development and operation of oil and gas fields, upgrading and renovating refineries and benefiting from refining capacities, training manpower and experts in the oil, gas and petrochemical sector, exporting technical and engineering services, transfer of technology and expanding crude oil, gas condensate and petroleum products export markets. 

OPEC SG:

Iran Oil/Gas Needed for Energy Sustainability

OPEC Secretary General Mohammad Sanusi Barkindo has underscored Iran’s role in future energy sustainability as demand for oil and gas would remain the main source of fuel in coming decades.

“We need more oil and gas, and we need the expertise, talent and resources of the Islamic Republic of Iran to help deliver this sustainable energy future,” Barkindo said in a message to Iran’s 26th Oil Show.

“Oil is forecast to remain the fuel with the largest share of the global energy mix up to 2045. Primary oil demand is set to increase in the long-term from 83 mboe/d in 2020 to 99 mboe/d in 2045,” he said.“In 2020, oil accounted for 30% of global energy requirements. By 2045, it is expected to account for approximately 28%.”

According to Barkindo, oil and gas together were expected to account for more than 50% in that time horizon.

“We see energy demand increasing by 28% in the period between 2020 and 2045, with all energies required to meet this growing demand. A doubling in the size of the global economy, population expansion, and the need to reduce energy poverty, will be behind this push,” he noted.

He touched on Iran’s “long and illustrious history” with the Organization of the Petroleum Exporting Countries (OPEC), saying: “Over the past 60 plus years, the Islamic Republic of Iran has continued to play a major role within the Organization, contributing each decade to the development and prestige of OPEC.”

“The bonds between OPEC and the Islamic Republic of Iran are strong, and were reinforced in recent years as the Organization looked to overcome two historic industry slumps as a result of the 201416 downturn and most recently due to the COVID-19 pandemic,” said Barkindo.

Touching on the oil show, he said: “The Iran Oil Show, as it is known, is famous for its high-profile, interesting and unique opportunities for interaction, at both the policy and technical levels.”

He said the fact that the event was being held in-person for the first time following the COVID-19 pandemic made it “all the more special this year”.

Barkindo heaped praise on Iran for its resistance to tough sanctions on its petroleum industry.

He said: “I am always very excited to learn about the remarkable developments in Iran’s industry. You have achieved amazing triumphs in both technology and industry in the face of very difficult circumstances due to sanctions. This has had a multiplier effect on the economy of your country that should not be underestimated.”

He also highlighted Tehran’s role in the OPEC policies, saying: “The wisdom and diplomacy of the Iranian leadership helped build the necessary consensus between OPEC and non-OPEC oil producing countries to reach the landmark Declaration of Cooperation (DoC) in December 2016, and subsequently the Charter of Cooperation (CoC) in July 2019.”

Regarding challenges faced by OPEC, Barkindo said: “Moreover, today, we are also now confronted by the escalating geopolitical conflict in Europe, which has massive implications for the world economy, volatility in commodity markets and oil supply and demand.”

“It is important to stress; however, that nonfundamentals are beyond the control of OPEC. We are focused on enabling a balanced market, and are committed to sustainable stability of the global oil market,” he added.

Barkindo said: “While monitoring, assessing, and acting when necessary, given short-term developments, OPEC is also focused on longer-term challenges, too.”

To put the investment issue in some perspective, in OPEC's World Oil Outlook (WOO) cumulative oil-related investment requirements amount to $11.8 trillion in the 2021-2045 period. This is a huge number, and we need to remember that investments fell by around 30% in 2020 due to the pandemic,” he said.

Gas Needs $8tn Investment

Mohamed Hamel, the secretary general of the Gas Exporting Countries Forum (GECF), visited the Tehran oil show and met with Iran’s Minister of Petroleum JavadOwji. 

Talking in aworkshop on the GECF Global Gas Outlook 2050, the GECF secretary generalsaid that global demand for gas had increased 23% since 2011.

“Investment in natural gas is important for the stability of global energy systems. According to the global gas outlook 2050, the gas industry would need more than $8 trillion in investment.

“Natural gas has been the fastest growing hydrocarbon fuel in recent years, with less than $3.3 trillion invested in natural gas infrastructure. Natural gas networks are expanding to new countries and regions, and today's gas markets are becoming more global and interconnected than ever,” he said.

Recalling that when GECF’s Global Gas Outlook report was finalized in December 2021, two key issues were highlighted,he referred to them as the profitability of energy because of relatively high energy prices in the second half of 2021 and climate changes.

He said recent developments in East Europe laid emphasis on the significance of energy security. He; however, added: “It is too early to assess all the consequences of these developments on the future of energy systems. However, it is clear that for natural gas, reconfiguration of physical flows is likely to occur in the medium term with further expansion of LNG trade, more investment in the upstream and downstream gas industry, possible increase in supply costs and re-interest in long-term gas contracts.”

Hamel said natural gas was instrumental in reducing energy poverty, upgrading economic growth, improving living standards and developing welfare while serving the environment.

“Given that the world's population is expected to reach 1.9 billion by 2050 and that global GDP will more than double in real terms, human energy needs will only grow despite improvements in energy efficiency, and all energy sources will meet such needs,” he said.

Hamel said that future energy routes between countries will be different, adding that natural gas was in line with the sustainable development objectives envisaged by the UN.

OPEC Solidarity

BehroozBaikalizadeh, head of OPEC Secretariat’s Petroleum Studies Department, in an OPEC workshop on global oil developments presented his account of the latest developments in the oil market, saying: “The forecast for global economic growth for most countries in 2022 is declining, and according to forecasts, Russia's economic growth will fall from 4.7 percent to 6 percent.”

He said that oil demand would be also experiencing a downward trend, adding: “Non-OPEC oil supplies will increase by 2.4 million barrels in 2022, with the United States being the largest producer, while no significant growth is expected for Russia.”

Baikalizadeh predicted a 139% compliance with the OPEC output cut deal in 2022, saying the compliance was 115% in 2021.

AfshinJavan, Iran’s national representative to OPEC, also touched on the impact of Russia-Ukraine tensions on the oil market, saying: “Russia-Ukraine tensions will adversely impact the global economic growth and inflation.”

He said that demand for oil would be falling by 2023 and Europe would face a severe gas shortage. He said that Russia’s economy was set to suffer in 2023.

“OPEC+ is expected to maintain its solidarity at least until the end of 2022,” said Javan.

Mahid al-Sayegh, senior public relations expert with the OPEC Secretariat, in the same workshop said: “Presenting the current policies of the Organization since 2016 has led to greater cooperation among members, creating market stability and safeguarding the interests of all stakeholders, including producers and consumers, as well as investors.”

He said that OPEC’s DOC in December 2016 was one of the most important measures taken by the Organization in recent years.

“OPEC has always been at the forefront of creating an atmosphere of international cooperation and dialogue,” he said.

Al-Sayegh said the US was levying the least taxes on fuel consumers, while Italy was among nations with the highest fuel taxes.

Maximum Knowledge-Based Capacity for Petchem Sector

CEO of National Petrochemical Company (NPC) Morteza Shah-Mirzaei said knowledge-based companies’ capacity has to be used for developing the petrochemical industry under the 7th and 8th national development plans.

Addressing a gathering of managers at Petrochemical Research and Technology Company (PRTC), he said: “In the current calendar year, we have to make precise and comprehensive planning to reach major objectives set for the petrochemical industry. We have to follow a coordinated rhythm for this purpose.”

He said all objectives envisioned for the petrochemical industry should materialize under the aegis of a sufficient level of knowledge. “The notion of knowledge-based is familiar enough to the entire petrochemical industry, and various divisions have been appropriately active in this regard,” he said.

“Most technical knowhow, equipment and catalysts used in the petrochemical industry are being domestically manufactured entirely. In the light of the existing capacities in the country and relying on domestic potential, we have to quit importing them,” said Shah-Mirzaei.

“In order to realize industrial development plans, PRTC is instrumental in managing planning and development. Adopting a new and technological look and relying on existing potential, we can move in the direction of progress, development and materialization of the 7th and 8th plans,” he said.

Gas Export Capacity to Increase

The director of gas storage development project in the Shourijeh field, Mehdi Velayati, has said that the storage project would help boost the capacity of gas delivery to neighboring nations. He added that the project would also help prevent a pressure fall-off in northern Iran. 

“The objective behind natural gas storage is to save this energy in an underground natural facility because gas consumption drops in Iran, like in the world, in the summer, when there is excess gas to be stored for eight months to be fed into national trunkline to be used during four cold months,” he said.

Velayati said the idea was to double the gas storage capacity in the Shourijeh facility.

“The agreement signed between Iran Gas Engineering and Development Company (IGEDC) and MAPNA took effect in December 2021. The agreement runs for 36 months,” he said.

He said that National Iranian Gas Company (NIGC) was determined to develop gas storage in the country, adding that negotiations were under way with MAPNA for several other gas storage projects.

 

Two Knowledge-Based MOUs Signed

Petroleum Ministry and the Office of Vice President for Science and Technology have signed a memorandum of cooperation to develop capacities, create synergy and realize knowledge-based economy with a view to drawing up a comprehensive plan for the knowledge-based development of the oil, gas, refining and petrochemical industry.   

Seven specialized working groups, comprising oil managers and top officials from the Office of Vice President for Science and Technology, would be established to make arrangements for the implementation of this MOU: “Upstream Oil and Gas Knowledge-Based Development Working Group”, “Refining and Integrated Refining-Petrochemical Knowledge-Based Development Working Group”, “PetrochemicalKnowledge-Based Development Working Group”, “Downstream GasKnowledge-Based Development Working Group”, “Oil Equipment Domestic Manufacturing Knowledge-Based Development Working Group”, “Energy Efficiency Knowledge-Based Development Working Group” and “Petroleum Industry Biotechnology Knowledge-Based Development Working Group”.

Oil Industry, Knowledge-Based Companies to Communicate Easily

Petroleum Industry Innotech Park has signed a memorandum of cooperation with the National Elite Foundation and the Innovation Fund to resolve technological problems relating to the petroleum industry and support knowledge-based companies. The memorandum is aimed at facilitating communications and cooperation between the petroleum industry and knowledge-based companies.

The main idea behind the memorandum was to make optimum use of the elite potential for growth and development and resolution of technological problems in the petroleum industry.

The MOU between Innotech and Innovation Fund was for the purpose of bilateral cooperation in providing empowerment services in technological management and commercialization within the framework of facilities envisaged for empowerment services.

Budget Allocation to Knowledge-Based Centers

CEO of National Iranian South Oil Company (NISOC) Ali Reza Daneshi said IRR 10,000 billion had been earmarked for activating knowledge-based centers in the current calendar year.

“We have developed plans at three levels for activities associated with knowledge-based organization. The first phase is identification of challenges, the second phase pertains to identifying knowledge-based centers involved in the petroleum industry and the third step is associated with developing a value chain the petroleum industry,” he said.

“To that effect, NISOC has opened an R&D office at ShahidChamran University and we have signed an agreement with the university on manufacturing compressor parts,” he said.

“NISOC, while prioritizing activities associated with knowledge-based organization, is taking measures relating to social responsibility and the environment. In the social responsibility sector, the Petroleum Ministry has earmarked IRR 72,000 billion in credit to oil-rich areas to be spent over three years.

Iran, Iraq to Develop Energy Cooperation

Iran’s Minister of Petroleum JavadOwji received Iraqi Electricity Minister Adel Karim to discuss further cooperation in the oil and gas sector.

In the meeting, Owji expressed hope that good decisions would be adopted by the two parties.

Karim described Iran as a friendly nation, adding he was happy to meet with Minister Owji for the second time.

He expressed hope for continued cooperation between Iran and Iraq.

They discussed cooperation mainly in the gas sector.

Recently, Owji met with his Iraqi counterpart on the sidelines of the summit of the Gas Exporting Countries Forum (GECF) in Doha.

Ahmad Assadzadeh, deputy minister of petroleum for international affairs and trading, had earlier said: “Iran has two gas agreements with Iraq. The first one regarding gas exports to Baghdad was signed in 2013 and the second one for gas exports to Basra was signed in 2015. Both agreements remain in effect and Iraq is a buyer of Iran’s gas. But the agreement is close to expiring.”

He said good plans had been arranged for cooperation with Iraq, adding that appointment of a special envoy for Iraq affairs at the Ministry of Petroleum showed the significance of this issue.

NIOC to Undergo Industrial Change

CEO of National Iranian Oil Company (NIOC) Mohsen Khojasteh-Mehr said digital transformation was the fourth industrial transformation in history, adding: “NIOC can have a significant share of this transformation if it can jump into the knowledge-based sector.”

He said that knowledge-based companies’ potential and capacities were of great value to NIOC, adding: “I hope that we would see valuable achievements in cooperation with these companies in the near future.”

Khojasteh-Mehr said more time would not be spent on making NIOC knowledge-based as “we don’t want to miss on time.”

“Based on the studies, it was observed that the main issues related to oil and gas reservoirs and wells remain and are not exposed to the view of scholars; Based on this, we decided that the activities entrusted to these centers move from field-based to technology-based or problem-based, and we agreed with the universities accordingly,” said the NIOC chief.

“Some contracts have progressed well and there is no obstacle in their way. About € 70 million is the only currency value of these contracts, and with the issue of their centralization, we took a step towards making them effective and gave direction to the path,” he said.

“We have about 700 to 750 low-efficiency or sometimes inactive wells, or wells of non-economic production, on the basis of which we have raised the issue of centralizing their contracts; Contracts worth about $ 700 million have now been approved by the Economic Council's specialized commission, with about 70 companies participating in the call,” said Khojasteh-Mehr.

Regarding proposals highlighted in the meetings with knowledge-based companies, he said: “The proposals made at this meeting will be definitely considered one by one in the Transformation Headquarters. We are still in the early stages of becoming knowledgeable, and things have to go step by step to reach maturity.”

He touched on helium as a neglected issue saying: “Helium is a neglected issue. The South Pars gas field has the highest amount of helium gas, which we have been deprived of due to lack of technical knowledge, while Qatar has been using this gas for many years and it is used in military, nuclear, medical and other high-tech industries. We are currently the importer of this gas. The call has been issued to establish the production of this gas

Is Iran’s Oil Industry Still Attractive for China?

