Energy Diplomacy in 13th Administration

Ali Forouzandeh
Director General of Public Relations

The 13th administration is nearing its first anniversary. During this one year, it has made significant achievements, which are marked mainly in the energy sector.

Increased oil exports, enhanced output from gas fields mainly from the giant offshore South Pars gas field, development of joint oil fields, following up on the implementation of agreements for the development of oil and gas fields, flare gas gathering, boosting international interaction and bolstering domestic manufacturing of commodities and equipment are among the major activities in the petroleum industry under the 13th administration.

The Islamic Republic and specifically its petroleum industry has long been under unjust sanctions by the United States and Western governments. The 13th administration is no exception. But Iran has not sit idle. While endeavoring to have sanctions lifted, Iran has been seeking to broaden its diplomacy with other nations. Broadening the energy diplomacy and cooperation with neighboring states is a major plan pursued by Minister of Petroleum Javad Owji.

Some achievements of the 13th administration’s energy diplomacy has been the Iran-Turkmenistan-Azerbaijan gas swap deal (with an annual volume of 1.5-2 bcm) last December, which took effect early this year. In a recent visit to the Republic of Azerbaijan, the minister signed an agreement to double the volume of gas swap from Turkmenistan to Azerbaijan.

A 25% increase in Iran’s natural gas exports year-on-year despite all restrictions, signing a memorandum of understanding with Turkmenistan to export technical and engineering services as well as petroleum products, interacting with Russia and China about broader energy ties, activating joint economic commissions, reaching agreement with Oman for the development of the Hengam oil field, signing four memorandums and two agreements with Latin American nations for developing oil and gas fields, upgrading and renovating refineries, exporting engineering services, building refineries overseas, the Ministry of Petroleum’s regular presence in international energy forums, particularly OPEC, exporting petroleum products to Afghanistan and considering long-term oil and gas agreements with China are among other achievements of the Ministry of Petroleum in the energy diplomacy sector.

Energy Diplomacy Led to Western Sanctions Failure

The dream of bringing Iran's oil exports down to zero via imposing the toughest sanctions in history, such as the D’Amato embargo over the last four decades, has not come true at all as Iran, with its energy diplomacy, has always been able to export its black gold to  the world markets.

Ever since the passage of the D’Amato Bill under former US President Bill Clinton, the United States has made every effort to gradually undermine Iran's importance and position in the world energy markets. This hostility culminated under President Donald Trump, who spoke of crippling sanctions on Iran's petroleum industry, but the question is whether they have reached their goal in the 43 years that have passed since the Islamic Republic came to existence. Or did these actions lead to tensions in the international oil markets? Iran has been under sanctions for years, but has sold its oil on the market through practicing effective energy diplomacy.

The US goal has always been to ensure that Iran’s security would not increase globally and that Iran would fail to use the energy issue as a bargaining chip in its foreign policy; a clear example of disruption by Western countries may be seen in the export of gas to Pakistan that, under US pressure, has refused to take gas from Iran so far despite having a formal gas export contract with Iran.

However, it is important for Iran to maintain its position in the oil and gas market to be an influential player in the world energy markets. Minister of Petroleum Javad Owji has repeatedly stated that Iran is ready to help consumers when the oil and gas market is thirsty, but the market has been deprived of Iranian oil and gas due to unlawful sanctions against Iran. However, since taking office, the 13th administration in Iran has made every effort to activate its energy diplomacy, despite all the restrictions imposed by sanctions, and to activate Iran's trade in the oil and gas market more than ever before.

US Failure

The fact is that  the US and Western pressure on Iran has led to a significant reduction in Iran's crude oil exports after Trump's unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA). This was a matter of great concern to the Iranian economy, which is still heavily dependent on crude oil sales, gas exports and petroleum products. Hence, the issue of strategic energy management was taken more and more seriously in order to use the leverage of international relations to advance energy goals and objectives. With the 13th administration in office, oil exports and sales, as well as its revenue growth, increased by 40 percent despite sanctions.

Even TankerTrackers, which tracks shipments and oil storage, has noted in several reports that Iran has brought its oil exports to above 1 mb/d. Washington Free Beacon, an American conservative political journalism website, recently said in a report that Iran's "fleet of ghost ships" has been successfully sidestepping US sanctions, delivering millions of barrels of crude oil and petroleum products to foreign destinations. The term "ghost ships", previously used by other publications such as The Wall Street Journal and Reuters, refers to Iranian oil tankers which carry cargoes around the world without being detected.

The start-up and operation of the first light crude oil train of the West Karoun pumping station, railroad export of crude oil to northern Caspian Sea states for the first time, opening new oil export gates, sale of more than 180,000 tonnes of gas condensate on the Energy Exchange floor for a total value of IRR 19,730 billion, launch of four LPG storage tanks at South Pars gas field for exports, increase in the crude oil storage capacity, designing software for metering supervision system to increase the accuracy of crude oil size, export of petroleum products including petroleum, diesel, gasoline and gas condensate under the shadow of international restrictions and sanctions are other achievements of the oil industry. 

There is no doubt that today, in addition to the economy, politics is also intertwined with oil, and a significant part of world politics in dealing with Iran stems from the same privilege of being an oil-rich country, and this is an indisputable fact of the Iranian oil industry.

First Step via Turkmenistan

Following the collapse of the Soviet Union in the 1990s, Iran, due to its geographical position, was able to create and strengthen the issue of energy transit for the countries of the region as a factor in the path of economic stickiness, especially for landlocked countries.

This position has never been used in the last 30 years for various reasons, including US pressure, and even in recent years in the 12th administration despite a complete cessation of gas imports from Turkmenistan, but with the activation of energy diplomacy in the 13th administration, Petroleum Minister Javad Owji left for Turkmenistan.

The imbalance between supply and demand and the cold winter forecast last calendar year pushed Minister Owji to revive the relations with Turkmenistan, which had been strained due to the gas cut in the winter of 2017, and to unlock the ties between the two countries. Reciprocally, last November, a Turkmen delegation headed by Foreign Minister Raşit Meredow travelled to Tehran.

Following the meeting, Owji stressed that the policy of the 13th administration is to

expand the level of bilateral relations with neighbors, including Turkmenistan, saying: “Iran’s Petroleum Ministry is determined to pay the gas debt to Turkmenistan. Finally, on January 1, 2021, we witnessed the import of gas from this country with the stabilization of gas supply across the country.”

The northeastern regions of the country are the farthest parts of the country from the main gas sources and fields of the country, which are large energy industries, and thus with the import of gas from Turkmenistan, the stability of the gas network in the northeastern and northern regions of the country increases.

Turkmenistan is also considered a gas rival to Iran, especially due to the construction of the TAPI pipeline. The policy of importing maximum gas from Turkmenistan could weaken the project.

Turkmenistan has always been interested in exporting gas to Western countries, and the constructive cooperation between Iran and Turkmenistan and the competitive advantage of the Iranian gas transmission network may make Turkmenistan's dream come true rather than heavy investments and environmental and legal problems caused by the pipeline crossing under the Caspian Sea.

After reaching an agreement with the Turkmen, the Petroleum Ministry started negotiations for the swap of its gas to the Republic of Azerbaijan. On November 20, 2021, Minister Owji received Shahin Mustafaev, Deputy Prime Minister of the Republic of Azerbaijan.

“Azerbaijan has a good capacity in the oil and gas sector and a good agreement was reached with the Republic of Azerbaijan on gas swaps from neighboring countries to the Republic of Azerbaijan, such as Turkmenistan,” Owji said after the meeting.

Finally, Iran and Turkmenistan signed a gas swap agreement in Ashgabat, according to which, Turkmenistan would deliver 1.5 bcm to 2 bcm per annum of gas to Azerbaijan via Iran’s land.

After signing the agreement, Owji said: “By signing this agreement, a step forward was taken in the energy relations between the two countries, and this agreement will help provide sustainable winter fuel for the provinces of Khorasan Razavi, North Khorasan and South Khorasan, Golestan and Semnan.”

While the term of the Turkmen gas swap agreement from Iran to Azerbaijan in the 13th government has not yet reached seven months, a memorandum of understanding for doubling the volume of the operation was signed between Iran and Azerbaijan.

The two sides agreed to double the volume of Turkmenistan's annual transit gas to the Republic of Azerbaijan via Iran. This contract is volume-based and Iran takes part of the transit gas as a swap fee.

Interaction with Oman

Expansion of Iran’s relations with neighboring countries has been and is one of the main pillars of Iran’s foreign policy, which is why the Iranian government has always tried not only to maintain its relations with its traditional allies in the Gulf Cooperation Council, without a doubt one of the most important being Oman. It has tried to use countries such as Oman, Qatar and even Kuwait as a bridge to expand relations with the region, as the Persian Gulf countries are one of the best trading markets for Iran.

In order to improve energy diplomacy relations, Minister Owji traveled to Oman last month to discuss topics and potential of cooperation between the two countries. According to the minister, the two axes that have been agreed upon so far are the formation of technical committees to develop a joint oil field and export technical engineering services.

The relations between the Islamic Republic of Iran and the Sultanate of Oman are of special importance due to the economic, geopolitical and political characteristics of the two countries. Iran and Oman have a common water border in the Strait of Hormuz and the distance between the two countries at this point is 37 km. The geopolitical importance of the Strait of Hormuz has led the two countries to have long-term security cooperation to maintain maritime transport security through the strait.

Oman has limited oil and gas resources in the Persian Gulf and has many weaknesses in this regard. That's why it needs its neighbors to meet its energy needs.

Energy Diplomacy in US Backyard

Signing eight agreements and memoranda of understanding with three Latin American countries in the fields of development and production from oil and gas fields, upgrading and modernization of refineries and utilization of refinery capacities and other fields of education and services of oil and gas industry are among achievements of Owji’s tour of three Latin American nations.

Owji’s important visit to Latin America should be considered a new chapter in energy diplomacy in the US backyard. The importance of this visit was visible in the anger of Western media.

Venezuela was the Iranian petroleum minister's first destination in Latin America, a country with more than 300 billion barrels of proven reserves, i.e. the largest oil reserves in the world. 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 lagged behind in recent years, due to political unrest and US sanctions. Iran, however, has stood by this country all these years and has delivered large shipments of gasoline and gas condensate to this country in the most difficult conditions.

Iran and Venezuela; however, have taken a new path in expanding cooperation under the 13th administration, which is set to expand, according to senior officials. In this regard, during the recent visit of Nicolas Maduro to Iran, the Iranian and Venezuelan presidents signed a 20-year comprehensive strategic cooperation document in the political, cultural, tourism, economic, oil and petrochemical fields.

United Front

Iran’s Minister of Petroleum left for Havana, the capital of Cuba, after intensive meetings and visits to the Venezuelan oil facilities. In Cuba, he met with senior Cuban officials, including Cuban President Miguel Diaz-Canel, Cuban Vice President Ricardo Cabrisas Ruiz, Cuban oil and energy ministers, and discussed ways for the two countries to work together in the energy sector.