Negar Sadeqi

A 25-year Iran-China comprehensive agreement has opened a new window towards cooperation between Tehran and Beijing. The two nations have been engaged in close energy cooperation. China, which imported 10 mb/d of oil and 140 bcm of gas in 2020, consumes 26% of world energy. Naturally, it would be seeking a reliable s supplier for coming years. Why not Iran, sitting atop the world’s top hydrocarbon reserves? However, the basic question is to know if investment in Iran’s energy sector is still attractive to the Chinese.

Majid Raoufi, energy market analyst, speaks to “Iran Petroleum” extensively about grounds for Iran-China cooperation.

Iran and China are expected to cooperate within the framework of their 25-year comprehensive pact. What does this pact contain essentially?

As you know what has been signed by the two nations is only a strategic comprehensive document, a roadmap with no agreement or any specific project. The 25-year comprehensive cooperation document is only some sort of cooperation pact explaining generalities and grounds for cooperation or issues that may arise in the future. In later phases, various projects would be considered for cooperation between the two nations. Now we must try our best to familiarize policymakers and decision-takers with various aspects of China’s energy sector.In order to sign agreements in favor of our national interests, we must know which entities are influential and China and what mechanism Iranian companies should follow, how China’s financing system is working, where China’s energy sector is headed for, what Chinese policymakers think, how Iranian companies can interact with China’s banking system, how the Belt and Road Initiative can help us for interaction, which companies can continue to cooperate with us if sanctions continue and what companies are willing to enter Iran if sanctions are lifted, to what extent FATF is effective in cooperation with China. Once these issues become clear for our policymakers, we can consider priorities and projects. For instance, the Petroleum Ministry has specified its priorities for development of oil and gas fields and the type of contract accepted by Chinese firms.

What are grounds for cooperation in the energy sector?

Chinese companies are certainly able to help boost our oil production capacity in terms of enhanced recovery and preserved output or development of new fields.In the gas sector, we can certainly have extensive cooperation in the production sector, and thus supply part of China's annual gas needs of about 600 bcm per year, and even Pakistan as a strategic partner of China. In the China Energy Transition Status Report released in 2020, one of the most important points is the increase in natural gas production in China itself.Another important issue, which is one of the most important strategies in their energy security, is the comprehensive and extensive cooperation with countries to meet the growing domestic demand, which must be done in the form of the Belt and Road Initiative. The third is in the field of renewable energies, where we can have high-level cooperation. There is also a high capacity for cooperation in the refinery and integrated refining-petrochemical sectors. In the petrochemical sector, the Chinese are also very interested in operating in the Jask and Chabahar regions.Other grounds for cooperation between the two countries are as follows: Developing direct cooperation with Chinese teapot refineries, cooperating with Chinese oil and gas service companies that have made good progress in new technologies and are not worried about possible Western sanctions, and can expand the level of their cooperation.Use of production sharing agreements with large Chinese companies, cooperation with China and Pakistan in the Gwadar development, more serious presence of Chinese companies in the Makran development, cooperation with China for effective presence in the international gasoline market, establishment of joint venture companies with small and medium-sized Russian companies , Chinese, Malaysian, etc., development of transportation routes and pipelines from the east-west corridor of Xinjiang, Khyber Pakhtunkhwa, Pakistan and the southern provinces of Afghanistan to Khorasan, supply of equipment needed by the Iranian oil and gas industry in exchange for purchasing Iranian oil and gas, cooperation with Chinese companies in joint fields with Iraq and Qatar, crossing the Belt and Road Initiative routes through Iran and linking the initiative and the North-South International Transport Corridor, trying to reach an intergovernmental agreement to continue buying Iranian oil instead of an agreement between the companies, public diplomacy and development of scientific cooperation between the two countries.

Have other oil and gas producers, such as Iran, signed a cooperation agreement with China?

Countries such as Saudi Arabia and the UAE have signed a

comprehensive strategic cooperation document with China. China has partnership agreements with 78 countries and five regional organizations on five continents. China and Iraq have a "strategic partnership" agreement. A higher level is the "Comprehensive Strategic Partnership" that fewer countries have signed. Iran, Saudi Arabia, the United Arab Emirates and Egypt have similar partnerships with China in the West Asia and North Africa region. So is Russia. Given energy transition, which world major economies have taken more seriously than ever, any country with oil and gas has a political or intellectual problem if it does not pay attention to China. Today, the most important energy market in the world is China. That is why countries like Iraq, Saudi Arabia, the UAE, and all of our neighbors that were practically in the United States bloc have the most contact with the Chinese today, and are getting closer to this country. For example, Saudi Arabia and the UAE are China's largest trading partners in the region, and Iraq has had the most capital acquisition in 2021 through the China Belt and Road Initiative.

Why should China cooperate with Iran in the field of oil and gas development, despite cooperating with the countries of the Persian Gulf?

We enjoy a special feature in the oil and gas sector that other countries in the Persian Gulf do not enjoy. We are the only West Asian country that can export oil or gas to China via pipeline. Saudi Arabia, UAE, Qatar, Kuwait and Oman do not have this feature. We can also export gas to China through Central Asia, Afghanistan or Pakistan. TheChinese have even defined a $62 billion project for the China-Pakistan Economic Corridor (CPEC) in Pakistan. Connect Pakistan and Kashgar in China. If we can expand our gas capacity, we can export oil or gas directly to China virtually without the usual Chinese security concerns for shipping.

Where is China’s energy sector headed to? According to statistics, the country's crude oil consumption is declining by 2050, but gas consumption in this country is still rising, and some consider China's future market to be a gas market.

To better understand this issue, I would like to provide a comparison between China's consumer basket between 2011 and 2020. The country's coal, oil and gas consumption has risen from 70.2, 16.8 and 4 percent in 2011 to 57, 20 and 8 percent, respectively. According to the vision published by the National Petroleum Corporation of China, the country will reach the peak of its oil demand by 2030, which is exactly what Xi Jinping said at the UN General Assembly in 2020. After this year, China will try to reduce carbon emissions. According to the same outlook, China's gas demand will increase by about 300 bcm to 610 bcm by 2035.It is noteworthy that China's current gas consumption is over 330 bcm per year, of which 190 bcmis supplied from local sources in China, and the rest through the Myanmar, Turkmenistan and Kazakhstan pipelines, two new pipelines from Russia called Siberian Power One and the other part is imported through LNG and from the United States, Qatar, Australia, Indonesia, Malaysia and Papua New Guinea. There is also speculation about a Siberia 2 agreement between Russia and China. Therefore, gas is the future of China's energy. Following the conflict between European and Asian countries, the Europeans finally agreed to consider gas as a green fuel, because they also realized that their energy security is not provided by renewable energies, renewable energiesare inflexible and cannot be trusted very much. On the other hand, gas pollution is much lower than oil and coal; therefore, they also accepted that gas is a clean energy.

Where does China stand in the world energy consumer market?

China is the world's largest consumer of energy, with 26.1 percent of the world's energy consumption in 2021, according to BP. That is more than a quarter of world’s consumption. So China is the largest and best possible market for all energy owners. It has been an oil importer since 1993 and a natural gas importer since 2007. China will import more than 10 mb/d of oil and approximately 140 bcmof natural gas by 2020. For this reason, all the owners of the world's oil and gas resources are looking to enter this market, and there is fierce competition between them.

How much is Iran’s share of China’s energy market?

Before answering your question, I have to note that energy security strategy does not allow Iran to export all its oil to a single country. Even China does not want to remain dependent on a single country for oil imports. On the other hand, you should also note that China’s energy demand is very high. Following their energy security strategy, they intend to have various carriers in their energy mix in a bid to decrease the share of coal in their basket and increase the share of gas and renewables. Therefore, they are cooperating with various nations in the energy sector, including Saudi Arabia, Russia, Nigeria, Angola, Kazakhstan, Oman, Iraq, the UAE and Iran, among others.We were one of the largest oil exporters to China in the two pre-sanctions periods. After 2000, Saudi Arabia became the largest exporter to China in many respects. Prior to this year, the Chinese market was dominated by Oman. Oman still retains its traditional share of the Chinese market, so given that demand in China is constantly growing and today averages more than 10 mb/d, it is natural for Oman to be able to supply such need.

Has Saudi Arabia preserved its position within China?

After 2000, except for one year when Angola claimed the top spot, Saudi Arabia was the largest oil exporter to China. However, Russia outstripped Saudi Arabia in 2015 and 2016. Under a law passed in China in 2015, in addition to the three major Chinese giants, CNPC, Sinopec and CNOOC, teapot refineries were also licensed to buy oil from exporting countries and clear in yuan. Saudi Arabia; however, refused to deal with the teapot refineries, saying it was not willing to trade the yuan and would prefer to trade with the same three major companies, but the Russians agreed to do so, thereby becoming the largest oil exporter for two years. Although it is a large exporter of oil to China, Saudi Arabia is exporting most of its oil to Japan. So is the UAE.

Therefore, China is seeking a balance among its suppliers.

China seeks a balance in the Persian Gulf region, because in the long run it needs security of its energy supply, Iran or even Russia cannot meet all of China’s demand. This is one of China's most important energy security strategies.In addition to being the largest consumer of oil, China is also the world's largest investor in this sector. The Americans have not invested heavily in the energy sector for years, and many European energy companies have been forced to reduce their investment and focus more on renewables because of climate change policies, and the Chinese need energy. And they want to secure the future of their energy supply and have no problems in

the years to come, that is why the Chinese are the biggest investors in this sector.

In which Chinese market do you think we can have a more active presence, given that Saudi Arabia, Kuwait and the UAE have a large share of the country's oil market? Oil or gas?

Saudi Arabia, Kuwait and the UAE do not have much to say about gas reserves, so it is much more likely that we will have a more active presence in the Chinese gas market, but in the case of the oil market, you should also pay attention to the fact that Russia earns three times as much as it earns from gas exports. Therefore, we must take the oil development sector very seriously and not look negatively at China in this sector.

But the gas market is strategic and, unlike oil, it is very difficult to replace it.

Yes, gas market is a strategic market. If it were not for this, when Russia seized Crimea in 2014, Russian gas exports to Europe would have been stopped, but Europe's heavy dependence on Russian gas prevented this from happening.

What are Iran’s gas export priorities?

In the gas sector, Europe is not our priority, but China and neighboring nations are totally different.We are in a region where the biggest gas producers are Russia, Iran, Qatar and Turkmenistan, the big gas consumers happen to be around us, new consumers like Iraq and Turkey and Pakistan are still in high demand, especially Iraq, which is in the discussion. There are many problems with electricity supply or home consumption. Therefore, I believe that we, the second largest holder of gas resources in the world, should have a larger share of the gas production and export market.To do so, we need investment and technology. The issue of oil is a little different, in any case the cost of oil production in Iran is very low and the dollar comes out of the ground, no other activity like oil has such income, if we did not have oil in all these years the welfare situation is much lower we had. In fact, we owe our lives today to oil, and the argument that oil is a scourge is not so relevant. Much of the relative well-being and living conditions of our people depend on oil, which comes easily from the heart of the earth.

One of our current challenges is unbridled gas consumption. Is there any hope for gas exports and can we make strategic planning to that end?

Undoubtedly, we can definitely have a share of the global gas market. At present, the share of natural gas alone constitutes 70% of the country's energy consumption basket. Electricity production in Iran also relies on fossil fuel power plants with a total share of about 94%. Power plants that operate at 30 to 40 percent efficiency, so we must enhance the efficiency of our power plants, is another part of our share of gas consumption for heating and cooking, which must also be optimized.On the other hand, we plan to produce up to 10,000 MW of renewable energy. Although it is difficult to reach this figure, its plan exists in Iran, and if the sanctions are lifted, we can expand this part of the energy with the Chinese. While the Germans are also very interested in being in Iran, if the sanctions are lifted, the Germans are planning to enter Iran. A few months ago, I attended a conference in Berlin where the CEO of Siemens also spoke. It was about Iran. So I think if the Vienna talks come to fruition, we can work well with them in this area, and the law has supportive measures in this area. At present, we have about 900 MW in the hydropower and solar sector, which is a very low figure.Therefore, if we can implement this 10,000 MW of renewable energy, discuss the efficiency of power plants, seriously implement the topic of 19 buildings, it will provide us with a very high capacity for gas exports.

How much does Iran-China trade total now?

The numbers are very low, Iran-China trade in 2021 was in the range of $15 billion. The largest trade figure between the two countries was about $55 billion in 2014. At that time, the balance was in Iran's favor. Because we sold them oil. But Saudi Arabia's trade with China has reached more than $70 billion. Given the close relationship between Iran and China, I think that if the sanctions imposed on Iran are lifted, the level of our cooperation will return to the pre-sanctions era. I should also add that China currently produces about 4 mb/d, which is equal to Iran's plan to increase production, so we should not think that our relationship with China should only lead to oil.

Do you think that Iran’s petroleum industry is attractive to Chinese investors?

Yes, greatly. Undoubtedly, there is this competitive advantage in the oil sector, because oil production cost per barrelin Iran is very low, and in the region, only Iran, Saudi Arabia and Iraq can produce oil at low price. You see, all our neighbors are focused on enhancing their oil production. Iraq is raising the idea of 5 mb/d-7mb/d, but some experts cast doubt on 7 mb/d. However, the point is that the Iraqis are seeking to stabilize their oil production at 5 mb/d, hoping to add 1.3 mb/d to their output by 2030. The UAE and Saudi Arabia are also lifting their oil production. The UAE hopes to reach 5 mb/d by 2030. All these countries are trying to produce more, and earn more until we reach the peak of oil demand, we are no exception and we have to do it. Various scenarios have been proposed for the peak of oil consumption, some of which have said 2040, some 2035 and some 2030. In light of all world events, it seems that everyone, especially the Europeans and Americans, have realized that renewable energy cannot be trusted very much, so Iran still has time to raise capital, but procrastination would mean loss of chance and revenue. Among other advantages of Iran for attracting capital I may mention the technical knowhow of Iranian manpower.For the first time, Iranians were able to rely on domestic power to produce oil from the Sepehr and Jofair fields.

On the other hand, the Chinese have considerable technologies that we can take advantage of in the field of exploration and production companies, service companies, horizontal drilling and increasing the recovery factor and deepwater drilling. In addition, the Chinese excel in some technologies such as 5G, artificial intelligence and the Internet of Things.

Do you think that we can use Chinese investment in the energy sector?

We do not have enough money to invest in the oil and gas sector to achieve our production goals, and the West does not invest much because of climate change policies. The Chinese also control capital. TotalEnergies and Iraq have signed a $27 billion green agreement, but everyone knows that Iraq does not have such capacity. It is clear that it is mainly oil and gas projects, but due to the strong media coverage of renewables and energy transition, investment in fossil energies is not discussed widely. All diagrams show that investment in oil and gas has fallen following the Paris Agreement. Therefore, China is the best option. We remember that despite sanctions, Sinopec invested $2 billion in the Abadan refinery and pushed ahead with its project silently.

As energy producers lose the US market, should we see China and India as the main destination of oil and gas in coming decades?

That’s true.The United States is now a major oil producer, although it has declined somewhat in the past two years due to the COVID-19 outbreak, but the shale revolution has nevertheless changed the world oil market. Prior to the COVID-19 outbreak, the United States produced more than 12.5 mb/d and even approached 13 mb/d in a few months, but production fell due to lower oil prices in 2020.

and declining shale production profits. Of course, with the increase in prices in 2021 and 2022, shale producers did not show interest in increasing production.The main plan of many shale oil companies is to return to the maximum free cash flow to return more cash to their shareholders. After years of allocating low profits to shareholders due to investment to increase production, they are trying to keep their shareholders satisfied, but despite the shareholders' acceptance of this policy, the public thought is concerned. Because the strict discipline of shale capitalists means that US oil production will grow slowly, which will keep US retail fuel prices high for longer.US President Biden is currently working to force shale producers to increase production. They are even threatened that if they do not produce shale, their license will be revoked for years to come. However, the United States, the world's largest oil producer, is also the largest consumer, supplying much of its import demand from Canada and Mexico and not focusing on West Asia. Saudi Arabia and other major oil producers have lost market share in the United States, and oil demand in OECD countries has reached almost constant levels. Some Southeast Asian Nations (ASEAN) countries are also in demand for the oil market, but demand will continue to grow in China and India.

                                                        In which country demand is higher? China or India?

China, by far, has higher demand. As many analysts have pointed out, the next century is the century of Asia, led by China and then India and Indonesia, which are moving towards higher production with very high economic growth, moving towards more production means a greater need for energy. I should also add that the Chinese market, in addition to being a very important market for oil and gas owners, is also considered by the world's coal producers.Last year, a disruption in the coal market affected the gas market, oil, products and even solar energy modules, as part of the supply chain in photovoltaic cells requires coal fuel. When coal fuel did not come to China from Australia, the price of polysilicon quadrupled and we saw an increase in the cost of electricity from solar energy.

Of course, the Chinese have also invested heavily in renewable energiesover recent years.

Yes, China has invested heavily in renewable energies and is the world leader over recent years, far behind other countries. Since 2016, China's share of the world's renewable energy has reached 27.4%, in fact more than a quarter of energy. Renewable in China. Until 2016, the Germans were the leaders in investing in green energy, but today we see that they have a problem in this area and may even activate their nuclear power plants. The share of renewable energies (total solar, wind, hydropower and nuclear) in China's consumer basket in 2011 was about 4.8 percent, which in 2020 will reach 15 percent.

It is interesting to note that 90% of the world's solar supply chain is owned by China. The weak Chinese also went bankrupt in this way, but the companies that had some support from the Chinese government and were big and were able to take over the market. In the field of wind energy, the Chinese have 50% of the supply chain.

How do you evaluate Chinese technology in the energy sector?

The fact is that CNPC, Sinopec, and CNOOC have really grown in technology, have acquired the drilling technology in deep water and high pressure, while this technology was owned by only a few large multinational companies. For example, the 40-story high-altitude Chinese drilling rig HD-981 is capable of drilling to a depth of 10,000 feet below the seabed. Or in the case of shales, they are almost certainly acquiring new technologies. Or in the case of shales, they are almost acquiring new technologies, even in the Yamal LNG project in the Arctic, whereNovatekwaspartneringTotalEnergiesbefore withdrawing due to US sanctions, China’s CNOOC built 36 major modules and reached $8.5 billion worth of equipment and $7.8 billion worth of LNG carriers with Russia to bring the Yamal plant into operation. That was a breakthrough. Furthermore, the Chinese managed to boost their supply chain in the LNG sector. Chinese companies are also technologically capable in enhancing the recovery rate.

Is it possible to count on the Chinese technology and even LNG development in Iran?

Based on the document released by the High Council of Energy in March, we should bring oil production to 6.5 mb/d and gas output to 1.4 bcm/d. That requires producing 400 bcm a year of gas, which requires high investment. Another issue is that most of our attractive fields, including South Pars, have been attractive due to condensate. But our onshore fields are less attractive because they contain no condensate. Today, in light of gas prices, investment in this sector has become attractive anew. Therefore, we are required by the High Council of Energy document to raise our gas production. We are the second largest holder of natural gas in the world. Investment in Iran’s gas remains attractive. However, in the LNG sector, we cannot solely depend on China to proceed with our LNG projects.

Why?

Because not all the technology in this sector is available to the Chinese yet. To activate our projects, we cannot count on China alone, we must carry out this project through a consortium. CNPC has collaborated with TotalEnergies in various projects in Russia, Iraq and other parts of the world. They have also worked together in South Pars. The two companies have very good relations with each other at the top management levels. Therefore, one of our options for activating CNPC in LNG projects is the company's partnership with Total. The LNG technology is owned by several large multinational companies, the Chinese have not yet reached all the dimensions of this technology, but they are trying to. The Russians do not have this technology at all,so if we want to work with Chinese capital in this area, we must use Western technology, that is, adopting the policy of ‘look to the East and the West’ at the same time.

As the last question, the Chinese have invested heavily in the Belt and Road Initiative over recent years. Is it also to ensure the security of their energy supply?

The Chinese main concern is the Straits of Malacca, which lies between Singapore, Indonesia and Malaysia. The Strait is in the hands of US troops. Even if the trade war between the United States and China spreads to the military and security spheres, the Strait becomes very important. Therefore, the Belt and Road Initiative is due to the reduction of dependence on the Strait of Malacca. This is one of the dimensions of promoting the Belt and Road Initiative.Increasing oil and gas ties with China and ensuring energy security is another important goal of this initiative. Reducing the cost and time of transportation and using China's surplus capacity in various sectors, including steel and renewables, are other reasons for advancing this initiative. In some projects, such as the China-Pakistan Economic Corridor, in addition to mutual economic benefits, there are geopolitical goals related to the China-India rivalry in the Indian Ocean. The Chinese say that with the development of infrastructure in the member countries of the initiative, the economic growth of these countries will increase, which will increase the demand for Chinese goods and services from these countries, which is also in China's interest.

NIOC to Raise Azadegan, Yadavaran Output

The head of corporate planning of National Iranian Oil Company (NIOC), Karim Zobeidi, says Iran is now ready to produce 3.838 mb/d of oil. In an interview with “Iran Petroleum”, he says the giant South Azadegan oil field would see its output reach 220,000 b/d. He also says talks are under way with a foreign firm to develop the second phase of the Yadavaran field for its output to increase to 210,000 b/d from the current 110,000 b/d.

The following is the full text of the interview Zobeidi gave to “Iran Petroleum”.

What measures have been taken by NIOC under the 13th administration?

Under the new administration, it was decided from the very beginning to adopt serious plans for restoring oil production to pre-sanctions levels. Before sanctions, we were producing 3.838 mb/d of oil, return to which took place in several phases until early March. Now we are fully ready to produce 3.838 mb/d of oil. Thanks to efforts made by NIOC’s subsidiaries – National Iranian South Oil Company (NISOC), Iran Offshore Oil Company (IOOC), Iranian Central Oil Fields Company (ICOFC), Arvandan Oil and Gas Production Company (AOGPC) and Petroleum Engineering and Development Company (PEDEC) – this objective was achieved. These companies, whose meetings I attended, were very active, mainly in pipe-laying and upstream-related activities including workover of wells.

Would you please specifically speak about other activities which have been done under this administration?

A gas sweetening train of Phase 14 of the South Pars gas field become operational as it had not been completed. It was significant and labor-intensive. Three contractors were working round the clock to finish the job so that this capacity would be used under tough winter conditions. The DMC unit was completed for demercaptanization and deodorization from South Pars gas condensate. Some wells had been drilled in West Karoun without having reached production. It was unused wealth. Thanks to PEDEC’s efforts, 13 of these wells reached production.

What are your future plans?

One of our major causes of concern is to supply winter gas needs in the current calendar year. NIOC hopes to make maximum output from South Pars. In other words, SP13, SP22-24 and the SP14 refinery should be finalized and completed. Moreover, in the current calendar year, gas transmission from the Kish field to South Pars, as well as activation of 15 packages of ICOFC gas fields would be followed up on. As far as SP11 development is concerned, we are focusing on the 450 mcf/d (13 mcm/d) output. Continued work for pressure compression at South Pars and developing North Pars to plug South Pars output drop are among other plans which we will be following up on the current calendar year. Of course, recovery from the North Pars field is expected in coming years.

What are your plans in West Karoun?

Production from South Azadegan is expected to reach 220,000 b/d by next March. A comprehensive development plan has been adopted for the integrated development of Azadegan (North Azadegan and South Azadegan) along with a water injection-based enhanced recovery. Of course, we would need extensive drilling for this project, which would start next calendar year. However, arrangements should be made now. More well drilling and completing part of the CTEP processing unit, which is associated with the phase 1 of the South Azadegan field, should be done this year.

Do you have a comprehensive plan for total recovery from Azadegan?

Yes, we eye 570,000 b/d production from the entire Azadegan. This development project is based on proposals made by numerous companies including Shell, Total, Petronas and Inpex that were willing to develop the field. Therefore, this figure is reasonable.

At what stage are negotiations for the second phase development of Yadavaran?

We intend to continue the Yadavaran development. We are in talks with a foreign company for the second step to bring production from 110,000 to 210,000 b/d. Meantime, EPDF, EPCF and IPC projects should be also pursued.

Integrated Azadegan Development

Minister of Petroleum Javad Owji has said the second phase development of the giant South Azadegan oil field would be implemented by local firms. The first phase of this field, which is among the West Karoun cluster of fields, has been developed by local contractors to reach the nominal output of 220,000 b/d by next March.

North Azadegan field had been developed beforehand and is currently supplying oil. Given the significance of developing joint fields, National Iranian Oil Company (NIOC) is considering integrated development of the Azadegan field. The question here is to know if integrated development would affect oil recovery from the North and South Azadegan. 

The West Karoun fields are among the youngest oil fields in Iran. They are North Azadegan, South Azadegan, North Yaran, South Yaran and Yadavaran, totally holding 64 billion barrels of oil in place.

South Azadegan is estimated to hold 25.34 billion barrels of oil in place, while North Azadegan is estimated to hold 5.6 billion barrels.

Iran’s recoverable oil and gas reserves are respectively estimated at 157 billion barrels and 33 tcm.Iran holds more than 1,200 billion barrels of oil equivalent in oil and gas reserves in place.

Given energy transition and efforts by oil producers to recover more oil and boost revenue, Iran’s Petroleum Ministry is naturally prioritizing development of oil and gas fields. However, development of joint fields takes up added significance due to recovery by the other party. CEO of NIOC Mohsen Khojasteh-Mehr has said that $8 billion would be invested in developing West Karoun fields. One related project would be second phase development of South Azadegan, which would be operated by a consortium of Iranian companies. But it does not mean Iran shuns foreign investment. NIOC welcomes foreign investors and companies in oil and gas field development projects.

Master Development Plan

The vast Azadegan field has been divided into North Azadegan and South Azadegan. These two fields had been developed separately, but a master plan is being studied for the integrated development of the entire field. Under MDP, the field would see its output total 570,000 b/d.

Given independent development of the North and South Azadegan fields, can integrated development harm the balanced development of the field or slow down its pace or can contractors go ahead with the integrated development of the field based on the infrastructure available in both sections? Project managers say integrated development of this field would not have any impact on its activity and therefore contractors may go ahead with integrated development without any problems.

Azadegan is attractive to investors thanks to its quick rate of return on investment.

In this report, we are offering our readers a review of the latest development efforts in the field whose enhanced recovery is on NIOC’s agenda.

Drilling 36 Wells

The South Azadegan field was initially developed by a Chinese contractor. But after the Chinese firm was expelled, Petroleum Engineering and Development Company (PEDEC) teamed up with local contractors to develop the field. Talks are currently under way for the second phase development of the field. Recovery from the first well drilled in south Azadegan occurred in 2007. Accumulated oil production from the field reached 250 million barrels in March. So far, 160 wells have been drilled and completed in this field with 36 more wells planned to be spudded in the current calendar year to 20 March 2023.A total of 11 drilling rigs are operating in South Azadegan, which would increase to 13 in coming months.

Production from South Azadegan is expected to increase in the current calendar year. It has to be noted that PEDEC focused on South Azadegan in the second half of last calendar year (ended on 20 March 2022). In addition to accelerating integrated development of phase 1 of the joint field after a long hiatus, planning began to make up for delays and also to benefit from maximum capacity available with a view to increasing production from the wells drilled in the field. The new wells were decided to become operational in the short-term and at minimum costs.

Before the end of last calendar year, 13 wells with an output rate of 15,000 barrels were completed and launched to increase daily output from this giant oil field. Six more wells would become operational during the first two months of the current calendar year.

According to plans, with the completion and operation of more than 40 more wells in the current calendar year, production from this field would increase further. In case everything goes ahead as planned, 70,000 b/d would be added to the current output of this joint field.

In South Azadegan, the API gravity of heavy crude oil in the Sarvak layer varies between 17 and 21, while the gravity varies from 29 to 35 for light oil in the Kajdomi, Fahlyan and Gadovan layers.

CTEP Development

Operating the Central Treatment Export Plant (CTEP) is under way despite past challenges. The priority in this project is to launch two oil trainson 20 March. Most commodities have been procured and work is in progress. Pipe rack installation, underground pipe laying, setting up oil storage and firefighting water as well as processing buildings have progressed significantly. CTEP’s products include processed oil, which would be carried to the West Karoun pumping station via a 50-km-long pipeline and sour gas, which would be moved to a gas plant via a 15-km-long pipeline.

7% Recovery

China’s CNPC developed North Azadegan based on a buyback deal. North Azadegan first started oil supply in March 2016. Accumulated output has since reached 150 million barrels.

Production from North Azadegan was assigned to the Arvandan Oil and Gas Production Company last August. Of a total 58 wells drilled in this field, 51 are producing oil. A key point with North Azadegan is its location in the Hoor al-Azim wetland. In light of the significance of preventing this wetland from drying up, all development operations including drilling, acidizing a well as surface operations have been performed in full respect of environmental obligations. For this purpose, a safety and environment checklist has to be completed and endorsed by relevant officials for any operation.