The Republic of Cuba is a country composed of the Algerian community in the Caribbean Sea and its capital is Havana. It has a population of 11.2 million and its official language is Spanish.

Joint Economic Commission

Owji's last destination on a trip to Latin America was Nicaragua. In addition to meeting with President Daniel Ortega and Speaker of the Nicaraguan National Assembly Gustavo Porras Cortes, he attended the Joint Economic Commission of the two countries in the presence of six Nicaraguan cabinet ministers, and discussed bilateral cooperation.

“Iran has been a helper of Latin American countries, especially Nicaragua, during the difficult days of US sanctions,” he said during a meeting with Ortega. “The policy of the Islamic Republic of Iran is to protect the independence, freedom and right to self-determination of nations and not to interfere in other countries’ affairs, so we strongly condemn the interference of some countries in the internal affairs of Nicaragua.”

Nicaragua is one of the largest countries in Central America, with a population of more than 6 million, according to the 2019 census.

Meeting with the Ministries of Energy and Mines, Industry and Trade, Finance and Public Credit and Agriculture of Nicaragua was another highlight of Owji’s trip, during which they discussed energy and agriculture cooperation.

Development of oil and gas fields and production from them, upgrading and modernization of refineries and utilization of refinery capacities, training manpower and expertise 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 among the topics of discussion and memoranda.

Energy diplomacy in the 13th administration has taken a different direction. Less than a year into office, this administration had recorded significant movements in the field of energy diplomacy everywhere from neighboring countries to South America. Iran can play a strategic role in energy developments and must use this capacity to benefit from its huge oil and gas resources. Gas trading is one of the ways to benefit from this big wealth. To that effect, Iran’s Petroleum Ministry is engaged in gas swap.

Oil-Rich Tehran, Caracas Boosting Ties

The presidents of Iran and Venezuela have signed a 20-year cooperation pact. The two countries altogether hold more than 460 billion barrels of oil reserves.

According to the latest report of the Organization of the Petroleum Exporting Countries (OPEC) Iran with 157 billion barrels of crude oil reserves and Venezuela with 303.8 billion barrels of crude oil reserves produce 2.564 mb/d and 707,000 b/d of oil, respectively.

While the capacity of the two countries is beyond these numbers they can meet the world's oil demand which has hit $120 if sanctions are lifted. Now will the US choose the price of $5 per gallon of gasoline or will it choose to lift the sanctions on Iran and Venezuela with more than 460 billion barrels of crude oil reserves? Tehran and Caracas; however, are expanding relations in various sectors, including energy, which has accelerated since the recent visit to Venezuela by Iran’s Minister of Petroleum Javad Owji.

Iran Gasoline in Venezuela

Minister Owji travelled to Latin America heading a delegation in May. Iran had already started its cooperation with Venezuela by exporting gasoline in 2020. But Owji’s visit paved the way for further ties.

In June 2020, five Iranian tankers – the Clavel, Faxon, Forest, Fortune and Petunia – carried 1.55 million barrels of gasoline and refined petroleum products to Venezuela. In that time, President Nicolas Maduro said: “I feel compelled to travel to Iran personally to thank these people. Venezuela and Iran both want peace, and we have the right to trade freely.”

Russia’s RT wrote in a report at the time: “After Iran sent gasoline to Venezuela, the Spanish hashtag #GraciasIran (thank you Iran) was trended on Twitter, and Iran was praised for its cooperation in the face of the US naval blockade.”

New Path

As noted, Iran-Venezuela cooperation is not limited to the export of petroleum products. On the sidelines of the sixth summit of the Gas Exporting Countries Forum (GECF) in Doha, Qatar, in the presence of President Ebrahim Raeesi, the two countries signed memorandum of cooperation in the field of technical services, technology transfer, training services, manpower training and cooperation in the development of refining industry. The memorandum of understanding was signed by Iran’s Owji and Venezuelan Foreign Minister Felix Plasencia Gonzalez.

During Owji’s visit to Latin America in May, in addition to pursuing these issues, cooperation in the petrochemical sector and the use of Venezuela's refining capacity were emphasized.

“The first phase of the 100,000-barrel Nicaraguan integrated refining/petrochemical complex will be completed with Venezuela’s investment despite US sanctions, and with the delivery of the technical documents for this project, Iran will undoubtedly participate in the completion of the project and other refining projects,” Owji said at the time.

The minister then said at Tehran’s annual oil show: “Effective cooperation with Latin American countries has provided tremendous opportunities for our oil industry and national economy, and for the first time oil industry experts' desire to acquire offshore refineries through active energy diplomacy, and new and attractive markets has been realized. For Iran's oil, condensate and petroleum products, we have achieved great success in this field, which indicates the commitment of the Petroleum Ministry to use all existing capacities in the world.”

Venezuela Potential

The Bolivarian Republic of Venezuela, with an area of 916,000 square kilometers, in the shape of a large triangle is located in North and South America and has an important strategic position due to being a barrier between Latin America and Central America and its rich natural resources. The country shares borders with Colombia to the west, Guyana to the east, Brazil to the south, and the Atlantic and Caribbean Seas to the north, and has a population of 28 million.

The country’s economy as a whole is dependent on oil and gas, and in 2021 the country’s nominal GDP was $73 billion, up about $23 billion from 2020. In 2021, real GDP growth was 0.7 percent, while between 2014 and 2020, real GDP growth was negative.

17.5% Share of Oil Reserves

According to the Institute for International Energy Studies (IIES), in 2020 the total primary energy consumption in this country was 1.44 exajoules, down 26.3% compared to 2019. In the past few years, total primary energy consumption in Venezuela has been declining to less than half, compared to 2013.

Oil and gas account for the largest share of the country's primary energy consumption. In 2020, the share of oil, gas and hydroelectricity in the country's energy mix was 34, 47 and 19 percent, respectively.

According to the latest estimates, the country has 303.8 billion barrels of proven oil reserves, i.e. 17.5% of the world's total proven oil reserves. In 2020, Venezuela's proven natural gas reserves were 6.3 tcm, which was 3.3 percent of the world's proven natural gas reserves.

Sanctions Impact on Output

In March 2021, the total oil production of the country was 801,000 b/d, of which 701,000 b/d was crude oil and 100,000 b/d was liquids and gas condensate. Venezuela's oil production began in 1917 at 300 b/d and reached 3.7 mb/d in 1970, a level the country has never been able to reach again.

Oil production began to decline in 1970 and reached 1.5 mb/d in 1985, but increased again in 1989 to 2.3 mb/d in 1992 and 3.1 mb/d in 1998.

Along with the rise to power of Hugo Chavez and the announcement of Venezuela's commitment to OPEC, the country reduced its output, and the political crises of Chavez, especially in 2002 and 2003, had a negative impact on Venezuela's production, which failed to reach pre-presidential levels. In addition, US sanctions against Venezuela severely affected production levels.

In 2020, the country's oil consumption was 242,000 b/d, which has decreased by about 18.3 percent compared to 2019, and its average growth rate in the last 10 years has been -8.3 percent.

In 2020, the country's gas production was 18.8 bcm, which is 0.5% of total world gas production. The entire gas produced is consumed domestically and the average growth rate of gas production in the last 10 years has been -2.2%.

Although the country has the largest proven oil reserves in the world, due to political factors, the volume of production is not commensurate with the volume of reserves and it is predicted that production will not change much in the next few years. Fitch Solution estimates that total oil production in 2021 will be about 554,000 b/d, which by 2030 will reach 715,000 b/d. In addition, the institute estimates that Venezuela's dry gas production will reach 24.7 bcm in 2021 and 29.6 bcm by 2030.

Opportunities for Cooperation

Cooperation in the field of development and upgrading of refineries in order to ensure domestic consumption, forming a sales network of products to meet the region's need for products and forming joint cooperation in order to blunt the impact of sanctions;
Venezuela’s refining sector is also suffering from chronic wear and tear due to sanctions imposed on the country, and the country's domestic companies do not have the capacity to upgrade refineries. In 2020, the country had a nominal refining capacity of 1.3 mb/d, but its throughput was 123,000 b/d. By upgrading its refineries, Iran may refine some of its crude oil in its refineries and sell it in the Latin American market because its production is less than its refining capacity.
Establishment of joint Iranian-Latin American study hub infrastructure in the two countries to continuously explore and pursue areas of cooperation;
Venezuela, like Iran, is subject to unilateral US sanctions, and cooperation between the two countries and the use of mutual experience to mitigate the impacts of sanctions could be one of the opportunities for cooperation.
Venezuela has the largest proven oil reserves in the world, but its production is not commensurate with the size of its reserves. Therefore, there is room for Iranian companies to operate in Venezuela’s upstream sector.
Iran and Venezuela are founding members of OPEC and have many common political views, so cooperation between the two countries in OPEC could be among the areas of cooperation between the two sides.

Azerbaijan, Iran New Eurasia Energy Diplomacy Target

Baran Mohammadi

“Iran can supply part of global energy needs”. That was the most important message Iran’s minister of petroleum, Javad Owji, sent to the world during the Baku Energy Forum in Azerbaijan.He traveled to Azerbaijan to attend Baku Energy Week and meet with officials present at the international event. During a meeting with Azerbaijani Economy Minister MikayilJabbarov, he signed a memorandum of understanding to enhance the level of bilateral cooperation. According to the memorandum, the two sides agreed to double the volume of Turkmenistan's annual gas supply to the Republic of Azerbaijan via Iran. Iran takes natural gas as the swap fee.

Iranian energy diplomacy took place this time in Baku with Minister Owji’s visit to Azerbaijan. During this visit, new aspects of expanding cooperation between Iran and neighboring countries, as well as cooperation with European countries were discussed.

Addressing the Baku Energy Forum, Owji said: “Despite unjust sanctions against Iranian people, Iran’s oil and gas industry development has not stopped.”

“The imposers of sanctions imagine that they can halt Iran’s development and progress by resorting to the terrorist tool of sanctions, but sanctions are like a double-edged sword which have now harmed them,” he said.

He recalled that Iran has one of the largest gas capacities in the world, putting Iran's gas reserves at about 34 tcm. He said Iran can help supplyglobal gas needs, adding: “We now have capacity to produce 1bcm/d. Our oil production is about 4 mb/d and the annual production capacity of petrochemical products is about 92 million tonnes.”

He said Iran’s gas production capacity would reach 1.4 bcm/d in eight years. “The world is thirsty for energy and Iran can meet some of this need. Islamic Republic of Iran is ready to absorb investment in gas production and trade. Iran is at the crossroads of world energy transit, while in the north of Iran are large producers such as Russia and Turkmenistan, and in the south is Qatar, and we have the capacity to transfer these huge resources to consumer markets.”

Openness to Cooperation

Owji underscored the necessity of energy supply to the entire world, saying: “Islamic Republic of Iran wants all the people of the world to benefit from this divine blessing, and with good and strong infrastructure, we declare our readiness to cooperate in all sectors of development, trade and transportation of oil and gas to countries in the world and the region.”