Production from North Azadegan is based on natural recovery and gas artificial lifting. The recovery rate of this field is about 7%, which is acceptable for ultra- heavy crude oil.

Domestic Manufacturing

Using domestically manufactured commodities is among objectives of development of North and South Azadegan oil fields. In North Azadegan, Iran has a 51% share in commodities and services. In South Azadegan, all contractors involved in the project are Iranian.

As the field is planned to be developed in an integrated manner, it has to be noted that integrated development would not affect the current production from North Azadegan. Meantime, in case development operations begin in this field, due to the facilities and equipment in phase 1, the field would see its output jump quickly. Furthermore, due to the good experience of local contractors, the planned integrated development of the Azadegan field is expected to go ahead satisfactorily by local contractors.

Knowledge-Based Oil Industry Document Drafted

A memorandum of understanding has been signed between the Petroleum Ministry and the Office of Vice President for Science and Technology with a view to adopting a comprehensive plan for a knowledge-based development of the oil, gas, refining and petrochemical industry.

Based on the terms of the MOU, specialized working groups would be established to make necessary planning for working our mechanisms for the implementation of plans. The final version of the bylaw on the implementation of the MOUinvolves executive mechanisms related to various sectors of the petroleum industry.It is considered a general roadmap in the knowledge-based oil industry.

The MOU requires establishment of a policymaking council to formulate macropolicies for the knowledge-based development of the oil, gas, refining and petrochemical industry and monitoring the materialization of objectives. The Council comprises vice president for science and technology, petroleum minister, deputy petroleum minister for engineering, research and technology, deputy petroleum minister for planning, secretary of Committee to Develop Hydro-energy Technologies and the CEOs of the main subsidiaries of the Petroleum Ministry– NIOC, NIGC, NPC and NIORDC.

In order to implement this MOU, seven specialized working groups are to be established as follows: Knowledge-Based Development in Upstream Oil and Gas Sector, Knowledge-Based Development in Refining and Petro-Refining, Knowledge-Based Development in Petrochemical Sector, Knowledge-Based Development in Downstream Gas Sector, Knowledge-Based Development in Petroleum Industry Equipment Local Manufacturing, Knowledge-Based Development in Energy Efficiency, and Knowledge-Based Development in Petroleum Industry Technological Ecosystem Development. These working groups are composed of oil managers, as well as directors from the Office of Vice President for Science and Technology.

Minister of Petroleum Javad Owji has said that increasing oil output by relying on knowledge-based companies is a top priority of the ministry in the current calendar year. Furthermore, increasing domestic manufacturing, boosting oil production and exports constitute three objectives envisaged.

Regarding domestic manufacturing, knowledge-based companies have been informed of petroleum industry commodity needs so that such commodity imports would be minimized in the current calendar year.

Last March, the Research Institute of Petroleum Industry (RIPI) helped complete the chain of petroleum products including fuel oil at the Bandar Abbas oil refinery. Furthermore, Iran started producing coke which it used to import.

950 Knowledge-Based Firms

Knowledge-based companies, as enterprises of knowledge-based economics, play a pivotal role in the structure of this type of the economy. According to Article 1 of the Law on Protection of Knowledge-Based Companies, knowledge-based companies and institutions are a private or cooperative company or institution that aims to enhance science and wealth, develop a knowledge-based economy, and achieve scientific and economic goals, including development and application of inventions, innovations and commercialization of research results. Development consists of development and manufacturing of goods and services in the field of high technologies and with great added value, especially in the development of related software.

The oil and gas industry is the most lucrative and most capital-intensive economic sector in Iran. It is instrumental in national economy and revenue generation.

Meantime, as a country sitting atop huge oil and natural gas reserves, Iran can play an effective role in global markets, and knowledge-based companies can engage in modern technology development with a view to reducing dependence and boosting resilience to international sanctions.

Officially, 6,500 knowledge-based companies are active in the country's economy, of which 950 are active in the oil, gas, petrochemical and related industries, accounting for 13% of the total share of companies in this field and 25% of sales of knowledge-based companies.

First-Time Manufacturing

The Petroleum Ministry in the 13th administration has offered projects for relaunching oil wells with low recovery, energy efficiency and completion of the value chain in the petroleum industry, resulting in agreement with knowledge-based companies operating in the oil and gas sector.

Considering the activities of knowledge-based companies in the country, it could be noted that these companies have now reached maturity to meet the most important needs of large industries.Over recent years, the Office of Vice President for Science and Technology has undertaken an initiative to support first-time manufacturing.

According to experts, accepting the risk of the presence of knowledge-based products in the oil and gas industry has helped development of large equipment and knowledge-based in the oil industry.

Oil Industry Open to Innovation

Now in the oil industry, a new culture is being replaced by an old one that opens doors to domestic innovation. In this new culture, Iranian-made equipment and innovations, new methods and advanced technologies are used to meet the needs of the oil industry.

The innovations and new technologies that we are witnessing in the oil industry can seriously shake the oil industry. Technologies in the field of polymers, additives, new materials and the use of advanced technologies such as new mechanical technologies that can be used in wells, digital and artificial intelligence, which has paved the way for technology in the oil industry, reducing costs and increasing efficiency.

Invitation to Knowledge-Based Companies

The Petroleum Ministry recently sent a six-point invitation to knowledge-based companies, inviting them to engage in projects associated with energy efficiency, digital transformation in the petroleum industry, enhanced recovery from wells, capturing associated petroleum gas, first-time manufacturing of strategic products for the petroleum industry, and completing the value chain of the downstream oil sector.

Knowledge-based economy today is considered as one of the most effective factors in economic and social developments and leads to sustainable growth and development of society and ultimately economic realization. Knowledge-based companies have a great impact on the growth and development of different regions by evolving in the field of science and knowledge and new economic findings and results. Following the emphasis of high-ranking officials on increasing the production of the oil industry by relying on the knowledge-based oil industry, the oil industry uses the maximum capacity of knowledge-based companies and research institutes to meet the challenges and needs of manufacturing technology and services.

In this regard, the national budget has allocated facilities to create job opportunities based on the knowledge of the oil industry and with the aim of helping the domestic supply of equipment needed, implementation of employment-generating development plans, first production and completion of the value of oil and gas. According to Minister Owji, over 150 knowledge-based companies participated in the first step of the call of the Petroleum Ministry to make the petroleum industry knowledge-based.

Some policies signed off on by the Minister of Petroleum with regard to knowledge-based companies are: Quantitative and qualitative development of the country's oil and gas innovation and technology ecosystem and the creation and development of all its following institutional components in order to increase the role of knowledge-based companies and technology units in solving oil and gas industry problems and promoting exports of technical and engineering services and oil and gas knowledge-based industries, identifying and consolidating the demand for priority technology, goods and services in the value chain of oil and gas industries and delegating their implementation to technology and knowledge-based companies, as well as expanding targeted material and spiritual support to elites, innovators, startups and knowledge-based companies upstream and downstream oil in the context of the oil industry innovation ecosystem, such as Ray Technology Park and its satellite centers.

Over 80% of Oil Industry Equipment Locally Sourced

Mahnaz Mohammad-Qoli

The chairman of Board of Directors of Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), Ehsan Saqafi, says more than 80% of equipment needed by the petroleum industry is domestically manufactured. In an interview with” Iran Petroleum”, he said that 14-15% of the remaining 20% was not cost-effective to be produced domestically while for 5-6%, the necessary technology is not available.

Here is the full text of the interview Saqafi gave to “Iran Petroleum”.

Would you please first tell us about SIPIEM’s structure?

SIPIEM started out in 2000. Currently, 850 companies involved in the field of manufacturing industry are members of SIPEIM, of which 220 companies are knowledge-based. One of the membership conditions set by SIPIEM is that companies must be on the Petroleum Ministry’s vendor list. The activities of these companies are divided into 10 commodity groups including fixed equipment, instrumentation, rotary equipment, electricity and wellhead installations. Of these companies, 50 member companies of SIPIEM operate in the world class. About 80,000 direct job opportunities have been created by SIPIEM, and according to the set of activities that take place, about 240,000 direct and indirect jobs have been created in the country. There are about 2,000 small and large contracting units in our supply chain.

What are the criteria for SIPIEM manufacturing?

SIPIEM bases its manufacturing on internationally recognized standards. Over 1,400 items of strategic goods required by the oil industry have been designed and manufactured by SIPIEM manufacturing companies. Nearly 80% of the equipment needed by related industries can be provided by SIPIEM. The capacity of our members is not limited to the equipment of the petroleum industry, and its customers are not only oil plants, but also energy plants, industries, mines, steel mills, and so on. But within SIPIEM, the main customers of our member companies are satellite companies related to the oil industry. Ten groups of goods defined in the oil industry in this association are followed by 10 specialized committees on the subject of these goods. On the other hand, there are 12 joint working groups in the field of employers and 4 specialized commissions in this association that deal with issues. On the other hand, there is an independent working group in the association called the Committee of Knowledge-Based Companies, which has a special activity in relation to the activities of the knowledge-based companies of the association. These companies are distributed throughout the country in the field of construction. But in some centers such as Khuzestan, Khorasan, Isfahan, Arak and Fars, the density of these companies is higher. Over recent years, SIPIEM members have made progress. During the years when the Iranian petroleum industry was facing sanctions, our manufacturers were given the opportunity to supply items that could not be made, and they were successful. It can be argued that we owe more than 50% of our progress in domestic manufacturing from 100 items in 2000 to 1,400 items now to developments over recent years.

Did SIPIEM and member companies have no licensing problem?

Obtaining these licenses has not been without problems, although the companies themselves have been pursuing this issue. One of the issues that should be pursued in the oil industry is the preparation of a standard in accordance with Iranian industry. We consider it appropriate to use international standards, but we can create new standards in accordance with our industry. One of the problems our manufacturers face is the insistence of employers on standards that do not conform to the raw materials available to us in terms of supply and manufacturing. These standards may be localized according to the conditions of the country. Of course, I am not saying that for all cases, but for some cases, it can be localized. Manufacturers were like combatants during the embargo, and now it is an economic war. Sanctions ramped up pressure in different ways.

SIPIEM is a private entity while sanctions have mainly targeted state-owned companies. Couldn’t SIPIEM act separately?

Sanctions are divided into several categories. Some were sector-based, and some were person-centered. It is true about persons. Sector-based sanctions on the oil sector apply to all public and private companies, and it cannot be said that these companies could easily operate in this field because they were private, although there were problems in meeting the standards in this area.

But you said that the sanctions created opportunities for you.

Sanctions are like a double-edged sword, one side of which is good for the domestic manufacturer and the other side is bad for the same manufacturer. Yes, it has created opportunities for domestic manufacturers, but we also had problems and issues. For example, the problems we had and still have with money transfer. We had problems with the supply of raw materials and we have still such problems.

Recently, you had a meeting with the Minister of Petroleum. What happened during that meeting?

SIPIEM’s relations with the Petroleum Ministry, although was without any difficulty before, have been facilitated since Mr. [Javad] Owji took office. We announced that we are ready to be a good liaison between the ministry and manufacturers, regulate bylaws and instructions to provide the necessary support for domestic construction. It was also decided that communications with associations should be followed up on by the Office of Deputy Minister of Petroleum for Engineering.

Are employers directly signing agreements with manufacturers?

Yes, manufacturers contract directly. SIPIEM is a facilitator and guide and acts as a regulator. Many projects do not want to be involved in the builders in detail, and it has been suggested several times that we hand over equipment that is in a group setting. They were considering consortia, but since these consortia have not responded in Iran, we are looking to establish a company in SIPIEM, whose shares belong to manufacturers. For instance, this company should sign a contract in the commodity group and take it from the employer companies and give it to the manufacturers to facilitate the work, as a result, the manufacturers' interaction with the companies will be easier.

How much of the capacity of these companies is used?

At present, on average, 50 to 55 percent of our total capacity is occupied, of which about 45 percent of the activities are allocated to the oil industry.

Why is this capacity idle? There is no capability?

No, there is capability, but active projects are few, and another challenge is related to the liquidity problem, because the capacity of the private sector is very low without paying at the right time. There are also problems with exchange rate fluctuations. During the exchange rate fluctuation, it was very difficult for the manufacturers.

But the Office of Deputy Minister of Petroleum for Engineering, Research and Technology undertook some measures to control forex rate fluctuations, didn’t it?

Yes, of course a number of changes were made, but they were not commensurate with the economic conditions. Of course, it was better than nothing. The issue of exchange rate fluctuations is a problem for domestic manufacturers because it is not possible to supply 100% of the projects inside, some equipment and parts are built inside and others have to be imported from abroad.

How is SIPIEM communicating with universities and scientific centers?

The connections are good. Academic Center for Education, Culture and Research (ACECR) is a member of SIPIEM. We have also signed an MOU with the Presidential Office’s Innovation Fund. There are 220 knowledge-based companies among our members.

What was the result of SIPIEM’s activity in establishing a joint working group with the four main subsidiaries of the Petroleum Ministry?

The demands of the related areas of the employer are conveyed to us. Defects are reported if they are in the field of manufacturers and vice versa. If there are any shortcomings, we tried to eliminate them. The SIPIEM’s arbitration board, in addition to the dispute resolution committee that exists in NIOC, reviews the cases that are announced to this committee, and if a member is found guilty three times, its membership in the society will be suspended. SIPIEM considers the industry and national interests while taking into account the interests of its members. If members are at fault, it decides about them. The output of the working groups has been facilitation and synchronization with industry.

What strategic commodities have SIPIEM manufacturers produced?

We were innovative in all product groups. In cold boxes and in the last 5 years in a variety of catalysts. It can be noted that 50% of the catalysts used in the petrochemical industry and refining and distribution could be supplied domestically. We were innovative in compressors and rotating groups, in the manufacture of instrumentation panels, and in drilling rigs and wellhead equipment, although we need support in the innovation sector. We are able to supply 80% of the equipment locally, of the remaining 20%, there is up to 15% of the manufacturing capacity available, but it is not economical. For the remaining five percent, the technology is not available.

Have you signed any agreements with other countries?

We have signed contracts with Syria, Iraq, Venezuela and Tajikistan, which are currently in force.

Prior to the sanctions, we had signed agreements with Azerbaijan. The credit line between Iran and Syria must also be activated. The lack of this credit line has caused the Russians and Turks to take the market from Iranian companies.

What do these agreements involve?

Supplying equipment to the oil and power sectors.