“The experience of transferring gas from Turkmenistan to the Republic of Azerbaijan can be repeated for all neighboring countries. We have the second largest network of gas pipelines after Gazprom and we have defined good projects in the field of energy,” said Owji.

“We have not even cut off gas supply to the countries arrears, and we are open to all countries and companies interested in investing in the upstream and downstream oil sector, as well as in the transfer and transit of energy carriers,” he added.

Owji highlighted the significance of clean energies in the country, saying: “This year, we have produced about 1,000 megawatts of renewable energy, and with the plans made, this amount will reach 4,000 megawatts in the next four years.”

Doubling Gas Swap

Owji signed an MOU with Jabbarov to increase gas transfer volume to Turkmenistan to Azerbaijan via Iran’s territory. 

According to the memorandum, the two sides agreed to double the volume of Turkmenistan's annual gas supply to the Republic of Azerbaijan via Iran.

Last December, on the sidelines of the ECO Summit, the three countries of Iran, Turkmenistan and the Republic of Azerbaijan agreed to swap 1.5 to 2 bcm of Turkmen gas annually to the Republic of Azerbaijan. The Iranian gas swap to Azerbaijan also became operational on January 1, 2022.

This agreement improved the stability of the gas network in northeastern Iran and paved the way for Iran to become the energy hub of the region.

Self-Reliance

After signing the gas swap MOU, Owji said: “With the signing of the gas swap agreement, the way has been opened for other areas of cooperation in various sectors, including transportation, electricity and trade, and the like.”

“The country's gas production was 25 mcm/d before the [1979 Islamic] Revolution. After the Revolution, when foreign advisers, especiallyAmericans, left our oil industry, we have reached capacity to supply 1bcm/d,” he said.

He added that Iran was continuing its petroleum industry development without foreign help.

“We are the world's largest combined oil and gas reserves, and the industry is now being developed by local experts,” he said.

Owji referred to his recent visit to Latin America, saying: “Since 2017, when the United States imposed sanctions on Latin American countries, especially Venezuela, their entire oil industry has been shut down because it was generally developed by foreign advisers.”

Joint Development

Owji said he agreed with Azeri officials to set up a joint committee to study how to develop jointly-owned hydrocarbon fields.

“The only place where we have invested abroad is Azerbaijan’s Shah Deniz field, we also have a contract to import electricity from Azerbaijan,” he said.

Owji said that Azerbaijan was ready to cooperate with Iran in some projects including the Rasht-Astara railroads.

In a meeting with Azerbaijan’s energy minister, Owji said Iran’s 13th administration was determined to develop its relations with neighboring countries.

“The experience of Iran-Azerbaijan partnership in the Shah Deniz field is also a good experience that may pave the way for the definition of joint work in the Caspian oil and gas blocks and fields,” he said. “Development of energy relations between the two countries will pave the way for the development of relations in other areas, as well. On the other hand, Iran is ready to increase the volume of gas swap between Turkmenistan and Azerbaijan.”

During the meeting, the executive criteria for increasing the volume of gas swap, the integrated development of joint blocks and fields in the Caspian Basin, electricity exchanges and common areas of cooperation between the two countries were discussed and memorandums of understanding were signed.

For his part, the Azeri energy minister said: “There are a lot of similarities between Iran and Azerbaijan. For instance, in OPEC+, good cooperation has been established between the two countries.”

“It is true that the world situation is unstable and volatile, but as OPEC+ has done before, it is now possible to help markets,” he said.

“The presidents of the two countries have a serious will to develop relations, and this will facilitate relations,” he added.

“The Turkmen gas swap agreement with Azerbaijan was also a historic and valuable event and was strengthened with the presence of the presidents at the time of signing the agreement, and I am glad that Iran is ready to cooperate and it is necessary to increase the swap volume,” he said.

It is noteworthy that Minister Owji and the accompanying delegation discussed in Baku with the Azerbaijan’s deputy prime minister about current issues, including the increase in the swap volume from Turkmenistan and cooperation in the development of hydrocarbon resources in the Caspian Sea. In this meeting, considering the responsibility of Iran’sPetroleumMinistry in the joint commission with Russia, some key issues such as removing barriers to the North-South Corridor and barriers to trade between Iran, Azerbaijan and Russia and facilitating banking relations and the use of national currencies were discussed.

More Meetings

Owji also met with Kazakh Energy Minister BulatAqchulaqov on the sidelines of the Baku Energy Forum.

During the meeting, bilateral cooperation in the upstream and downstream sectors of the petroleum industry, various types of energy exchanges and various cooperation in this field were discussed. The two sides emphasized the vast potential for joint cooperation in various fields in the field of oil and gas, and each presented their different capacities for cooperation.

Owji also met with Romanian Energy Minister Virgil Daniel Popescu and Bulgarian Energy Minister Alexander Nikolov on the sidelines of the Baku Energy Forum to discuss the global energy crisis, export of engineering and technical services, export of equipment and other areas of cooperation.

Iran, Russia Eye $40bn Annual Trade

As a follow-up to President Ebrahim Raeesi’s state visit to Russia last January, a Russian delegation composed of more than 50 private companies, headed by Russia’s Deputy Prime Minister Alexander Novak, recently travelled to Tehran. The delegates said they were seeking long-term cooperation with Iran. Iran’s Minister of Petroleum Javad Owji said Tehran and Moscow planned to raise their trade to $40 billion in 1 ½ years.  

Iran’s Owji and Russia’s Novak chair the Iran-Russia Joint Economic Commission. During the two-day stay of the Russian delegation in Tehran, intensive talks were held in various economic and political domains. A seminar was also held with 100 Iranian private companies to provide a venue for both sides to express their views about better economic and trade ties.

Addressing the Iran-Russia business forum, Novak said Tehran and Moscow were working in favor of enhanced economic cooperation.

“Today, Russia is under enhanced pressure from unfriendly states, adding to the urgency of further cooperation between the two countries. That is why a big Russian delegation of public sector, tradespeople, economic actors and representatives of manufacturing units has come to Iran to prepare the way for deeper ties,” he said.

Obstacles to Investment

The Russian delegation was received by First Vice President Mohammad Mokhber, Minister Owji as well as Saeed Mohammad, Secretary of the High Council of Free Zones.

Mokhber said expansion of ties with Moscow in all sectors was among Tehran’s strategic and serious policies, adding that transportation and transit were among domains of cooperation between Iran and Russia. He said Iran was ready to upgrade its cooperation with Russia in this sector.

Referring to cooperation between the two nations in various sectors, particularly oil and gas, he said: “Fortunately, the obstacles to joint venture projects between the two countries have been removed, and the recent meeting of the two presidents has paved the way for the development of cooperation.”

In conclusion, a final statement was signed by Owji and Novak, covering cooperation in commercial and economic, financing and banking, transport and logistics and customs, industry and mine, agriculture, energy and healthcare sectors.  

Development of financial and banking cooperation between the two countries and use of national currencies for exchanges, definition of a banking messaging system between the two countries to facilitate economic relations, upgrading transportation system and north-south corridor and providing relevant logistics and Russia’s location in India-Iran-Afghanistan trade route, development of cooperation in the field of agricultural products and supply of basic items needed by the two countries, development of peaceful nuclear cooperation, trade cooperation to establish joint free trade zones and reviewing development strategies for cooperation with Eurasian countries constituted the agenda of the meetings.

$40bn Trade Ceiling

Russia’s export to Iran increased to $3.068 billion last year, while its imports from Iran reached $ 967.3 million.

Owji touched on the agreements and memorandums signed in the energy sector adding that Iran-Russia trade totaled $4 billion. “But we have arranged to bring this ceiling to $40 billion over 1 ½ years,” he added.

Owji also said that agreements had been made for connecting Iran’s IBAN to Russia’s messaging system.

He said that Russia had released a $5 billion credit line to Iran, adding that nearly 50% of the credit had been used.

The energy sector, development of joint fields, independent oil and gas fields and joint ventures, the petrochemical sector, technical knowhow, export of catalysts and swapping gas, oil and petroleum products were among other points of agreement noted by Owji.

North-South Corridor

During President Raeesi’s recent visit to Oman, the issue of operation of the North-South Corridor was brought about with the participation of Iran, Russia, India and Oman. The issue was agreed to be discussed at a Tehran-hosted meeting.

In the transportation sector, as one of the important points of negotiations in areas such as the North-South International Transport Corridor, the Rasht-Astara railway, the Garmsar-Incheh Boroun railway, the shipping and maritime, rail and land sectors, good agreements have been reached with the Russian side.

Novak said the North-South Corridor was handling 15 million tonnes a year of transport, adding that the figure could increase to 30 million tonnes in 3 years

and to 50 million tonnes in 5 years.

Underscoring the significance of the North-South Corridor, Novak said: “We are seeking to develop the corridor and ensure Russia’s access to Persian Gulf littoral states.”

Iran, Reliable Partner

Novak described Iran as a longtime and reliable trade and economic partner, adding that bilateral political ties were at their highest level.  

Owji said Iran and Russia, both slapped with unjust sanctions, had good potential for cooperation.

“However, with the good capacities that these two countries have, we can undoubtedly neutralize the sanctions in the fields of energy, transportation, industry, agriculture, and the export of equipment and medicine,” he said.

Lower Dollar Role

Novak said the agreements reached during this trip may give additional impetus to the development of trade and economic cooperation between the two countries, because in the meetings held, all economic sectors between the two countries were examined in details and extensively.

One of the key issues discussed was the two countries' cooperation in the field of banking and finance and the reduction of the role of the dollar in bilateral exchanges in order to create conditions for the settlement of accounts and payments between legal entities and organizations.

Ali-Reza Peyman-Pak, head of Iran’s Trade Promotion Organization (TPO), met with Veronika Nikishina, Director General of the Russian Export Center (REC). They agreed to prepare a roadmap for joint cooperation and the removal of customs barriers, the amendment of customs laws, joint investments, exchanges and financial and banking transactions so that the trade between the two countries will double.

The Iranian side has also suggested that a clear and online mechanism be considered to introduce the two countries’ companies and businessmen to each other, in order to eliminate intermediaries in the relationship between the two countries' businessmen, because despite the good political relations between the two countries, businessmen do not know each other very well, and a big step in the prosperity of trade is the elimination of intermediaries and the establishment of a direct connection between the merchants of the two countries.

Sending specialized trade delegations from Iran to Russia and vice versa, and holding joint exhibitions are among the future measures that Iran seeks to expand its trade offices in Russia following the establishment of Russian trade office in Iran.

Barter Trade

One of the most important issues in trade exchanges between the two countries is the purchase of ships, locomotives and trailers from Russia with the financial support of the Russian government, which the Iranian delegation has announced is ready for joint investment in the production of these logistics products in Iran. Of course, the Russian side has also said in this regard: Russian companies are ready to invest in Iran's free and trade zones, and the Russian government will make every effort to supply these logistics products.