Are SIPIEM members teaming up with foreign companies for technology transfer?

Yes, they team up with European and East Asian, as well as Chinese companies.

Have sanctions been effective?

SIPIEM members have largely circumvented the sanctions.

Do you have any plans for presence in the Russian market following President Ebrahim Raeesi’s official visit there?

Yes, of course. We can reach agreement with the Russians. Russian firms attended an exhibition in Sari and some memorandums were signed with them, which are yet to be implemented.

Can We Halve Greenhouse Emissions by 2030?

The 14th meeting of Working Group III (WGIII-14) of the Intergovernmental Panel on Climate Change (IPCC) concluded its two-week work (starting March 21) so that delegates and scientists would convene virtually on April 4 to officially adopt the summary for policymakers (SPM) of the 6th assessment report (AR6).

 The Working Group III report provides an updated global assessment of climate change mitigation progress and pledges, and examines the sources of global emissions.  It explains developments in emission reduction and mitigation efforts, assessing the impact of national climate pledges in relation to long-term emissions goals.

Working Group III introduces several new components in its latest report: One is a new chapter on the social aspects of mitigation, which explores the ‘demand side’, i.e. what drives consumption and greenhouse gas emissions.  This chapter is a partner to the sectoral chapters in the report, which explore the ‘supply side’ of climate change – what produces emissions. There is also a cross-sector chapter on mitigation options that cut across sectors, including carbon dioxide removal techniques. And there is a new chapter on innovation, technology development and transfer, which describes how a well-established innovation system at a national level, guided by well-designed policies, can contribute to mitigation, adaptation and achieving the sustainable development goals, while avoiding undesired consequences.

In 2010-2019, the average annual global greenhouse gas emissions were at their highest levels in human history, but the rate of growth has slowed. Without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5°C is beyond reach. However, there is increasing evidence of climate action.

Since 2010, there have been sustained decreases of up to 85% in the costs of solar and wind energy, and batteries. An increasing range of policies and laws have enhanced energy efficiency, reduced rates of deforestation and accelerated the deployment of renewable energy.

“We are at a crossroads. The decisions we make now can secure a livable future. We have the tools and know-how required to limit warming,” said IPCC Chair Hoesung Lee. “I am encouraged by climate action being taken in many countries. There are policies, regulations and market instruments that are proving effective. If these are scaled up and applied more widely and equitably, they can support deep emissions reductions and stimulate innovation.”

The Summary for Policymakers of the IPCC Working Group III report, Climate Change 2022: Mitigation of climate change was approved on 4 April 2022, by 195 member governments of the IPCC, through a virtual approval session that started on March 21. It is the third instalment of the IPCC’s Sixth Assessment Report (AR6), which will be completed this year.

Options in All Sectors

Limiting global warming will require major transitions in the energy sector. This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen).

“Having the right policies, infrastructure and technology in place to enable changes to our lifestyles and behavior can result in a 40 -70% reduction in greenhouse gas emissions by 2050. This offers significant untapped potential,” said IPCC Working Group III Co -Chair Priyadarshi Shukla. “The evidence also shows that these lifestyle changes can improve our health and wellbeing.”

Cities and other urban areas also offer significant opportunities for emissions reductions. These can be achieved through lower energy consumption (such as by creating compact, walkable cities), electrification of transport in combination with low-emission energy sources, and enhanced carbon uptake and storage using nature. There are options for established, rapidly growing and new cities.

“We see examples of zero energy or zero-carbon buildings in almost all climates,” said IPCC Working Group III Co -Chair Jim Skea. “Action in this decade is critical to capture the mitigation potential of buildings.”

Reducing emissions in industry will involve using materials more efficiently, reusing and recycling products and minimizing waste. For basic materials, including steel, building materials and chemicals, low- to zero-greenhouse gas production processes are at their pilot to near-commercial stage.

This sector accounts for about a quarter of global emissions. Achieving net zero will be challenging and will require new production processes, low and zero emissions electricity, hydrogen, and, where necessary, carbon capture and storage.

Agriculture, forestry, and other land use can provide large-scale emissions reductions and also remove and store carbon dioxide at scale. However, land cannot compensate for delayed emissions reductions in other sectors. Response options may benefit biodiversity, help us adapt to climate change, and secure livelihoods, food and water, and wood supplies.

Critical Years Ahead

In the scenarios we have assessed, limiting global warming rate to around 1.5°C (2.7°F) requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by 43% by 2030; at the same time, methane would also need to be reduced by about a third. Even if we do this, it is almost inevitable that we will temporarily exceed this temperature threshold but could return to below it by the end of the century.

“It’s now or never, if we want to limit global warming to 1.5°C (2.7°F),” said Skea. “Without immediate and deep emissions reductions across all sectors, it will be impossible.”

The global temperature will stabilize when carbon dioxide emissions reach net zero. For 1.5°C (2.7°F), this means achieving net zero carbon dioxide emissions globally in the early 2050s; for 2°C (3.6°F), it is in the early 2070s.

This assessment shows that limiting warming to around 2°C (3.6°F) still requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by a quarter by 2030.

Closing Investment Gaps

The report looks beyond technologies, and demonstrates that while financial flows are a factor of three to six times lower than levels needed by 2030 to limit warming to below 2°C (3.6°F), there is sufficient global capital and liquidity to close investment gaps. However, it relies on clear signaling from governments and the international community, including a stronger alignment of public sector finance and policy.

“Without taking into account the economic benefits of reduced adaptation costs or avoided climate impacts, global Gross Domestic Product (GDP) would be just a few percentage points lower in 2050 if we take the required actions to limit warming to 2°C ( 3.6°F) or below, compared to maintaining current policies,” said Shukla.

Sustainable Development Goals

Accelerated and equitable climate action in mitigating and adapting to climate change impacts is critical to sustainable development. Some response options may absorb and store carbon and, at the same time, help communities limit the impacts associated with climate change. For instance, in cities, networks of parks and open spaces, wetlands and urban agriculture may reduce flood risk and reduce heat-island effects.

Mitigation in industry can reduce environmental impacts and increase employment and business opportunities. Electrification with renewables and shifts in public transport can enhance health, employment, and equity.

“Climate change is the result of more than a century of unsustainable energy and land use, lifestyles and patterns of consumption and production,” said Skea. “This report shows how taking action now may move us towards a fairer, more sustainable world.”

The IPCC has three working groups: Working Group I, dealing with the physical science basis of climate change; Working Group II, dealing with impacts, adaptation and vulnerability; and Working Group III, dealing with the mitigation of climate change. It also has a Task Force on National Greenhouse Gas Inventories that develops methodologies for measuring emissions and removals.

Comprehensive scientific assessment reports are published every 6 to 7 years; the latest, the Fifth Assessment Report, was completed in 2014 and provided the main scientific input to the Paris Agreement.

At its 41st Session in February 2015, the IPCC decided to produce a Sixth Assessment Report (AR6). At its 42nd Session in October 2015, it elected a new Bureau that would oversee the work on this report and Special Reports to be produced in the assessment cycle. At its 43rd Session in April 2016, it decided to produce three Special Reports, a Methodology Report and AR6.

The Working Group I contribution to the Sixth Assessment Report Climate Change 2021: the Physical Science Basis was released on 9 August 2021.The Working Group II contribution, Climate Change 2022: Impacts, Adaptation and Vulnerability, was released on 28 February 2022.

The concluding Synthesis Report is due in autumn 2022.

The IPCC also publishes special reports on more specific issues between assessment reports.

R6 WGIII in Numbers

278 authors from 65 countries

36 – Coordinating lead authors

163 – Lead authors

38 – Review editors

354 – Contributing authors

Over 18,000 cited references

A total of 59,212 expert and government review comments

(First Order Draft 21,703; Second Order Draft 32,555; Final Government Distribution: 4, 954)

NISOC Eyes PDC Technology

Enhanced oil recovery (EOR) requires application of modern technologies. Although Iran's oil industry has faced sanctions in recent years and has been prevented from having access to many of these technologies, Iranian oil companies are seeking technical knowhow through cooperation with international companies or Iranian universities. The head of R&T division of National Iranian South Oil Company (NISOC), Mohammad Golestan-Bagh, tells Iran Petroleum that efforts are under way to develop knowhow for the manufacturing of polycrystalline diamond compact (PDC) bits.

Here is the full text of the interview Golestan-Bagh gave to “Iran Petroleum”:

Could you tell us about the current status of the university-industry relationship?

Communication with universities is the most important topic of research and technology. In other words, it is the gateway for universities, knowledge-based companies and science and technology parks to industry, research management and technology. A review of the relationship between industry and university in recent years shows that, unfortunately, the favorable and effective relationship between universities and industry has not yet been formed, and both groups are seriously concerned in this regard. Science production is a process whose origin is university. As science is developed and transformed into knowhow in the university, this knowhow is applied through an engineer and becomes a skill in industry. Skills, technology, and knowhow are updated with effective communication between academia and industry, which, in other words, must be accompanied by intelligent awareness, and this does not happen, or at least does not happen effectively. Intelligent awareness, no matter how much it meets the needs of the industry, can help develop skills. What we are seeing now in the industry is that skills are growing with experience, that is, a junior staff learns skills by accompanying experienced staff, while experience alone is able to update skills, techniques. Knowhow is not a specialty, in other words, the chain of the process from science to skill is not well established.

What are your plans to prevent a breakdown of the chain of process?

Our suggestion in this regard is to form a technology network based on knowledge and skills. This technology network monitors the skills and experience of knowledge inside and outside the industry to identify the challenges of the industry for universities, and on the other hand, identifies technology, innovation and capabilities that meet the needs of the industry. Let’s provide you with an example. In a large and national project of the country, it took two years to set up a piece of equipment. The story was that this equipment had been dormant for two years due to non-operation under the pretext of sanctions and non-compliance with the commitment of a foreign company. Later, an incident led us to find out that the skill and experience of launching this equipment was in the country two years before. In other words, the lack of a network for recognizing skills and industry leaves many of our needs unmet today. Obviously, if there was a technology network, the system would not be challenged to find this capability. Therefore, this interactive network should be formed among researchers, science and technology parks, universities, knowledge-based companies and industry.

Is the formation of a technology network designed?

We are currently working on the initial design, localizing a number of foreign and non-local networks in line with this design. Once completed, this project could be piloted in oil-rich areas, and if it has the desired results, we recommend it to National Iranian Oil Company (NIOC) and even other parent industries in the country.

Do you believe that no relationship between industry and academia has been formed?

It has definitely been formed, and the projects that have taken place in the oil industry and the successes that we have had in this field, confirm this. But we are looking for more effective communication, one that is smarter, more effective and more colorful. The process of turning our challenge into a research project at the university is now very time consuming. For example, it may take 2 years for a university to submit a research proposal for a challenge, because communication is weak. If we can use networking processes, we will have effective communication with universities.

What is the current status of NISOC’s research with universities?

Currently, NISOC R&T Division is implementing 37 research projects in 11 sectors: reservoir management, drilling, process and processing, construction, geology, energy efficiency, industrial protection, IOR/EOR, ICT, studies and human resources. We are also about to sign 10 other research agreements. Of course, faculty members’ studies, research projects, and master's and doctoral dissertations are another important element in strengthening the industry-university relationship.

What are your plans for acquisition of the latest technology in the world?

The first way in this direction is to use the elites abroad as intermediaries in science and technology. We have a number of Iranian elites in the world's leading universities with high capacity. Another way is to use the capacity of memoranda of understanding that some of our universities have signed with some universities and knowledge-based companies and technology companies around the world. The atmosphere of sanctions may show itself in economic issues, but it is less revealing in scientific and academic matters, and this atmosphere can be used to turn the university into a technology point of entry.

What are NISOC’s technology acquisition plans?

NISOC is also planning to acquire the latest technology in the world through universities under the technology network. Currently, 10 to 12 technological needs of the company have been identified and are being monitored so that we can provide them to some universities by signing memoranda of understanding.

To what extent are NISOC’s technological needs locally filled?

For the purpose of meeting technological needs, NISOC’s R&T Division is steering key projects on domestic manufacturing of turbines, electrostatic desalting, and PDC bits. PDC drilling rigs are considered as one of the strategic goods in the drilling industry. PDC drilling bits are currently manufactured by a few countries possessing the necessary technology, and so far no major research activities have been carried out to develop the technical knowledge of manufacturing them in the country. The result of this project will be the acquisition of PDC drilling technology in the country. This size of drill is one of the most widely used sizes of this type of drill. Considering the annual consumption of 130 matrix body drills with a size of 1.2 inches in the country, according to the calculations made in the roadmap, the implementation of this project

will save the country $1.17 million. Making and testing this size of drill could be the first and foremost step in making other sizes of PDC drilling bits. Meanwhile, considering the sanctions and the Petroleum Ministry’s plans regarding the development of the country's oil fields, planning and investing in the production of drilling bits in the country could be considered an important step in achieving the goals of the country's oil industry and play a significant role in domestic industry. This project is based on the provisions of the research regulations of the Petroleum Ministry in such a way as to find access to valuable economic knowledge and technology in several sectors and to register an international trademark. In this way, in addition to meeting the needs of the company in a completely indigenous and reliable way, generation of national wealth is achieved by producing a high-tech product and presenting it to international markets. The general vision of this project is the domestic production of PDC drilling bits and the registration of an international trademark, which is expected to achieve two phases of executive operations, the first phase of which is the implementation of a research project and the second phase of mass production of PDC bits. The basis of technical knowledge is developed and approved by the employer. At present, the study phase, design, supply of required materials and equipment, as well as molding and fabrication of the test drill sample have been successfully completed and are in the field of field testing and drill performance.

Give the significance of EOR, what are your research plans to that effect?