A policy pursued by the 13th administration is barter trade. Peyman-Pak said Iran, whose barter trade with China was valued at $5 billion, would like to have barter trade with Russia. He said Iran was also close to bartering trade with Pakistan, Oman, Cuba, Turkey and Venezuela.

Nikishina welcomed the idea, saying: “Russia is ready to import construction materials from Iran.”

She also expressed the desire of the two countries to establish financial and banking relations with each other and said: "Iran is a very good partner for us and we are looking for direct trade without intermediaries with Islamic Republic of Iran."

Masoud Khansari, director of the Iran-Russia Chamber of Commerce, said that reducing the role of the dollar in bilateral trade would expand the unprecedented expansion of cooperation to $10 billion in the first phase and expand it to $25 billion in the next phase. He believes that the use of bartering between private sector traders of the two countries with the support of governments will improve economic partnership.

Russian Needs Listed

Novak announced Russia's readiness to strengthen the presence of Russian economic operators in Iranian ports such as Chabahar and Bandar Abbas and said: "In the next month, Russian experts will come to Iran and visit the capacities of Iranian ports."

He considered the cooperation between the two countries in the current situation for the export of goods from Iran to Russia and vice versa very important and said: "Also, a list of goods needed by Russia in industry, automobile, shipbuilding and pharmacy was presented."

He said development of cooperation in the field of oil and gas swaps, investment in oil and gas projects, the acceleration of free trade and cooperation in the field of nuclear energy were also among the topics discussed.

Mohammad Sadeq Mofateh, deputy minister of industry, said: “We have a good potential for exporting agricultural products, food, construction materials, automobiles, parts and other fields, and we welcome cooperation with Russia in all fields, given our existing capabilities.”

Ali-Akbar Safaei, deputy minister of road and urban development, said: “We are investing rapidly in the purchase and construction of ships for the Caspian Sea, and in this regard, there are three large ships, 4 ships under purchase and 12 ships have been ordered.”

He asked his Russian counterpart to accelerate the launch of a roll-on/roll-off shipping line between Russian ports and Iran’s northern ports.

“We want Russia to announce the exact date of the launch of this shipping line,” he said.

He said that Iran and Russia are in a certain situation and we should remove our sanctions routes. "Russia's foreign trade is currently more than $300 billion, and if part of this trade is through the Caspian Sea to be shielded from sanctioned, we would need to expand the shipping fleet.”

Documents Signed

A joint statement was signed between Iran’s Owji and Russia’s Novak following the meeting in Tehran.

In addition, a Memorandum of Understanding between the National Petrochemical Company (NPC) and the Russian Chemical Industries Union on the exchange of technical knowledge and expert cooperation in the field of petrochemical equipment was signed by Morteza Shahmirzaei, CEO of NPC, and the representative of the Russian Union.

Also, the twelfth protocol of the meeting of the Working Group on Transport Cooperation between Islamic Republic of Iran and the Russian Federation was signed between Shahriyar Afandizadeh, deputy road minister, and his Russian counterpart.

Turkmenistan Unfreezes Iran Traders Money

Iran’s deputy foreign minister for economic diplomacy, Mehdi Safari, said Turkmenistan has unfrozen the bulk of money owned by Iranian businesspersons, which had been blocked following suspension of gas supply to Iran.

He said the development came after Minister of Petroleum JavadOwji discussed the issue with Turkmen officials.

Referring to the active energy diplomacy of the current administration, Safari said: “With the facilitation of trade with Turkmenistan; the Bajgiran, Incheboroun and Sarakhs border terminals have already started operating, and this will largely contribute to increasing the level of Iran's private sector’s trade with their Turkmen counterparts.”

Referring to Iranian businesspersons’ money frozen in Turkmenistan following the abrupt suspension of gas supply to Iran, he said: “In return for the value of gas exports to Iran, Turkmenistan had frozen the accounts of Iranian businessmen in Turkmen banks. But thanks to consultations by the minister of petroleum and a presidential instruction, most Iranian businesspeople got back their money.”

It should be noted that up to 2016, Turkmenistan was among Iran’s main gas partners. Tehran-Ashgabat gas relations have been a win-win game for Iran, due to the difficulty of supplying gas to the northern and northeastern regions and Turkmenistan’s constant desire to sell its gas.

Big Steps in Transit and Gas Swap

PresidentEbrahimRaeesihas said that Iran and Turkmenistan have taken good steps in the field of gas swap and transit.

He said his recent visit to Turkmenistan helped furtheractivate cooperation in some sectors.

In a meeting with Turkmen President Serdar Berdimuhamedow, Raeesi said: “Undoubtedly, the presence of the president and the high-level delegation of friendly, brotherly and neighborly Turkmenistan could be a turning point for relations between the two countries. We had good relations with Turkmenistan during these three decades, and my visit to Ashgabat a few months ago, helped boost cooperation particularly in gas swap and transit.”

Referring to the potential for cooperation between the two nations over the past three decades, he said: “The two countries should develop economic, trade, water and energy cooperation, and agreements; and memoranda of understanding should be signed by the two countries to enhance level of cooperation. Iran's relations with Turkmenistan are not neighborly, but brotherly, civilizational, cultural, kinship, and very close and deep.”

Iran Favors Active Oil, Condensate Marketing

The government spokesman has said: “Iran's policy in selling oil and gas condensate is active marketing, and currently a significant amount of oil is sold and the hard currency earned in this way is returned to the country.”

Ali BahadoriJahromi said: “The government seeks to take advantage of markets that have received little attention so far, with regional target markets; and markets that are easily accessible being prioritized.”

Ali Saleh-Abadi, the governor of the Central Bank of Iran, said recently: “In the first two months of the [current calendar] year, in the oil and petrochemicals sector, more than $7.5 billion in foreign exchange was received from sales, which shows an increase of $3 billion compared to the same period last year.”

“In previous years, the CBI, as the banker of the government, bought petrodollars from the government and supplied Iranian currency, but in this year’s budget, it was foreseen that in addition to the CBI, other banks would also supply government currency on the market.

Iran Exports Catalysts to Russia

The CEO of National Petrochemical Company (NPC), MortezaShahmirzaei has said Iran is exporting catalysts to Russia.

He referred to a number of agreements signed by the Petrochemical Research and Technology Company (PRTC), adding: “When there is will there is a way.”

“Within five years, we will be celebrating the completion of the petrochemical industry cycle,” he said.

Shahmirzaei put at 90 million tonnes a year Iran’s rated petrochemical capacity, stressing the need to complete the chain of petrochemical production.

“After revision, focusing on the completion of the value chain is on the agenda of the development of the petrochemical industry to produce the strategic products needed by the country and move towards self-sufficiency,” he said.

Shahmirzaei said human life was dependent on a variety of petrochemical products which required completion of the value chain. He said that Iran’s petrochemical industry capacity would reach 200 million tonnes a year by the end of the 8th national development plan.”

Pars Port to Serve Persian Gulf Container Exports

The head of maritime terminals and ports of Pars Special Economic Energy Zone (PSEEZ) has said that Pars Port would become the export port for container products in the Persian Gulf.

“It will materialize by setting up fixed container shipping lines for this purpose and launching the Siraf Pars Port for LPG exports and sulfur from the Pars 2 zone,” Ali Massoumi said.

“As Pars Siraf Port has been handed over to this Directorate (Pars Service Port Directorate) for operation and the export of liquefied natural gas and sulfur produced in that zone is on the agenda of this directorate, we hope to create a source of significant revenue for the country,” he said.

Noting that thanks to the completion of the infrastructure of the container yards prepared by the investor, increasing the load capacity and container operations for the export of local products was on the agenda of the port complex and is still underway, he said: “On the other hand, a proper platform has been created, as well as correspondence made with National Iranian Oil Company (NIOC) in order to obtain the necessary license to carry out the process of import and export of non-oil products.”

OPEC Top Official Mohammad Barkindo Dies at 63

Secretary General of the Organization of the Petroleum Exporting Countries (OPEC) Mohammad Sanusi Barkindo, a prominent figure in the international oil industry, died on July 5. He was 63.

No cause of death was given. Barkindohad followed a busy schedule the day before his death, giving a speech at a conference and meeting with Nigeria’s president, Muhammadu Buhari.

Barkindo took the helm of OPEC in 2016, during a turbulent period after oil prices collapsed. He was scheduled to leave his position at the end of July. In January, OPEC declined to give him a third term and chose Haitham Al-Ghais, a veteran oil official from Kuwait, as his successor.

Iranian Minister of Petroleum JavadOwji sent a letter of condolence to the Nigerian Ministry of Petroleum Resources to express his sorrow over the departure of Barkindo.

In the letter addressed to Nigeria’s Minister of State for Petroleum ResourcesTimipre Sylva, Owji said: “I received the very sad news of the passing away of His Excellency Mohammad Sanusi Barkindo, our Distinguished OPEC Secretary General. On behalf of the Government and people of Islamic Republic of Iran, I would like to express my heartfelt condolences to Your Excellency, Esteemed Government and Great People of Nigeria.”

Owji noted that Barkindo’s“round-the-clock efforts as the OPEC Secretary General to establish solidarity and unity among member states, along with his trust in collective wisdom and efforts made for creating understanding, had always been of help to the organization and its members.”

He heaped praise on Barkindo for his“timely and tangible measures taken over the past six years” in favor of “global economic stability”.

“These achievements, which are the result of his valuable services as the OPEC Secretary General, will be remembered in the history of OPEC and the world oil market,” said Owji.

Barkindo came to head OPEC after a long career as an industry official and executive, including a brief stint as head of the Nigerian National Petroleum Corporation.

In a statement, OPEC saidBarkindo had “played a key role” in forming the wider group that came to be called OPEC+, which includes Russia, in 2016. OPEC also saidBarkindo had helped the group navigate major downturns, including oil price falls in 2015-16 and during the beginning of the pandemic in 2020.

New Buyers Sought for Iran Oil

The CEO of National Iranian Oil Company (NIOC), Mohsen Khojasteh-Mehr said: “It could be said with certainty that we export more oil than in the past and we have no problem in collecting oil claims, and as time goes on, we pursue exports in a managed manner.”

“The past trend of oil exports is still going on, while the oil market hasalways its own rules,” he said.

Referring to a 40% increase in Iran’s oil exports, he said: ‘This increase included exports to new destinations, while at the same time we have had new customers, and have been working hard to revive part of the traditional market.”

“In addition, there was the perseverance of our colleagues inNIOC. That along with other factors led to an increase in Iranian oil exports,” said Khojasteh-Mehr.

Regarding investment in the petroleum industry, he said: “The estimate for achieving a production capacity of 5.7 mb/d of oil is realistic and is based on the recovery capacity of Iran's oil reservoirs. Of course, to achieve this production goal, $90 billion of investment is needed to use the maximum domestic financing capacity in the first place, while foreign companies may also invest in the implementation of these projects, and we do not rule out the presence of foreign companies. This route is always open.”

No Restrictions to Wooing Foreign Investors

The head of investment and business department of National Iranian Oil Company (NIOC) has said: “Negotiations with domestic and foreign investors in the petroleum industry are now in full swing, and there are no restrictions for this sector.”

FereydounKordZangeneh said: “Recently, companies and petrochemical holdings have also entered the realm of investing in the upstream oil sector, and this clearly shows that the new mechanism is to use all the capacities.”

He said: “Over the past eight months we have signed agreements and MOUs with foreign companies to help develop the petroleum industry.” He added that the agreements were confidential due to the special circumstances of Iran.

“For instance, a €500 million confidentialcontract was signed with a foreign company last March, but it was not made public due to sanctions. This is the firstcontractfor the development of the South Pars oil layer.

LPG Output Up

The CEO of National Iranian Gas Company (NIGC), Majid Chegeni, has touched on the Petroleum Ministry’s measures to prevent waste of liquefied petroleum gas (LPG) in order to allow for its production hike, saying: “LPG is a valuable product in the natural gas production chain. In addition to being used as fuel, it is used to feed many industries including petrochemical plants.”

“Despite the very high intrinsic value of this product, in recent years, LPG has been burnt at refineries…but after the 13th administration took office, the Petroleum Ministry moved to prevent the waste of valuable products including LPG,” he said.

“With basic and infrastructural measures such as setting up Siraf Pars export port, to complete the remaining units in South Pars refineries and setting up gas vapor recovery units in refineries in South Pars Zone 1, and active marketing for exporting liquefied natural gas, LPG waste has been largely contained. Despite a 15% increase in production in the last seven months of last calendar year compared to the same period a year before, the amount of LPG burned during this period decreased by 10%,” he said.

270bcm of Gas Processed at Iran Refineries

The chief coordinator and supervisor of National Iranian Gas Company (NIGC) has announced that more than 270 bcm of gas has been treated at refineries across the country.

“NIGC is supplying more than 70% of Iran’s energy,” said Ahmad Zamani, underscoring the need for the timely supply of chemicals, processing equipment as well as spare parts required in the refining of gas.

Referring to the qualitative upgrading of refineries last calendar year, he said: “The readiness of processing equipment, the availability of consumables and spare parts, especially chemicals, and the timely implementation of overhaul, development and process optimization projects in line with improving the efficiency of refineries are very effective.”

“Accordingly, the country’s gas refining companies in the past decades, based on the policy of developing domestic production and supporting domestic producers, and despite external pressures and sanctions, have focused on the use of domestically produced goods,” he added.

Second Iranian Tanker Delivered to Venezuela

The second Iranian-built oil tanker was handed over to Venezuela in the presence of the presidents of Iran and Venezuela.

During a ceremony attended by Iranian President EbrahimRaeisi and Venezuelan President NicolásMaduro, the 'Aframax 2' oil tanker built by Iran Marine Industrial Company, also known as SADRA, was handed over to the Latin American country.

The tanker is the second ship ordered by Venezuela to Iran in recent years. According to the contract, Iran will also deliver two more tankers to Venezuela after construction.

Raeesi said at the ceremony: “The construction and delivery of the 113,000-tonne tanker to Venezuela, in addition to helping the country achieve its goal of independence in maritime transportand proves the effectiveness of the model of a resilient economy.”

He added that the achievement was made despite attempts by the enemies of Iran and Venezuela to impose unjust sanctions and restrictions on the two countries to block progress by Tehran and Caracas.

“The construction and delivery of the tanker, which has also been approved by the Venezuelan technical and engineering group, in addition to helping the Venezuelan government achieve its goal of independence in maritime transport, once again demonstrates the will and unity of militant and revolutionary nations and states. It is much stronger and more effective than American sanctions,” he said.

“On the other hand, Iran and Venezuela, as two complementary and supporting economies, will be able to move towards the welfare and development of their nations by completing and linking supply chains in both countries. This kind of joint cooperation is a good model for all developing and independent countries to notice that great things could be done through cooperation and interaction,” he said.

“Two more tankers are under construction, which I hope will be ready for delivery to Venezuela soon,” he said.

For his part, Maduro praised the construction of the tanker, saying: “The construction of the tanker for the Venezuelan state oil company was Commander Chavez’s  plan to strengthen the country’s oil industry, to make it self-sufficient in the face of all foreign aggression.”

“The construction of the modern and strong ship shows the high capability, extraordinary and admirable industry of the Islamic Republic of Iran. Iran is one of the emerging powers of the 21st century and the construction of the ship is one of the practical and clear signs of this emerging power,” he said.

During Maduro’s visit to Tehran, Iran and Venezuela signed a comprehensive 20-year strategic cooperation document, in addition to which the two presidents signed documents on cooperation in the political, cultural, tourism, economic, oil and petrochemical sectors.

NIDC Renovating Drilling Rigs

Mahnaz Mohammad-Qoli

Iran owes its planned oil output enhancement to coherent planning in various sectors, one of which is the drilling industry. The drilling rigs owned by National Iranian Drilling Company (NIDC) are helping National Iranian Oil Company (NIOC) achieve its oil output goals.

Hamid Reza Golpayegani, CEO of NIDC, tells “Iran Petroleum” the company plans to renovate its rigs and provide technical services to help Iran’s petroleum industry achieve its objectives.

The following is the full text of “Iran Petroleum’s” interview with Golpayegani:

What plans is NIDC currently pursuing in line with NIOC’s macro objectives?

Our main plan at NIDC is the permit issued by the CEO of NIOC. The first priority of this permit is to renovate the existing rigs. For this purpose, we have presented a $700 million plan for 5 years and for the first 2 years, a $200 million plan for the reconstruction of 20 to 30 rigs. Our total project is €740 million, which includes reconstruction andrenovation of rigs as well as technical drilling services.But we have another plan to rebuild and renovate rigs for which no plan has been defined. Currently, many of NIDC rigs have been used to develop 28 reservoirs in the southern oil fields, while NIDC has commitments to drill wells in other sectors, which would require renovation. A total of 62 rigs of NIDC are operational. 11 rigs are not currently operational, which are to undergo reconstruction and renovation. Regarding the operation of Modarres and Rajaei offshore rigs, we have agreed with IOC to modernize the company's naval fleet. Just as we worked with the Iranian Offshore Oil Company (IOOC) for 40 years to drill and develop oil wells, our cooperation with the company will increase with the modernization and development of offshore rigs. In addition, we are intend towork over wells in the South Pars gas field.

Do you have any plansto purchase rigs?

We do not have any plans for the time being. But if NIOCreaches agreement on developing joint fields as well as fields located in West Karoun, rigs will be purchased. We plan to decommission some of our rigs. We will definitely not expand the fleet in quantity, but we will develop in quality and increase productivity.

What has NIDC done over the past nine months?

Over the past 9 months (from August of last year to May of this year), drilling and completion of 64 offshore/onshore oil and gas wells, totaling 71,555 meters in depth,was completed and production wells were delivered to clients. These wells were drilled and completed in the areas administered by National Iranian South Oil Company (NISOC), Iranian Offshore Oil Company (IOOC), Petroleum Engineering and Development Company (PEDEC) and NIOC Directorate of Exploration. During this period, in the technical services, special services and special drilling operations sectors, NIDC experts worked tirelessly and in a round-the-clock effort together with the operational staff to complete or work over wells.Maintaining and enhancing production capacity is very important and is considered a unique national feature of NIDC among drilling companies worldwide.

                                                   How many rigs is NIDC operating in West Karoun fields?

A total of 6 rigs are operating in these fields. We are currently waiting for financial lifeline for the Azadeganfield project. We plan to drill 10 wells in the Azadegan field by the end of the current calendar year.

What steps have you taken to use knowledge-based companies?

Within NIDC, 20,000 direct and 40,000 to 50,000 indirect jobs have been created. There are more than 100 knowledge-based companies in Khuzestan working with NIDC. The country does not need to seek drilling partners overseas. Regarding drilling equipment, some knowledge-based companies are developing the required items. We have contracts with them. Regarding downhole equipment such as logging tools, cooperation is underway with various universities, including Sharif University of Technology, University of Tehran, and Academic Center for Education, Culture and Research, and we are conducting field tests. I would like to mention that we will soon do a field test on the downhole motor developed by Academic Center for Education, Culture and Research.There is capacity to modernize the rigs in the country, so we will never import a rig with all its equipment. Thanks to NIDC engineers, a 15,000 PSI wellhead valve has been manufactured by local companies, which is one of the greatest masterpieces of the oil industry that has ever happened in this sector and is one of the best technologies related to wells. This valve is to be used for drilling wells in the Marounfield. Previously, American and Chinese companies had a monopoly on the manufacturing of these valves, but now such monopoly has been broken in Iran.

$1.2 Investment Planned in Abadan Oil Refinery

The Abadan oil refinery is among the first ones built in the Middle East region. With a refining capacity of 400,000 b/d, it is the largest treatment facility in Iran, whose development is under way.

The Petroleum Ministry plans to enhance the country's refining capacity by completing development projects in existing refineries and build new refineries with acceptable refining capacity per day. Therefore, the refinery development projects, the study phase of which has been completed and some of which are under implementation, will be completed and operational.

One of these projects is to develop the Abadan refinery,JalilSalari, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), has said the Abadan project, financed by China, would be implemented in three phases.

Three-Phase Project

In the first phase of the refinery development plan, the capacity of the distillation unit 85 increased from 130,000 to 180,000b/d and the vacuum distillation unit with a capacity of 70,000b/d and the viscosity reduction unit with a capacity of 25,000b/d to reduce fuel oil and feed the cracker unit became operational.

In the second phase, the plan to consolidate the current capacity and improve the quality of the refinery's products was considered. In this project, atmospheric and vacuum distillation units and refining units for gasoline, kerosene, gas oil, sulfur, construction of the second coat cracker complex, increased gasoline and other ancillary units will be constructed. This project has made significant progress and is expected to be operational by the end of the current calendar year.

The third phase includes construction of the Cracker Coating Complex, butane isomerization and reconstruction of the acid unit, the aim of which is to produce more gasoline and reduce fuel oil. Gasoline production will increase by 6 ml/d after the implementation of this project.

Farhad Ahmadi, CEO of National Iranian Oil Engineering and Construction Company (NIOEC), said: “The project has had 86% progress. It was 60% complete last October. Such progress over six months is considerable.” 

He said the project was estimated to require € 1.6 to 1.7 billion in investment, adding: “In completing the second phase of the Abadan refinery development, we will not wait for foreign sources and its financial resources will be provided from domestic sources, based on this, for the first time, the refinery's products will be financed  by selling refined products.”

According to Ahmadi, the second step of the plan to develop and stabilize the capacity of the Abadan refinery with €1.7 billion is one of the most important refining projects in the country. He added: “It will take three to four years to complete the project, but despite the available equipment and the measures taken, it is expected to be realized earlier than expected.”