Defining and managing EOR projects is one of the most important goals and research and technology programs that are being planned in the form of the same technology network and the university's relationship with industry and the fullness of technology-based processes focusing on well-based and reservoir-based technologies. In other words, we are looking for work processes, that is, if the work process is reformed, it will cover all important issues, including EOR, maximum efficient recovery, energy management and efficiency. I emphasize that the work process should match the whole structure. In recent years, during two phases, 22 major research contracts have been concluded between NIOC and academic / research centers, of which 10 pertain to NISOC-run areas. “Conducting research and technological studies to develop technologies to optimize production processes and enhance recovery” from the Ahvaz, Bibi Hakimeh and Rag Sefid fields was assigned to the Research Institute of Petroleum Industry (RIPI), the Gachsaran field to the Petroleum University of Technology, the Mansouri field to the University of Shiraz, the Kupal field to the Sharif University of Technology, the Karanj field to Islamic Azad University, the Masjed Soleiman field to the Sahand University of Technology, the Binak field to Ferdowsi University and the Maroun field (Bangestan) to the Isfahan University of Technology. Under these agreements, the selected universities and research centers were required to adopt a research approach based on the latest technologies in the world, to lead all activities necessary to enhance/improve recovery from the relevant fields within 10 years. In this regard, managers and experts in the oil-rich southern regions have used all their facilities and capabilities to achieve the goals of this project. So far, more than 150 NISOC experts have participated in the process of these projects. The first package of 6 contracts that have been awarded in the first stage, including Ahvaz, Bibi-Hakimeh, Gachsaran, Mansouri, Kupal and Karanj fields, has been completed, and fast-track studies of these fields are nearing completion. Furthermore, the first package of 4 new contracts, which includes Rag Sefid, Binak, Maroun and Masjed Soleiman fields, is underway. The first package of these contracts includes identifying field challenges and screening methods for EOR/IOR. EOR/IOR contracts are also in the form of 5 work packages: field recognition, field modeling and simulation, specialized experiments, simulation model modification and pilot design. In addition, the IOR package and construction of upstream equipment are included in the service descriptions of some research consultants. The initial oil volume of these fields is a large fraction of the total primary oil volume of NISOC, and only one percent increase in recovery from these fields will be equivalent to $135 billion. Recently, modifications of the executive processes of these contracts from field-to-technology-based, focusing on well-based and reservoir-based technologies, with the aim of establishing specialized technology institutes in the upstream field, has been on the agenda. A working group has been formed at the level of the Petroleum Ministry to further study the matter.

The issue of reducing environmental pollutants has now been raised and the approach of major oil companies has changed in this direction. What are your plans in this regard?

Unfortunately, future research topics are not seen in the research structure. On the other hand, the value chain with a unified view is missing in the structure of the Petroleum Ministry and NIOC. The value chain consists of a series of production and support activities. For instance, value chain support activities include corporate infrastructure, human resources, technology development, commodity supply, and manufacturing activities, including marketing and sales, services, internal and external logistics, and operations. The more the value chain process is addressed, the more integrated the production process will be. The issue of the environment that you mentioned is usually in the form of associated gases (flare), management of effluents and wastes or contaminated oil soils. It is interesting to know that in the process of network production, the value of these items is seen as wealth. For example, there is currently a proposal for the use of oil-contaminated soil, or in the case of oil effluents, which according to some predictions and scientific articles states that three barrels of effluent will be produced per barrel in the future, so there is a need to manage this issue. It is possible to manage these cases with value chain and value added and these cases should not be looked at point by point. Environmental problems can undoubtedly be solved by implementing projects as a value chain. We have prepared a plan for the creation of a value network and a value-added network, the preparations for which had already been prepared, but we are going to formally implement it with one of the universities in the country as an integrated and comprehensive study plan. The initial proposal is that the value chain view in the body of the Petroleum Ministry should be integrated, i.e., there should be a division in the body of the Petroleum Ministry based on which all the processes of the oil industry upstream to downstream create value and that the value chain would be extended to small organizations.

Does the budget of the research department cover the expenses of this sector?

The proposal we have for a research budget is a floating budget, a budget for which there is no ceiling, in other words, a profitability that seeks to meet the need. This requires a financial model. Currently one of our challenges for working with universities is the same contractual and financial issue, we cannot combine research issues with current non-research projects. Certainly, the current research budget is not enough given the expectations from this section. At the same time, no matter how much is spent in this sector, it will be useful, and the money spent on research is a source of wealth and certainly not a cost.

What plans does NISOC have in using renewables?

The first suggestion is to add this category (renewable energy) to the research and technology structure of NISOC, so there is a need to review the structure. Efforts should be made to make the research sector, which is in fact the future of an organization, more prominent. Of course, now suggestions have been made in this field, such as the use of solar energy technology, hydrogen fuel, and so on, for which there should be a mechanism and planning.

Petrobras Takes Prosafe Rig for Long-Term Support

Petrobras has contracted Prosafe’s Safe Notos semisubmersible vessel for safety and maintenance support offshore Brazil.

The four-year firm program, valued at around $110 million, starts in 3Q/4Q 2022 following the expiry of the rig’s current contract which started in 4Q 2016.

Safe Notos can accommodate up to 500 persons, with a large-capacity open deck area and telescopic gangway.

Prosafe says that its focus during operations will be on reducing emissions through energy performance monitoring and associated fuel consumption reduction.

FAR Seeking to Exit Guinea Bissau E&P

 FAR is preparing to withdraw from the Esperanca Blocks 4A & 5A and Sinapa Block 2 offshore Guinea Bissau.

The company has issued notices of withdrawal to the Government and the blocks’ operator Petronor in accordance, after the partners’ joint efforts to farm-down their interests were unsuccessful.

Skarv Enters Gas Blowdown Phase

Aker BP has started gas blowdown from two reservoir segments at the Skarv Field in the Norwegian Sea, following nine years of gas injection to produce the oil reserves.

Blowdown forms part of the approved drainage strategy for the Skarv plan for development and operation (PDO) and is taking place two years later than originally planned.

It should lead to increased take-up of available gas processing and export capacity from the Skarv FPSO and Åsgard pipeline transport system, with increased volumes of gas available for export to markets in Europe.

In its latest results statement, Aker BP added that drilling for the SkarvIdunTunge project is due to start in the second half of the year, while preparations continue for the Skarv Satellites project (Ørn, Shrek, Idun Nord and Alve Nord). PDOs should be submitted before year-end.

INPEX Surveying Drilling Prospects Offshore Japan

INPEX has started exploration drilling surveys in the Shimane and Yamaguchi prefectures offshore Japan.

This follows preparations undertaken by the company’s subsidiary INPEX Sanin Offshore Development.

The surveys are taking place in 240 m water depth, 130 km northwest of Shimane Prefecture and 150 km north of Yamaguchi Prefecture. INPEX plans to assess the data to determine the extent of oil and natural gas deposits at the drilling location.

Noble Rig Spuds Apus Well Offshore Australia

The jackup Noble Tom Prosser has started drilling the Santos-operated Apus-1 well in the sub-Bedout basin offshore Western Australia.

According to partner Carnarvon Energy the location is 27 km (16.8 mi) southwest of the recent Pavo-1 discovery, drilled by the same rig.

Apus-1 well is targeting a large structure with two potential reservoir intervals, with potential combined resources of 235 MMbbl of liquids and 408 bcf of gas in the Caley and Milne Members within the main Apus structure (including Apus West and Apus East).

Oil Market Review

Gray Shadow of Energy Security

 Afshin Javan

Iran's National Representative to OPEC

Introduction

The energy market has seen many fluctuations over recent months. The latest lockdowns in China are causing significant demand destruction and adding downward pressure on oil prices, reduction of gas storage in Europe and finally the tension between Russia and Ukraine complicated part of energy marketpuzzle, such a wonderful life!

Over recent weeks, western countries have made many attempts to sanction Russia's energy sector andthe US administration has banned the oil imports from Russia to the United States, while the United Kingdom has prevented Russian oil tankers from entering British ports but in reality, both actionswere just symbolic and had not impact on export flow of Russia. The European Union has also imposed sanctions on Russia that have not been targeted, at least not directly and at Russia's energy export system; however, the channel of banking sanctions and insurance of the Russian financial system has had a negative impact on the country's energy exports. In this situation, oil companies are trying to find alternatives to Russian oil.

In 2021, Russia’scrude oil export stood at 4.5 million barrels per day of and its petroleum products exports stood at 2.7 million barrels per day, of which Europe alone last year had 4 million barrels per day of crude oil and petroleum products imports. 40% of European diesel fuel is supplied from Russia. Therefore, replacing such a volume of crude oil and petroleum products seems to be impossible, at least in the short term. So western countries are faced with the option of how in the long term keep up the pressure on Russia.

MoreUS Therapy

The IEA defines energy security as the uninterrupted availability of energy sources at an affordable price. Energy security studies have expanded from their classic beginnings following the 1970s oil crises to encompass various energy sectors and increasingly diverse issues. This viewpoint contributes to the re-examination of the meaning of energy security that has accompanied this expansion.

According to interesting academic researchentitled “The impact of international sanctions on energy security”, they concluded that international sanctions do significantly and negatively influence the energy security of target countries in some cases. Specifically, unilateral sanctions, U.S. sanctions, economic sanctions, and the intensity of sanctions have a significantly negative impact on energy security.

Unilateral sanctions would jeopardize energy security, and the consequences would be the high cost of energy and raw materials, and ultimately the high inflationary effects that are unfortunately imposed on ordinary people.

The contradiction in the behavior of western governments, especially the United States and Europe, in the center of the energy crisis and the start of the tension on the Europe has become more apparent. The US administration, which came to power with the motto of avoiding fossil fuels consumption, has taken steps in less than a year, such as repeatedly asking OPEC Plus producers to increase oil production faster, negotiating with shale oil companies to increase production, releasing huge amounts of oil from strategic petroleum reserves (SPR), and so on.

Regarding the tension between Russia and Ukraine, it should be noted that, like any war in this conflict, the losers would be more than the winners. Weakening Russia's national system is on the West's agenda, and so is sanctions against the Russian central bank considered in this regard.

General Concerns

April reports published by three international oil market institutions show that global demand in 2022 will be lower than previously expected, due to the Russia–Ukraine tension, quarantine in China and a drop in the global economy's growth estimate. In this way, the U.S. Energy Information Administration (EIA) has revised down its estimate by 0.8 mb/d, believing that daily demand will average 99.8 mb/dthis year.

OPEC also cut nearly half a million barrels from its previous forecast to keep its estimate of global demand above 100 mb/d. This comes after the International Energy Agency (IEA) last month saw Russia-Ukraine tension sharply reduce demand estimates, and in its new report it has kept dropping by 0.26mb/d to average 99.4 mb/d.

All these three institutions have reduced their assessment of demand this year in their most recent monthly report, though they have not performed the same in reduced volumes. The International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) updated their estimates of the 2022 oil balance. Accordingly, these institutions are in quarantine due to factors such as the new wave of COVID-19 cases that have brought parts of China into quarantine,and rising retail prices, partly due to fears of supply disruptions from buyers and traders boycotting Russian oil, lowered their estimate of demand.

Having a glance at oil demand forMarch and April, we see the agency lowering its estimate by a total of 1.2 mb/d, bringing it below 100 mb/d. The U.S. Energy Information Administration did not apply any reductions in demand estimates in its report last month as the economic data used by the agency were finalized prior to the Russian invasion. On the contrary, OPEC analysts continue to see the diminishing impact of geopolitical tension or COVID-19 on demand, as relatively small.

In the past two months, they have lowered their forecast of global demand by a total of just 0.3 mb/d. The current wave of coronavirus pandemics, which have gained strength in parts of China, could reduce the country's demand by 0.6 mb/d during the second quarter of 2022, according to the agency. The U.S. Energy Information Administration, on the other hand, sees the decline at just 0.13 mb/d.

Thereis more agreement on the impact of economic sanctions against Russia, especially when we look at the forecasts for the past two months. The EIA and OPEC both appeared to be trying to get themselves to the agency's forecast last month.

It seems OPEC analysts have been more cautious than the other two oil bodies, lowering their outlook for Russian demand by just 0.15 mb/d, or 4 %. However, the two other bodies have applied reduction reforms of about 0.4 mb/d, or 10 %, in their estimates.But the big difference is in the views of the three bodies about Russian production from the current month onwards. Although OPEC has revised down its estimate of Russian supply since March, it believes it will rise slightly above 11 million barrels per day in the following year. However, this estimate is 0.53 mb/d lower than the previous estimate.On the other hand, the EIA and IEA see a much larger impact on Russian oil production, even though there is still no comprehensive sanction against the purchase of oil or refined products. The culmination of disputes between the institutions in the third quarter of the year is seen, with the Russian Oil Production Agency estimating 8.7 mb/d and OPEC estimating it at 11.2 mb/d, i.e., 2.5 mb/d of disagreement. The EIA figure is also at a level between the two.

Russia-Ukraine Tension Impact

According to the OPEC April MOMR “The year began with the expectation of an ongoing and solid underlying global economic recovery towards mid-year. However, this expectation changed as the conflict between Russia and Ukraine unfolded at the end of February. While the COVID-19 pandemic has been the main topic for the global economy over the course of two years, the outcome of the latest events in Eastern Europe along with the COVID-19 pandemic appear to redefine considerably global economic developments. In the short-term, the impact on global economic growth will be negative. While it is forecast that both Russia and Ukraine will be facing recessions in 2022, the rest of the global economy will be thoroughly impacted as well, via a variety of channels. Inflation is the main factor that will have impact on the global economy. The strong rise in commodity prices along with ongoing supply-chain bottlenecks and COVID-19-related logistical buildups in China and elsewhere are all fueling global inflation, which was already at a high level. Food inflation will likely be an existential challenge for low-income and less-developed economies. Moreover, increasingly tight labor markets in major advanced economies are expected to further fuel wage and salary increases,feeding an extended inflation trend. The price pressure has guided central banks across the world to actswiftly to rein in inflation. Actions by the US Federal Reserve, as well as gradual actions by the EuropeanCentral Bank (ECB) among others, will need close monitoring. Given the geopolitical situation and theglobal impact of price rises, consumer and business sentiment is expected to decline in Europe particularly,and in the rest of the world.

Moreover, numerous additional uncertainties beyond the direct impact of the current geopolitical tension and COVID-19-related issues continue to challenge current growth levels. In light of risinginterest rates, an important challenge to note is the concern over the very high sovereign debt levels acrossthe globe that could cause a considerable burden on the fiscal health of many economies. Counterbalancingmeasures to the economic downward trend could come from additional fiscal stimulus measures, especiallyin the western economies and China.”

The International Monetary Fund (IMF)in its latest report also reviseddown its global growth projections for 2022 and 2023. IMF is now projecting a 3.6% GDP rate for the global economy this year and for 2023. This represents an 0.8 and 0.2 percentage point drop, respectively, comparedwith its forecasts published in January.

According to the latest WTO publication and simulation model,it is predicted that the crisis of recent geopolitical tension and related policies could reduce global GDP growth by 0.7% to 1.3 % and put it somewhere between 3.1 % and 3.7 %.