Distillation Unit

He also announced the operation of the distillation unit of the Abadan refinery development project with a capacity of 210,000 barrels in the first half of the current calendar year, saying: “The first phase of the project to improve the quality of products and modernization of the refinery with 86% physical progress. The whole project may be put into operation by the end of the current calendar year.”

Ahmad Farzaneh, project manager for Abadan refinery development, referring to the contract for capacity development and consolidation project of this refinery with the aim of optimizing and making it profitable, announced that standardizing production products and consolidation of refinery capacity by constructing new units and collecting old units in under way.

With the implementation of this plan, in practice, there will be no increase in capacity in the Abadan refinery, but the goal of the plan to stabilize the capacity and improve the quality of Abadan refinery products includes a distillation unit of 210,000 b/d, which will replace the old distillation unit.

He said that the refinery would see its distillation capacity reach 360,000 b/d, from a current 150,000 b/d. “In addition to stabilizing the refinery capacity at 360,000 barrels, all products resulting from the refining of 360,000 barrels in phase 2 will be refined in hydrogen units and the standard of manufactured products will be upgraded to Euro 5.”

“In the first part of Phase 2 of the Abadan refinery, HPU hydrogen production units, HCU hydrocrackers, LPG liquefied petroleum gas, crude oil distillation unit and CDU / VDU vacuum distillation unit and utility units and ancillary facilities will be constructed with an investment of $1.26 billion,” he added.

“In the second part of Phase 2, hydrogen treatment and gasoline plants, including CCR, NHT, ISOM, GHT, KHT, and related utility units and ancillary facilities will be built with an investment of about $1.7 billion, accordingly, with the completion of the first part of Phase 2, the operation of the second part will begin immediately,” said Farzaneh.

He said the agreement had been initially singed in July 2017 for 45 months, which has been furtherextended for 17 months.

The main units of phase 2 include hydrocrackers with a capacity of 42 barrels, naphtha hydrogen treatment unit with a capacity of 65,000 barrels, sulfur recovery unit with a capacity of 560 tonnes, crude oil distillation unit with a capacity of 210,000 barrels, vacuum distillation unit with a capacity of 100,000 barrels, and liquefied gas recovery unit will have a capacity of 16,750 barrels.

With the implementation of this plan, 460 tonnes of propane, 15,700 barrels of butane, 60,000barrels of gasoline, 65,800 barrels of diesel and about 53,000 barrels of heavy oil fractions will be produced daily.

He said that 7.5% of the new products at the Abadan refinery would be LPG, while 10% would be kerosene and jet fuel.

The share of gasoline in the production of the new phase of Abadan refinery is 27.9% and diesel has a share of 30%. Heavy petroleum fractions such as fuel oil account for a total of 24% of the Abadan refinery's 210,000-barrel unit. Meanwhile, in the old unit of the Abadan refinery, fuel oil accounted for 40% of the products.

The development and stabilization plan of Abadan refinery has a capacity of 210,000 b/d. Among the advantages of this plan, we may mention the improvement of the quality of products with standard specifications (Euro 5) and the plan to replace the old units of the existing refinery.

According to the report, the bulk of the feed is sour heavy crude oil, and with the advent of the new phase, there will be little change in the composition of crude oil.

The Abadan refinery, as the oldest refinery complex in the country, supplies 25% of Iran's fuel.

It is noteworthy that there are currently 10 refineries operating in Iran with a total refining capacity of crude oil and gas condensate reaching about 2.2 mb/d. Iran's refining industry, while having enough capacity to meet the country's sustainable fuel needs, has also created good capacity for exporting petroleum products.

Gas Storage, Iran’s New Strategy

Mahta Sadeqian

The ground was recently broken for the second phase of underground gas storage in the Shourijeh D field in northeast Iran in the presence of President EbrahimRaeesi with a view to doubling winter gas storage capacity over three years.

But when and how did gas storage in hydrocarbon reservoirs become important in Iran? In 2007, at the same time as a cold spellstruck, Iran's northeastern neighbor, Turkmenistan, seized the opportunity and demanded an increase in the price of its gas exports, after which gas export to Iran was halted due to the failure of negotiations. Turkmenistan's move highlighted the importance of increasing gas production and underground storage during warm days of the year.

Previously, the issue of storage wasfollowed up on in a limited way, but after these events, decision-makers realized that having huge gas reserves alone could not guarantee lasting energy security. Storage has since been seriously on the agenda with the aim of stabilizing the country's energy security and preventing potential problems; a few years later, the gas storage project in the mothballed Sarajeh field in central Iran was inaugurated as the first such project.

Global Gas Storage

Basically, the history of gas storage dates back to 1915, now the Americas has the largest storage sites in the world with 441 storage sites, Western Europe currently has 75 active sites, including 17 Central European reservoirs with a total of 92 storage sites. The former Soviet Union has a total of 46 gas storage sites, of which 21 belong to Russia.Meanwhile, Iran, as the world's first holder of gas resources and the owner of one of the largest gas transmission networks, is still a young country in terms of storage and has only about 1.5 percent of the world's storage volume. This strategic industry has major economic benefits for countries and is a reliable support for energy security and exports.

In some countries, due to the increase in gas consumption in winter, part of the gas is stored in the domestic sector, which averages 14% of the annual consumption, but in Iran we have less than 1.5%. Iran is currently the world's second largest holder of natural gas reserves after Russia, with more than 33 tcm of natural gas reserves (new gas exploration in the Caspian Sea has not been taken into account). Iran holds 18% of theworld’s total reserves.

Iran Gas Storage

With the expansion of the gas supply network and increasing consumption, the use of natural gas storage resources to continue the timely and sufficient supply of gas in the situation of maximum annual consumption, is inevitable. Gas is usually stored in suitable fields or underground structures such as depleted oil wells, deep aquifers and salt domes, as well as abandoned mines.In Iran, natural gas storage projects are planned to prevent pressure drop in gas pipelines and to ensure a continuous supply of gas flow, especially during peak consumption in the cold months of the year. Therefore, the country's storage projects in terms of geographical location, are mainly targeted in cold, densely populated areas and industrial hubs.

Key gas storage projects in Iran include Sarajeh, Yourtshah, Talkheh and Shourijeh.

10% of Consumption

                According to thestatistics provided by the country's gas industry officials, Iran is the world’sfifth largest gas storing country. Normally, we have to store about 10% of the country's gas consumption in underground storages for one year. For example, if we are to increase gas consumption to 800 bcm per year, we must have 80 bcm of gas storage in the country, so new gas storage facilities are an important and significant issue.

According to National Iranian Gas Company (NIGC) officials, a study is currently underway on 40 natural gas storage facilities in the country, of which 9 facilities are being prepared for natural gas storage.

Reza Noshadi, CEO of Iran Gas Engineering and Development Company (IGEDC), has said the Shourijeh D gas storage site would see its capacity double to 40 mcm over three years.

Every winter, when household consumption multiplies, we need resources in excess of available reserves to be able to meet the needs of consumers at peak shavings. In addition, for optimal oil production from reservoirs that have suffered from pressure drop, we also need gas injection, and if the injection operation is stopped due to the priority of domestic needs in winter, the oil recovery factor will be reduced. Therefore, the existence of storage tanks in such cases is also a blessing.

We now have gas export contracts with neighboring countries, which highlight the fundamental importance of such contracts in the winter. Therefore, balancing the supply and consumption of gas through the use of gas storage sites in the country, may make Iran one of the reliable partners for gas exports.

As you know, some areas, such as the northeast of the country, are located very far from Iran's gas production resources, which are mainly in the south of Iran. If the Khangiran storage facility, which now meets the major needs of consumers in the region, declines in the long run, gas supply to Khorasan and Mashhad may be hampered.

Gas storage is a strategic advantage for the country due to its economic advantages, security and easy access, and achieving this important goal for our country, which depends on meeting the basic needs of the people on this clean and cheap energy carrier, is a must. Storage plans are much more cost-effective than gas pipelines, and ensure the energy security of people and industries.

Iran is currently studying and designing about 14 other gas storage projects in addition to the two active storage projects of Sarajeh of Qom and Shourijeh D, which will increase their gas storage capacity from the current 30 mcm to 250 mcm. Once this happens, approximately 25% of the country's gas consumption in the cold days of the year will be removed from the gas storage area. By achieving these goals, we can somehow witness a great revolution in domestic gas supply and even gas exports from underground storage.

10,000MW Renewable Energy Planned in Iran

 Iran is one of the richest countries in the world in terms of access to various energy sources, and in addition to extensive resources of fossil and non-renewable fuels such as oil and gas, it has great potential for renewable energies such as wind, solar, biomass and geothermal.

Large oil and gas reserves and subsidized energy prices have caused Irannot to investsufficiently in renewable energies compared with industrializednations.Currently, less than one percent of the country's electricity consumption is supplied by renewable energies.

Oil and gas consumption rate in Iran has been growing while according to various scenarios,2035 or even 2050 will see fossil energy consumption reach its peak before starting to decline only to be replaced by renewable energies owing to their environmental considerations. That explains why oil producers are trying to maximize recovery from their hydrocarbon resources by investing heavily in renewable energies. For instance, officials in Saudi Arabia, a leading crude oil supplier, believe that by 2050 no fossil fuel would be needed. Therefore, the country has embarked on a comprehensive plan for solar energy development. 

Solar

Iran is located in a region with about 300 sunny days. It is among the top nations in the world in terms of potential access to solar energy.The use of solar and wind energy is very desirable for various reasons such as easy access and ease of conversion into electrical energy, environmental friendliness and renewability.

Over the past two decades, several measures have been taken to transfer and improve the technology of renewable energy (solar, wind, etc.), which in turn has led to increased employment and energy savings. In Iran, over recent years, the need to include clean energy in the country's energy mix has been considered, but the lack of adequate funding has not allowed the construction of large power plants, while experts believe that all of Iran's electricity needs could be suppliedvia solar energy.Such capacity in the country remains untapped as electricity production in Iran, including the construction and maintenance of power plants and annual electricity generation, consumes tens of billions of dollars of fuel and foreign exchange earnings.

Generationcosts of each kilowatt of solar energy stand at IRR 70-80 million, but if this is done on a power plant scale, the costs could be reduced by up to 60%. As far as Iran’s advantage in wind energy generation is concerned, it could be argued that Iran has potential to produce 40,000 MW of electricity from wind, which may be quintupled. For instance, the Qazvin and Takestan deserts alone generate 2,000-3,000 MW of electricity from wind energy. The Manjil power plant’s capacity reached 92MW last calendar year, which would finally reach 100MW. Iran has also started building a second wind power plant with capacity of 28.3 MW in Binaloud in Khorasan Razavi Province, in addition to other ones in Khaf and Tabriz, among other Iranian cities.

There are two noteworthy points about Iran's capacity to develop solar energy. First, if Japan, China, and Germany can count on solar energy, Iran will need to invest much more in the solar industry than these countries. The simplest reason could be considered as two reasons: annual global radiation and annual direct sunlight in Iran. Maps of solar radiation in the world show that in Iran, there is about two thousand kilowatts per square meter of annual radiation, which is higher than global average.

No Big Costs Needed

               Second, unlike large Asian countries, Iran does not need high costs to generate electricity from sunlight. If Japan spends $700 billion to develop its solar infrastructure, it is because it consumes about 850 billion kilowatt/hours of electricity. Electricity consumption in Iran is about 200 billion kilowatt/hours. In addition, the number of sunny days in Iran is much higher than in Japan. Iran is a country that, according to experts in the field, despite 300 sunny days in more than two-thirds of it and an average radiation of 5.5-4.5 kWh per square meter per day, is one of the countries with high capacity in the field of solar energy.

Some solar energy experts have gone a step further and claim that if Iran equips its desert area with radiant energy systems, it can also supply the energy needed in part of the region and be active in exporting electricity. Unfortunately, in addition to quitting the implementation of solar power plants, projects such as inviting citizens in metropolitan areas to buy solar equipment in installments are more than an executable and planned program, the fate of which is tied to the personal decision of citizens.

Iran’s PowerMinistry data show that currently the largest solar power plant with a capacity of 97 kW has been installed in the "Sarkavir" region of Semnan and the second largest solar power plant with a capacity of 30 kW has been installed in Taleghan city.

Investing in the solar industry is an investment in energy independence, and countries that couldfasterexpand their solar infrastructure and grid will be one step ahead of their competitors in competing for electricity generation and economic development.

Capping Greenhouse Gas Emissions

Over 30 years, the amount of carbon dioxide emissions from energy production and consumption will increase at a faster rate than the growth of base energy consumption. Its emissions from 2000 to 2030, with a steady growth of 1.8 percent per year, will eventually reach 38 billion tons per year, which is a 70 percent increase over the current annual emissions.Two-thirds of the increase will be due to consumption in developing countries, and the power generation and transportation sectors will increase carbon dioxide emissions by more than 75%, and the geographical location of carbon dioxide emissions will be shifted from industrialized to developing countries.Iran's commitment to reducing global greenhouse gas emissions under COP21 has put development of renewable energy high on the agenda. According to available statistics, the current installed capacity of the country's power plant in the renewable energy sector is only one percent of the country’s energy mix.The possibility of reducing gas

supply to thermal power plants due to increased consumption in the domestic sector, excessive need for thermal power plants for water and excessive emissions of environmental pollutants, the need to develop renewable energies for our country despite the cheap fossil fuels is inevitable.

World Investment

Mahmoud Kamani, head of Renewable Energy and Energy Efficiency Organization (REEEO), said: “The general trend in the world is to move towards the production of 90% of electricity from renewable energy sources, and accordingly, some countries announce the end of the use of fossil fuels by 2030, some by 2040 and some by 2050.”

Las Vegas Mayor Carolyn Goodman, for example, recently boasted that it is one of the few cities in the world to receive all of its public electricity from green energy. This achievement was the result of a ten-year plan to replace energy consumption from fossil fuels with renewable energy sources.

Green energy use has so far reduced Las Vegas's costs by about $5 million annually and more than 30 percent of its energy costs. San Francisco, San Jose, California, and Michigan are other major US cities that are committed to getting all their energy from green sources by 2035. Currently, the world average capacity of renewable energy in the renewable energy sector is 30%, which in some countries reaches 70 to 80%.

According to the International Energy Agency (IEA), last year the world's electricity generation from renewable sources experienced the highest growth in the last two decades. Meanwhile, Chinaalone, on its way to becoming the world's first electric superpower, accounted for 80 percent of the capacity of new wind and solar power plants.

Kamani said: Production capacity of 100,000 MW in the field of solar energy and 40,000 MW in the field of wind energy is provided in Iran, which could provide the peak of the day from solar energy and the peak of the night with wind energy.”

“Given the existence of a capacity of 140,000 MW to generate electricity from wind and solar, we have not yet reached a capacity of 1000 MW in this sector,” he added.

Article 12 of Production Impediment Reversal Act would be of great help to potential investors. That would allow for the return on investment in three to four years with commitment to supply power six to seven years. Building and developing renewable power plants is pursued with credit allocation from customers’ bill.

The growth rate of renewable industries in our country is less than 3% of the growth rate of these industries in developed countries, this unfavorable trend of renewable energies development in the country is due to various reasons.

Out of 53,000 MW of electricity generation capacity in the country, only 400 MW, i.e. 1%, is related to the field of renewable energies. Undoubtedly, Iran’s share in the field of renewable energy should be at least 10 times the current level, while Turkey’s share in this field is currently over 7,000 MW, while our country is more than twice the size of Turkey.

Renewed Effort

Recently, with the 13thadministrationtaking office, activities such as the conclusion of a memorandum of understanding to build 5,000 units of solar power plants in Isfahan provinceto develop more renewable energies have increased. At the beginning of the thirteenth administration, the Minister of Energy promised the realization of 10,000 MW of renewable energies in the country, and now the initial preparations for this work have been effectively prepared and implemented in Isfahan. Of the 10,000 megabytes that are the goal of developing renewable energies in the country, 4,000 megawatts of solar energy and 3,000 megawatts of wind energy have been approved by the Economic Council.

In this regard, the current installed capacity of renewable power plants is 931 MW, which Iran has prepared for itself according to the proposed program, and that is to increase the number of renewable power plants within the next four years.

Among the plans of Iran’s Ministry of Energy to get out of the current situation in the short and medium term, including the issuance of Islamic bonds, the allocation of fuel saving certificates and the purification of the claims of non-governmental producers of electricity.

Electricity is a strategic commodity and is one of the important and necessary infrastructures of the country. The process of production, distribution and consumption of this product has different sensitivities.

Gov’t Obligation

According to the 6th Five-Year Economic Development Plan (renewed twice), the government is required to bring up to at least 5% the share of renewable and clean power plants. 

The Ministry of Energy has announced plans to build renewable power plants with capacity of 10,000 MW. REEO then embarked on its effort to develop such power stations.

Kamani said: “10,000 MW of new power plants in the renewable energies sector will be built with the help of private sector investors. This amount of renewable energy power plant will be built in a period of four years. Our country's renewable energies include solar, wind, small hydropower, biomass and expansion turbines, all of which account for only one percent of the country's power plant, which is a very small share. Currently, the installed capacity of the country's renewable power plants is about 900 MW, which is 310 MW wind power plant and 390 MW solar power plant.”

“The average capacity of the world's power plants in the field of renewable energies is 30%, which in some countries reaches 70 to 80%, and the general trend of the world is to produce 90% of electricity from renewable energy. The global situation compared to our country shows that we need to make more efforts to use this type of energy because we can no longer rely on fossil fuels alone to supply electricity,” he said.

According to the plans made in the 13th administrationof Iran, 550,000 home solar systems are to be built with priority given to less privileged areas and households covered by supportive institutions. Imam Khomeini Relief Committee, the state Welfare Organization, as well as the Basij Organization for the Underprivileged, have completed the executive process for the construction of 110,000 home solar systems in the current calendar year.

Shifting Geopolitics of Energy: A New World Energy Order

Fereydoun Barkeshli,

energy market analyst

Whatever the outcome of war in Ukraine, one thing is for sure. The economic reverberations will be felt and in fact is already affecting the global economy by everyone and in all countries for years to come as the world divides between the West and rapidly reshaping Eurasia. The tectonic shifts and fractures in the world and how sanctions against Russia are likely to reshape and redefine a set of new global geopolitical realities.

Sanctions vs. Protective Tariffs

With a geo-strategically important part of the Eurasian land mass once again in the grip of conflict, the United States government under current administration appears oblivious to the concept of the multipolarity that would surely go a long way to creating a peaceful resolution in Ukraine.

But as Iraq, Syria, Venezuela and Islamic Republic of Iran all illustrate, one of America’s main weapons of choice against adversaries involves the use of sanctions.

Often underestimated among policy- makers and central planners is the fact that serves as protective tariffs on affected countries which are often, though not always forced to become more self-reliant.

In fact the theory of Resilient Economy that was raised and developed by Schumacher in the 1960’s makes reference to the imposition of sanctions against India and China by the United States and Britain in order to prevent setting up iron and steel plants.Schumacher, Swedish economist back then named it under the title or more popularly referred to as small is beautiful. India and China both turned to Russia for developing steel manufacturing plants. In fact Iran had then signed a contract with the Soviet Union to build Iran’s first steel mill in Isfahan.

In a somewhat more recent or relevant case, when America imposed sanctions on European trade with Russia; Denmark and Lithuania dutifully quitted exporting cheese to the country in 2004. This resulted in Russia setting up its own cheese sector and becoming self- reliant in the product.

Nevertheless, with the emergence of World Trade Organization (WTO), commodity trading began to be more financially-based and to be precise fully dollar- oriented. We willdealwith this topic; however, it is timely to mention that the notion of protective tariffs imposed by external factors namely sanctions or export quota on a certain country and goods or services seized to function as a supportive element in self-sufficiency and imports substitution. This relates to extreme monetization of the international tradition system.

The narrative goes back to the year 1971 when Richard Nixon did away from Breton Woods and abolished the gold standard system. This enabled America to make dollar the world’s currency and all the global traders relied on dollar as the only medium of transaction and settlement or clearance of accounts. In the 1970’s dissolution of Bretton Woods and gold standard allowed the United States to print money at its own convenience. Domination of dollar led the world economy and geopolitical structure to a new era never seen and experienced before.

Sanctions and World Economy

I would like to make a short reference to my earlier remarks about the notion of sanctions under WTO regime and sanctions prior to that. As mentioned earlier, sanctioned sometimes acted as protective for the sanctioned economies and in fact led some countries to prosper from sanctions, though after an initial period of hardships and scarcity.

With WTO and later much more importantly SWIFT (Society of Worldwide Interbank Financial Telecommunications), that was originally designed against money laundery, every single dollar and dollar denominated currency that is globally transacted must pass via the approval of SWIFT. When the United States imposes a financial sanction against another country, the embargoed country is virtually disconnected from the world in that there’s no SWFT clearance.

However, the imposition of too many sanctions and too frequently, has led to backlash not only by the sanctioned countries but those countries and businesses that suffer from sanctions on other countries. In other words, sanctions come at price. The current sanctions that are imposed on Russia over the recent war in Ukraine is a clear indication of how countries are reluctant to sanction Russia. On the other hand, imposition of frequent and costly sanctions that are politically motivated is now leading the countries, central bankers and think tanks to grope for solutions and alternatives.

Looking back at the events of the last two months or so, we’ve noticed a

tendency to move away from a dollar based global economy underwritten by financial assets to commodity-backed currencies. The world economy is facing a dilemma. International financial system is worried and nervous.

We witness a desire to move away from collateral being purely financial in nature to becoming commodity based. It is collateral that underwrites the whole financial system.