The World Bank latest report also reviseddownits global growth expectations, now estimating a growth rate for 2022 of 3.2%, down from 4.1%. According to the IMF “a severe impact on the Russian economy,” which estimated that the country’s GDP will fall by 8.5% this year, and by 2.3% in 2023.

With regard to the recentgeopolitical tensionand its continuationuntil 2023,Russiareal GDPwill decrease…about 4.4% lower than the April 2022 OPEC baseline, which means it will drop from -2% to -6.4% in 2022 and about -9% in 2023. Russia negative spillover impact will be conveyed to the Eurozone andglobaleconomy.

The UK GDP according to model result also will impact from Eurozone trade channel, but model has not performed any impact on theChinese and Indianeconomy.Meanwhile, other factors will treat China economy, which the IMF now expects to log growth of 4.4% in 2022, well below Beijing's official target of about 5.5%. The world's second biggest economy has been disadvantaged by lockdowns aimed at stopping the spread of Covid-19, consequenceof the Russia-Ukraine tension and problems in its property sector.

The simulation results show that this stress has the least impact on the US economyand may accelerateenergy transition; this will be a warning to the major oil and gas producing countries in the medium term. Rapid energy transitionmay be accompanied by propaganda of environmental and climate change issues and further restrictions on investment in oil and gas projects in the near future.

Tensions between Russia and Ukraine and their impact on new energy development in short term are significant.In March and April 2022, wind energy surpassed US coal and nuclear energy. The solar and wind energy markets grew the fastest in the Netherlands; Australia and Vietnam. New technologies that have been introduced over recent months in relation to wind turbines have gradually increased the share of these turbines in the energy basket.

For the first time over recent months, electricity generation from solar and wind energy has surpassed its turning point, supplying more than 10 % of the world's electricity, a figure to be pondered. The figure for 2021 is about 10% (about 30,000 TWh).

It should be noted that the growth and development of technologies with advanced technology is exponential.

Impact of Russia – Ukraine Tension on the Global Oil Demand

Global oil demand growth in 2021 is slightlyrevised down by 0.04 mb/d, reflecting actual data across the regions, standing now at 5.7 mb/d. The downward revision is necessitated by an upward revision to the 2020 baseline. Oil demand in the OECD increased by 2.6 mb/d in 2021, while the non-OECD showed growth of 3.1 mb/d. For 2022, world oil demand growth is revised down by 0.5 mb/d to stand at 3.7 mb/d, mostly reflecting the downward revision in world economic growth. Oil demand growth is forecast at 1.9 mb/d in the OECD and 1.8 mb/d in the non-OECD.

It seems crude oil demand will decline sharply in 2023, following global slowing economic growth and high market uncertainty, as well as continuing tensions between Russia and Ukraine.

Will the oil market face an oversupply of oil in 2023?

Will 2023 be the starting point for energy transitions?

World Oil Supply

According to OPEC MOMR, in April 2022 Non-OPEC liquids supply growth in 2021 is broadly unchanged at around 0.6 mb/d. Total US liquidsproduction in 2021 increased by 0.1 mb/d. The largest growth increases were seen in Canada, Russia and China.

Non-OPEC supply in 2022 is revised down by 0.3 mb/d to 2.7 mb/d, mainly on the back of a downward revision for Russia. On the other hand, the US liquids supply growth forecast for 2022 is revised up by 0.3 mb/d to 1.3 mb/d. The main contributors to liquids supply growth in 2022 are expected to be the US, Russia, Brazil, Canada, Kazakhstan, Guyana and Norway. OPEC NGLs are forecast to grow by around 0.1 mb/d both in 2021 and 2022, averaging 5.1 mb/d and 5.3 mb/d, respectively. In March, the OPEC-13 crude oil production increased by 57 tb/d, m-o-m, to average 28.56 mb/d, according to available secondary sources.

Energy Transition

“Reaching the economic, environmental and social sustainability (EES) objectives of all societies requires thenumerous major energy challenges to be successfully overcome and requires rapid progress besides multiple dimensionswithin the framework of the Global Energy Assessment (GEA) to explore technical measures, policies, and related costs and benefits for meeting the following energy objectives:

providing almost universal access to affordable clean cooking fuel and electricityfor the poor,
limiting air pollution and health damages from energy use;
improving energy security throughout the world, and
avoiding dangerous climate change.
These objectives are defined as quantitative targets in the GEA pathways.”

What is behind rapid energy transition? Which factorswill expedite energy transition process?Peak oil factor or disruption in oil supply by unilateral sanction orembargo. Actually,in both situations oil price will riseand creates a minimum condition for transition of energy.But the fundamental question is;what happensif there is enough infrastructure for this transition in the next 2 years?

I would like to draw your attention to the following issues.

In 1914 US Bureau of Mines believedthe world will run out of oil in 10 years. In 1939 and 1950 and before first energy shock, US Department of the Interior suggested that the world will run out of oil in 13 years.US administration in 1976 said that the world will run out of oil in 2011. In 2003, university of Uppsala in Sweden supposed the decline of oil and gas will affect the world population more and finally in 2019 EIA based on Zero Carbon Roadmap report said the global supply of oil is expected to meet the world’s demand through 2050.Lots of unachievable ambitions from 100 years ago.

When reviewed recent Daniel Yergin’s book which is published after EIA report entitled “the New Map” it seems he already predicted recent oil market situation or already was under plan, God Knows!!On page 11 of introduction, he wrote “energy flows, geopolitical competition, and the continuing contention over the unsettled borders that resulted from the collapse of the Soviet Union three decades ago—and from Vladimir Putin’s drive to restore Russia as a Great Power. Russia may be an “energy superpower,” but it is also economically dependent on oil and gas exports. Today, as in Soviet times, those exports are stoking fierce debate about the possible political leverage over Europe that may come in their wake. Yet, any potential leverage has been dissipated by changes in both the European and global gas markets.” One year before Russia and Ukraine tension.

Deborah Gordon in his recent book explained that; “For now, market price is the best metric for gauging a peak in petroleum supply or demand. Various market factors influence petroleum prices, including the balance in oil and gas trade and exogenous forces from financial markets. There is no consensus among experts; however, on the efficacy of oil and gas markets. Some experts view oil and gas as durable assets that the market sets a price based on the available supply. They subscribe to the expectations of future traders to generate changes in price and inventories. Others believe that resources are not durable and that the market price is determined by ongoing imbalances between oil supply and demand. Based on this logic, when supply tightens, prices rise. Higher prices dial down demand and unlock new technologies that increase supply and usher new unconventional hydrocarbons into the market. Any resulting oversupply lowers prices, which in turn moderates production and reaccelerates demand. Round and round the oil and gas market goes”.

Current oil and gas market conditions will support rapid energy transition in the midterm. However, despite the mentioned approaches by Western Europe and US, a recent report from Reclaim Finance as an anti-fossil fuel campaign organization shows that 30 of the world’s leading asset managers had $82 billion invested in companies developing new coal supply, and $468 billion in 12 major oil and gas companies.

In transition of energy, we are wondering between classical and modern concepts of energy security, the classical one emphasizes on the sustainable oil and gas supply but the modern one supports green energy and new technology to ensure supply security. The question arises as to how and when the energy transition takes place? Also,how and when will shift from classical period to modern one?

In terms of energy security, the time interval between these two mentioned periods is vital and considerable. Itwillbe accompanied by a lot of uncertainty. If energy transition rapidly takes place, then will have substantial risk for the global economy. Skipping from one period to another one is like daily exercise; when we exercise hard without any preparation, we will definitely collapse.

Any unilateral sanctions would jeopardize energy security, and the consequences would be the high cost of energy and raw materials, and ultimately the high inflationary effects that are unfortunately imposed on ordinary people.

Therefore, current situation is a short-term threat to global security of oil and gas supply and if this situation escalates then nobody can manage it, hence we will have consequential crisis in the midterm. According to the IMF latest report that "global economic prospects have worsened significantly" since the start of the year, it does not predict a recession, which the IMF typically calls when growth falls to 2.5% or lower.But the IMF also notes uncertainty "well beyond the normal range" surrounding its projections because of the unprecedented nature of the shock. And the risks of an even greater slowdown, combined with persistently high inflation, are climbing.

According to the Goldman Sachs recent report, there is a likelihood of a US recession at 15% in the next 12 months and 35% within the next 24 months. Japanese investment bank Nomura also believes the chances of China for falling into a recession this spring is significant.

Conclusion

It seems the most serious incident is the tension between Russia and Ukraine, which has targeted energy supply security. On one hand, Russian oil supply was impacted by new restriction of western countries and on the other, western countries look for other oil supply sources for replacing Russian oil and gas. Russia is one of the OPEC Plus membersand in recent months unanimouslysupported by OPEC and non-OPEC members.

In the current critical situation, it seems that cooperation and consensus in OPEC Plus may seriously contribute to oil market balance, and this consistency is necessary by the end of 2023.

Energy market conditions in coming months will be affected by two factors on supply side and demand side. On the supply side, much could depend on Russian and Western countries decision in the next move,and on the demand side, Covid-19 lockdowns and surging energy prices hit Chinese oil demand in March and April 2022 numbers and will show a further contraction as the lockdowns continue to spread and are only now starting to show faint signs of easing.

By the way, accelerating the energy transition process in major oil-consuming countries considered as new security goals, of course, the above-mentioned issue is one of the OPEC Plus concerns and a substantial uncertainty. It seems lower oil price and stable oil supply to the world market may control the speed of energy transition and provide a balance in oil market in the current situation. However, it is clear that high oil and natural gas price will expedite energy transition process.

Realistic diplomatic way will protect all producers and consumers.Otherwise, we will see a dangerous loss-loss game in energy area that is gradually amplifying consequences damage. This situation will impose unbridled recession and inflation to the global economy. This crisis also may delay the achievement of important environmental goals andrationalenergy transition in the long term.

References:

OPEC, IEA, EIAmonthly reports
Oxford economics data bank April 2022
IMF GDP growth estimates and forecast -April 2022 report
Oil Price internet site
“Russia-Ukraine conflict puts fragile global trade recovery at risk”- WTO 12 April 2022
Jun Wen, Xinxin Zhao, Quan-Jing Wang “The impact of international sanctions on energy security “- SAGE Journal First Published July 19, 2020
Yergin, Daniel, The new map: energy, climate, and the clash of nations -First Edition- New York : Penguin Press, 2020.
  Gordon Deborah, No standard oil: managing abundant petroleum in a warming world - New York : Oxford University Press, 2022.
Keywan Riahi, David McCollum, Volker Krey –“The Next Energy Transition Transformative Pathways, Choices and Opportunities”- Energy Program International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria 2012

Iran’s Energy Diplomacy in Latin America

Shuaib Bahman

Growing demand for energy has intensified international rivalry over access to energy resources. Therefore, various nations are trying their best to adopt an effective and efficient energy diplomacy in a bid to guaranteeing safe access to these vitally important resources.

Energy diplomacy is not only used in oil and gas consuming countries, but in many cases, producing countries also use energy as a diplomatic tool. Such a thing is a necessity for Iran, which has rich and vast energy reserves. Therefore, over recent years, the issue of energy diplomacy has always been the focus of the PetroleumMinistry as an important issue, which, of course, has been associated by ups and downs.

Meanwhile, the visit of Iran’s Minister of Petroleum Javad Owji to Latin America, which led to the signing of four memoranda and two agreements in the field of oil and two agreements in the field of agriculture, is important from various economic and political dimensions and is a positive step in developing energy diplomacy. During the visit, talks were held on the development of oil fields, improving tradeof oil and refined petroleum products, and refining cooperation between Iran and Venezuela and withNicaragua.Also development and production in oil and gas fields, upgrading and modernization of refineries and utilization of refinery capacities, training manpower and experts in oil, gas and petrochemical industries, export of engineering services and technology transfer and development of export markets of crude oil, gas condensate and petroleum products were at the heart of the negotiations and memoranda of understanding.

Latin America's importance in Iran's foreign policy and energy diplomacy lies in the fact that the region had long been known as the heaven for the United States. Over the years, the United States has sought to expand and consolidate its influence in the region in various ways, and has put significant pressure on countries that oppose it in Latin America. Most of these pressures have come from leftist and anti-American governments or politicians, and have led to imposition of economic sanctions, especially in the energy sector. As in recent years, Venezuela has been hit by the US energy sanctions. The sanctions have both reduced the country's production and disrupted Caracas exports’ trend.

However, when US political pressure on Caracas and the Maduro government escalated with the creation of an energy crisis in the country, Iran was able to rush to Venezuela's aid by sending energy shipments. The same is true of Nicaragua against the United States. This country is in dire need of development in the field of energy and has shown considerable interest in expanding cooperation with the Islamic Republic of Iran. Therefore, in Nicaragua, as in Venezuela, there is a very positive atmosphere for cooperation with Iran in the field of energy. Accordingly, cooperation in completing the 100,000-barrel Nicaraguan oil refinery, developing oil and gas fields, and supplying crude oil and petroleum products to the people of this country are among the most important pillars that may shape Tehran's energy diplomacy with Managua.

In Iran, on the other hand, the 13thadministration’s approach is based on expanding economic and political relations with Latin American countries, especially Venezuela and Nicaragua. Especially since Latin American countries, regardless of US sanctions and pressures, are willing to improve their relations with Iran. Therefore, supplying energy to Nicaragua, as well as rebuilding Venezuela's oil industry and cooperating in various energy sectors in these countries may be a significant economic advantage for Iran.

With suchdescription of development and production of oil and gas fields, upgrading and modernization of refineries and utilization of refinery capacities, training of manpower and expertise in oil, gas and petrochemical industries, export of technical-engineering services and technology transfer, development of crude oil export markets, gas condensate and petroleum products are mentioned as the most important axes that could be considered in prospective interactions between Iran and Latin American countries.

Undoubtedly, Iran's technical, professional, technological and economic capabilities are such that it could play a decisive role in the world energy economy. With its vast oil and gas reserves in the world and long experience in the field of energy, Iran has the opportunity to establish ties with the countries of this region if it adopts active diplomacy and pays attention to potential future markets in the developing countries in Latin America.

At the same time, energy diplomacy could provide the ground for easing economic sanctions against Iran, and help other countries that have been similarly subject to US sanctions. Accordingly, the Iranian Minister of Petroleum’s visit to Latin America marks the beginning of a new chapter in Tehran's interactions with countries in the region, focusing on energy, and may transform many international equations in the field of oil and gas.

Shale Oil and Gas in 2022

Shuaib Bahman

Shaleoil and gas production, which has grown significantly over recent years and is referred to as an energy revolution, is facing significant constraints.

Estimates of the production process of this type of energy indicate that the future of shale oil and gas in the world largely depends on the conditions of conventional oil production, as it is conventional oil that is currently influencing prices in the world markets. Therefore, if oversupply of oil reduces prices or, conversely, if demand exceeds supply, shale oil production will also be affected.

Profitability and Loss Production

Investors made huge profits at the beginning of the shale oil revolution. In particular, the more than 30-fold increase in the shares of some companies in less than two years attracted a great deal of attention to the shale oil industry in the United States. However, the fall in oil prices in 2015 paralyzed the industry, reducing shale oil production by about 1mb/d.

Then, as prices improved, the shale oil industry improved dramatically and production steadily increased until the United States eventually became the world's largest oil producer and top exporter in 2018 and 2019. Of course, in the same period, shale oil investors sometimes suffered heavy losses because in many cases, the revenue from the sales could not cover the cost of production.

In the meantime, the budget deficit in 2019 and the dispute between Russia and Saudi Arabia in March 2020, which sharply reduced prices, was a serious alarm for shale oil production. Subsequently, the outbreak of the coronavirus epidemic and the closure of many businesses around the world caused serious damage to the shale oil industry. WTI crude price fell on April 20, 2020.

This led to the shutdown of a large number of wells in shale oil fields from Eagle Ford in the south to North Dakota in the northern United States in order to avoid selling oil at low prices, which in many cases did not even offset production costs. After OPEC+ countries cut production since May 2020, oil prices began to recover, prompting shale oil producers to once again extract from their closed and semi-closed wells.

Although this period was a good opportunity to drill new wells and complete incomplete projects, this did not happen due to oil companies’ monetary problems and banks’ refusal to lend or release credit lines. Larger companies were unable to expand drilling and completion projects after prices rose to more than $60 a barrel.

Although now with the increase in oil prices above $100, there is a favorable environment for companies operating in the field of shale oil, but it is noteworthy that in addition to financial issues, there are other issues that somehow against the growth of production of this type of oil and gas creates a barrier.

These include protests by environmentalists, as well as general trends and programs to eliminate fossil fuels and achieve clean and renewable energy, each of which has been effective in challenging shale oil and gas production.

Opportunities and Challenges

The future of the shale oil industry faces opportunities and challenges. These opportunities include rising oil prices. If the supply of crude oil is challenged due to issues such as lack of investment and events such as the Russia-Ukraine war, then world markets will experience an upward trend in favor of shale oil production. However, many experts are of the opinion that the excessive price of oil cannot be very favorable to shale oil producers because the most important shale oil producer, the United States, will suffer severely from rising energy prices.

Meantime, it should be noted that in coincidence with the Ukraine war, the state of the coronavirus pandemic is affecting the future of global energy markets. If the outbreak of the disease rises again in the world, one should expect a decrease in energy demand, which in turn can have consequences such as lower prices. As a rule, any trend in theworld markets that leads to lower oil prices is not pleasant for shale oil investors. Because the cost of producing and extracting this type of oil is higher than conventional oil. As a result, lower global oil prices will reduce profits and productivity of shale oil production. Accordingly, there are at least two serious obstacles to enhancing shale oil production in the future:

The first obstacle to the future prosperity of the shale oil and gas industry is the lack of financing. The shale industry needs huge sums of fund to grow, which must be spent both to prevent the depletion of existing industries and to complete DUCs. According to US institutions, there are currently thousands of DUCs in the country, many of which are underdeveloped due to lack of funding and others due to lack of technology or geological and environmental challenges.

The second obstacle to serious progress in the shale oil and gas industry is operational challenges. The industry has laid off tens of thousands of skilled engineers and workers by 2020, and most of them will never return to the industry. At the same time, the number of students studying petroleum engineering and geology at US universities has dropped dramatically. This could also challenge the employment of foreign nationals due to immigration and employment laws, quarantine, travel bans and closures due to the COVID-19.

Future Outlook

One of the most important factors influencing the future of shale oil is its production in different countries. Many believe that shale oil production, known as the oil revolution, will not be repeated in places other than the United States. In fact, despite the fact that some countries benefit from shale gas and oil, they will not reach the production and extraction stage, at least in the short term. Because private ownership of resources, advanced infrastructure, and industry rules and regulations, along with the knowledge, technology, specialists, engineers, and skilled labor to extract shale oil, exists only in the United States. In other words, other shale oil-rich countries do not have the infrastructure, technology and expertise to extract this type of energy. This in itself may affect the position and impact of shale oil on world markets.

This industry cannot gain a large position in the global markets. At the same time, given that the shale oil industry suffers from a high rate of wear and tear, if proper investment in this industry is not continued, the high level of production will cause future investments to be used to compensate for the wear and tear of existing facilities. In other words, most investments are spent on maintaining the level of production and not enhancing production. However, if oil prices rise in 2022, then banks will invest and allocate credit to the shale oil sector. As a result, while the shale oil and gas industry will continue to live, it is unlikely to experience significant growth in 2022. However, the future of the shale oil and gas industry will remain largely dependent on conventional oil prices in the world markets.

Petroleum Products Storage Capacity up 600ml

The storage capacity of refined petroleum products is increasing 600 million liters in southern Iran following a memorandum of understanding whichwas signed for financing the Shahid Nader Mahdavi Storage Site in Hormuzgan Province. The signing ceremony was attended by the minister of petroleum, deputy minister of petroleum for refining and distribution and the CEO of Bank Melli. 

Expanding petroleum products storage facilities due to the planned construction of the ShahidSoleimani Integrated Refining/Petrochemical Complex and Mehr Persian Gulf refinery, increasing strategic reserves, establishing the largest oil products storage site in southern coasts and completing the offshore and onshore oil products export chain are among the objectives of the Shahid Nader Mahdavi storage site construction.

JalilSalari, deputy minister of petroleum for refining and distribution, said the petroleum products’ storage capacity would increase in parallel with progress of refining projects.

He said that storage constituted a major challenge to the refining industry, adding: “In the previous projects we had studied, the capacity of storage facilities was planned to increase from 12 billion to 16.5 billion liters.”

Five Cargoes Exported

Salari said consumption was forecast to increase in the new calendar year. Due to the coronavirus pandemic, he said, consumption of gasoil and gasoline reached 97 ml/d.

He noted that Iran managed to export five cargoes of kerosene and gasoil during the first month of the current calendar year at the highest price possible.

He said that plans would be devised for export in coming months, adding: “Creating oil products storage capacity would be followed up on in parallel with refining development projects.”

Regarding the financing of these projects, he said there were a variety of options, including build-operate-transfer (BOT). He added that another option would be to sign an MOU per month, which would be independent of state funds.

Salari, who is also CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said: “Several knowledge-based projects are currently being monitored, and if the results are successful, a memorandum of understanding will be signed in the coming months, in various areas, including first-time manufacture, software, supply and intelligence.”

Refining/Petchem Integration

Salari said gasoil prices in Iran stood at a ratio of 1 to 60 compared to neighbors. “Naturally, that would motivate fuel smuggling, which should be managed. This issue has been resolved by managing consumption and exercising supervision, as well as increasing rationing in the areas with high consumption,” he added.

“With the construction of the Persian Gulf Star refinery and over coming years, the Mehr and ShahidSoleimani refineries in southern Iran, the storage capacity in southern Iran would increase. That would strengthen our position in domestic distribution, as well as exports. In coincidence with the implementation of storage projects, we are building an oil pipeline for carrying petroleum product (Tabesh pipeline),” he said.

Salari said integrating refineries and petrochemical plants would move Iran’s petroleum industry from fuel burning to profitability. “Concurrently with the increase in national oil products supply, we need to think of efficiency.”

He said that swapping and exporting petroleum products was on the agenda in collaboration with the private sector in northern Iran. “That would be done with a view to reducing fuel transport costs in the country and using the capacity of Caspian Sea terminals. Meanwhile, petroleum products were swapped with northern neighbors in the past, but in small quantities.”

“Today in many refineries in the country it is possible to build petrochemical plants. Therefore, if these refineries are not required to distribute fuel, they quickly build such units in their proximity to convert their gasoline to more profitable products,” said Salari.

Bank Melli Ready for Cooperation

Mohammad Reza Farzin, CEO of Bank Melli, said the bank would be contributing to energy development projects and financing oil projects. “Bank Melli is among the largest banking networks in the country. It has more than 3,000 branch offices in the country.”

“The most expanded banking network outside Iran belongs to Bank Melli. We have many branches in London, the UAE, Iraq, Germany and other Persian Gulf littoral states. We also plan to open branches in China, India and Brazil,” he added.

“Foreign branches of the bank can attract foreign investment. We have strong force for this purpose and this is under way in Russia,” said Farzin.

Noting that the objective was to reduce energy consumption in the country, he said: “This MOU is the beginning of our cooperation with the PetroleumMinistry. We are also ready to cooperate with the Petroleum Ministry in developing the energy sector.”

“Bank Melli is investing € 90 million in this project. This bank intends to be actively involved in financing energy projects, particularly in the oil sector. Meantime, talks are under way with other divisions of the Petroleum Ministry for financing other oil projects,” he said.

Farzin said Bank Melli’s objective in participating in these projects was only related to financing without having any management role. “Companies owned by Bank Melli, be it profitable or not, are listed for sale. We are not looking for business and we intend to help the financing system in the country and create new enterprises.

History of Mideast Oil Contracts

From Pearl Island to 50-50

Part II

Some 115 years has passed since oil was discovered in the Middle East. These years have not been without ups and downs though. In this tense region, oil has gone through a variety of legal, political, economic, social and cultural challenges, whose examination would be hundreds of volumes. In this article, the legal and economic aspects of oil contracts in the Middle East are summarized.

In the final years of the eighteenth century, Napoleon occupied Egypt. The Muslim world was stunned. The Westerners had a clear strategy by occupying Muslim countries, using the resources of Islamic lands to advance their own interests. It did not take long for Western colonialism to show its face. Everything became clear when oil came to the fore. It was basically the colonizers who extracted the oil from the lands of the Middle East to lighten their houses and warm themselves up.

Pearl Island

Following the Iraq oil crisis, the oil in the Persian Gulf and its islands started being coveted by the West. After World War I, no one could stop the Allies, especially as the United States was envious of Middle Eastern oil. It was Bahrain’s turn, a small and rich island that had been part of Iran’s territory for decades. The Bahrainis started giving concessions in the 1930s. Like the Iraqis, they were first paid in rupees for their royalties. As Bernard Mommer, in Global Oil and the Nation State, puts it: “In 1930, Bahrain granted an oil concession to the Bahrain Oil Company, wholly owned by Standard Oil. The payment of fixed property interest, as well as general taxes in the amount of approximately 4 shillings and 6 pence per tonne was provided in the relevant contract, but payments were made in Indian rupees and no gold backing was provided.” At that time, Saudi Arabia was more independent than other countries in the Persian Gulf and was able to benefit well from Bahrain's oil concessions. With much conflict in 1933, property rights eventually shifted from the rupee to the shilling.

Mommer’s account is as follows: “Stankal was forced to compete with the Iraqi Oil Company; however, it was not until 1933 that Stankal eventually established the California Arabian Standard Oil Company (CASOC). He had no choice but to pay a fixed property interest in the British shilling rather than the Indian rupee. In addition, the new payment method was backed by gold, and due to the good fortune of Saudi Arabia, it was agreed to pay 4 shillings per tonne before the devaluation of the British pound.”

Kuwait and Qatar Concessions

There was tough competition between Western companies, and according to colonial logic, they each tried to fill their pockets with Persian Gulf oil. There were two other ready-made bites for Westerners. Kuwait and Qatar could be good sources of income and energy for them and complete the oil exploitation collection of the Persian Gulf countries.

According to Mommer, “In the early 1930s, a rivalry broke out between the Anglo-Persian Oil Company and the Gulf Oil Company, which almost ended in Kuwait's favor. But prior to that, the two agreed to set up a joint venture called the Kuwait Oil Company, in which they each had a 50% stake, and they also agreed on terms to be offered to the Kuwaiti government. In Qatar, the Iraqi Oil Company was the sole applicant for the oil operation. It is noteworthy that in 1929, the Turkish Oil Company was renamed the Iraqi Oil Company. The relevant oil concession was transferred in 1935 to its subsidiary, Qatar Oil Company. In Qatar and Kuwait, land rents and taxes were similar to those used in Bahrain, paid in Indian rupees at approximately 4 shillings and 6 pence per tonne, backed by gold, and inflated and devalued. The Indian rupee also affected the amount payable. However, despite the success of oil exploration operations in Kuwait and Qatar, oil production was delayed due to World War II.”

Saudi and 50-50

World War II was over, Venezuela was connected to the Middle East, and level of their ties grew day by day, every month, and every year. This happened for several reasons; First, the same oil companies that operated in Venezuela also operated in the Middle East. Second, the Americans were much more present in both regions, and third, delegations from Venezuela visited the Middle East in 1949 in a serious and effective manner. Oil also became more expensive after World War II, and the intelligence and power of colonized countries almost increased. The Venezuelans, who were able to increase their property profits by force to 50 percent, made their mark in the Middle East, and the first country to enter such an atmosphere of property profits was Saudi Arabia.

Mommer’s account: “In 1948, 4 shillings per tonne was equivalent to $ 0.21 per barrel of oil. Upon the request of the Saudi government, which referred to the increase in oil prices, Aramco agreed with an immediate increase of $0.32 per barrel, and with the expected increase in ownership interest rates, the Iraqi oil company increased its score from 4 to 6 shillings. Despite this increase, Aramco paid $38 million in land rent to the Saudi government in 1949, and $43 million in income tax to the US Treasury. This was a strange situation, and the situation worsened as the corporate income tax increased from 38 percent in 1949 to 42 percent in 1950 and finally 52 percent in 1952. In terms of crude oil production, according to the depletion coefficient of reservoirs, the relevant rates were 27.55, 30.45, and 37.7 %. But because of the double taxation law in the United States, a simple solution to the problem has emerged. As a result, Aramco entered into negotiations with the Saudi government to reach a new solution on property interest, to produce inland areas of $0.21 per barrel and to produce offshore areas. Then, with the help of US tax experts, a 20-percent income tax bill was drafted. Another law was enacted to provide a 50-50 percentage point tax surcharge, with the aim of securing a 50-50 dividend. Eventually, the same clause related to the 50-50 dividend became part of the concession agreement, which was a supplementary agreement that had been in force since 1950.”