New Geophysical Roadmap

The ending of the financially based settlement system is being hastened by geopolitical developments. The West is desperately trying to sanction Russia into economic and political submission as in the case of Iran or Venezuela, but is only succeeding in driving up energy, commodities and food prices.Central banks will have no option but to inflate their currencies to pay for higher prices.

Russia is linking the ruble to commodity prices through a moving gold peg instead. China has already demonstrated an understanding of the West’s inflationary game by having a stockpiled commodities and essential goods even prior to the Ukraine war. Indian rupee is doing the same. India is currently offering its trading partners to feel free to trade in rupee against their own domestic currencies. I would prefer to call this as the New Bretton Woods.

A New Bretton Woods that distance itself from the dollar system that is crippling the world financial system and economy. Iran was among the first countries that declared her determination from dollar based to Rial-based trade relations. Though the conceptual and operational apparatus wasn’t yet ready back in mid- 1990’s neither in Iran nor Iran’s commercial partners.

The new geopolitical road map should address the issue of dollar dominance and US sanctions appetite against any nation that isn’t in the US sphere of interests. United States sanctions by means of institutions such as SWIFT is Weapon of Mass Economic Destruction. This has to be condemned by the United Nations.

The new Bretton Woods must accept and respect individual countries’ national currencies or a basket of currencies as means of global financial transactions. This should specifically be applied to Petro Dollar. Oil market has to be freed from the yoke of dollar domination. United States must end the policy of weapons of mass economic and energy destruction.

Prevalence of US dollar as an international medium of transactions, enables the country to print any quality of money to their advantage. As mentioned above, under the first Bretton Woods right after the First World War, America as the powerful and mighty rich country agreed to support its currency with gold. Once President Nixon discontinued gold standard, dollar posed as the world’s single currency for clearance of all international financial settlements. US debt topped $30 trillion in March 2022. Nearly half of the volume of debt was built up during eight years of Barack Obama’s presidency. Though Covid-19 and pandemic breakout was also instrumental in building debts in the country. This debt has nothing to dowith the productivity of the economy and the US Federal Reserves has just printed that money.

Having said that the US economy has begun to experience unprecedented inflation not seen in two and a half decades.

Nord Stream 2: The Game-Changer

Washington was constantly critical of construction of Nord Steam 2. This huge project allowed Russia to carry its natural gas through a 1200 kilometers long pipeline that goes under seabed and hence bypass Ukraine and Poland. Nord Stream 2 together with Nord Steam 1 would allow Russia to supply some 55 percent of European gas consumption. This is an $11 Billion project that took six years to complete.Nord Stream 2 would make Germany, the number one economy of Europe totally dependent on Russia for energy.

Europe is an aging continent relying on exports to survive. Germany’s average age is 56 old. This population structure means that the population isn’t consuming a lot and has to rely on theworld market for its excess industrial products. Europe’s economic relations with the US is already marginal except that of finance and high tech sector.

In this context NATO or OSCE lost most of their relevance on both sides of the Atlantic. This sounded less relevant for Trump’s Republican administration but very significant for Atlantic treaty nostalgic Democrats such as President Biden.

Biden was determined to jeopardize Nord Stream 2 by any means.

The pipeline was due to be officially inaugurated on first week of February 2022. Biden administration signaled that wasn’t happy at all and loudly cheered the possibility of engaging Ukraine into NATO alliance.Germany differed with Washington but agreed to delay Nord Stream 2 operations for final safety examinations. I am not a fan of conspiracy theory but United States did all it could, to sabotage the gas pipeline project from Russia to Germany.

Nord Stream 2 meant a lot to Russia and Germany. For Russians, security is first. For the United and Europe, economy comes first. Russia is huge in size but limited access to warm waters. Russian natural gas is supplied to Europe and Germany at one-third of gas prices in North America and South East Asia. The United States currently began to export shale gas and shale oil to Germany and is determined to replace two-thirds of energy market of Europe.

Do you remember when WTI was priced at minus $37 per barrel? America filled up its Strategic Petroleum Reserves (SPR) at that kind of prices. Volume of US SPR approached a billion barrels, not seen since the war in Ex- Yugoslavia when Bill Clinton was president. Now the United States is selling that oil to Europe at $100 plus per barrel.

The war in Ukraine is a gas war. It’s war of energy superpowers for market share during the remaining two to three decades of oil and gas supremacy. Economy First, for America was designed when Trump arrived in the White House. A quote from William Burn, currently America’s chief spy agency, CIA might be interesting. A declining power may be as destructive as a rising power. And now Russia is a declining power and China is a rising power.

Most of us are familiar with the oil diplomacy. We know little about gas diplomacy. Gas diplomacy is a Russian expertise. United States, Canada or in West Asia, Iran and Qatar know little about gas diplomacy. Russia cannot imagine a Germany without Russian gas supply. The US is forcing its own vision of gas diplomacy into Germany and Europe. These countries are now forced to spend three times more for imported gas in order to safeguard US version of democracy. This interpretation of democracy means safeguarding the US global hegemony that is no more relevant.

Before moving to the next topic, it is important to refer to the 24Th of April, French presidential election where President Macron won a second five year as president. France is a political leader of EU. Germany is the economic powerhouse

of Europe. France advocates forceful sanctions against Russian oil and gas imports from Russia. Germany objects the notion and criticizes French policy as too much alienated with the US and without consideration for German’s economy and energy needs. With the current administration remaining in office in France, EU integration and future prosperity might be at risk.

On the Russian side, the country’s natural gas is often pumped up to 8 thousand kilometers before reaching the borders of the destination. This gas passes through extremely cold trails. Technically can’t stop moving. Once halted for some days, it can cause damages beyond repair. Russian gas has to be exported and keep moving in the pipelines. That may be one reason that it is supplied cheap. For Russia and Germany, gas trade is a marriage of convenience.

Current debate initiated by the United States is whether Russia is European or Asian or in fact Eurasian. President Biden is in the business of catheterizing Russia as an Asian country and signal to China not to think of invading Taiwan. Geographically Russia is now 90 percent European.

Rethinking Eurasia. Future is Asian

As mentioned earlier, in a multipolar geopolitical landscape, global power is shifting to Asia. West has been the center of world economy, trade, technology and modernity for the last several centuries. Back in 14Th and 15Th centuries, Portugal was the focus of growth and development. Portuguese era was replaced by Spain. Then the Dutch, French and British had their turn one after the other. 20th century was the era of American empire. American hegemony lasted because of its geopolitical and geographical location. It’s too far from the rest of the world. The only time that a country risked to attack America was during the World War 2 when Japan attacked a port in the US shores.

US hegemony is rightfully challenged by Asia and in a wider sense Eurasian land mass. Biggest producers of oil and gas and largest consumers of oil and gas are in Asia. The six critical minerals are all Abundant in Asia. Gas, copper, uranium,lithium, cobalt and rare earth materials are all in Asia. Africa is also rich in those resources but not for own use.

Russia has plans to divert its gas and oil exports to Asia. Though it’s not easy. China is investing heavily on shale gas and renewables. India is more inclined to import energy from Russia. India is in fact the only major economy that has refused to condemn Moscow for Ukraine war and has publicly indicated that has no intention to condemn Russia. It is important to note that India has a pro- western foreign policy and is a member of the QUAD alliance to contain China. India has in fact increased its Russian oil and oil products imports from Russia though at discontented prices.

In the meantime, turning to a different aspect of Asian age namely population Asia has a relatively young population. Average age in Asia is below thirty years old. This means a different production and consumption market economy and pattern. Russia is aging fast, too. In three decades, there won’t be enough Russian to live in the vast country. Europe has aged too but they have designed a well- calculated immigration policy. One reason that Russia ran to war in order to secure access to the Black Sea is aging population, not young enough to fight.

A shift in global geopolitical sphere of influence is evident in economy, trade and political outreach from Western Hemisphere to the East. The only powerful tool that is in the hand of the United States is the financial and monetary device. This is exactly where the US feels the pain and the risk of entering an all-out war and even a nuclear mischief. United States needs a war. US economy is on decline but United States is militarily superior to all other powers; namely China, Russia and EU. This looks as the remaining option for America in case dollar loses its glitters against a world on the threshold of sanctions by the US.

A major problem; however, is how to replace world international money and finance system from dollar. I mean to indicate that there’s no substitute as yet. Ruble, Yuan or Euro and Yen aren’t ready to replace dollar and the global trading system might face the risk of total collapse.

World has lost confidence in US in that the global financial system is now a full- fledged Weapon of Mass Economic Destruction that is even threatening energy security of Europe.Ukraine war has now only hastened the process of a shift from dollar system to a modern monetary system. Emergence of a new Bretton Woods monetary system is appearing on the horizon.

Potential for Hengam Development

Rahim Silavi

Reservoir Engineer

Minister of Petroleum Javad Owji, who recently visited Oman, said Iran and Oman had agreed to develop the joint Hengam oil field.

Given the significance of development of jointly-owned fields and the necessity of recovery from them, I am analyzing joint fields in general and the Hengam field in particular. 

Cooperative Development

Sharing 28 hydrocarbon fields with seven neighboring nations, Iran is among few countries in the world to have this number of jointly-owned hydrocarbon reservoirs. Iran shares 12 fields with Iraq, the highest. Iran also shares 5 fields with the United Arab Emirates (UAE), 4 with Saudi Arabia, 4 with Qatar, 1 with Oman, 1 with Kuwait and 1 with Turkmenistan. About 50% of Iran’s natural gas reserves lie in these joint fields. Totally, 15 joint fields are operational. Iran shares an onshore gas field with Turkmenistan and shares all onshore oil fields with Iraq, holding more than 82% of reserves Iran shares with neighbors.   

Hengam Owned by Iran, Oman

The Hengam field is the only field shared by Iran and Oman. It is located 45km off Qeshm Island in the Persian Gulf. About 80% of Hengam lies in Iran’s territory with the remaining 20% owned by Oman. The main reservoir of Hengam is composed of carbonated rocks. Hengam holds light crude oil with estimates of oil in place and recoverable oil marking it as a small field. In terms of rock properties, this field is known as a tight (lowly porous) field with permeability varying from low to medium.

According to official reports, Iran and Oman have separately taken some measures in their own sector of the field for oil recovery. But both have experienced output fall due to technical reasons.

Joint Development

Currently, due to the international restrictions created in recent years, although in many cases independent development of joint fields has been considered by our country, in some cases the lack of advanced technologies to develop or carry out special operations. (completion of well, type of drilling, type of well tests, necessary equipment among other factors) has caused delays in the development of some joint fields. On the other hand, joint development of shared fields, in addition to helping parties share ideas and technologies, reduces costs and optimizes production from such reservoirs.

The Omani section of the Hengam field has 1 exploration well, 2 appraisal-production wells (one of which is horizontal and length) and 3 production wells (one of which has been suspended due to technical problems). The Omani section was developed by DNO. Also in that section, there are facilities required for fluid processing and transfer.

Raising the issue of joint development of this field and the concluded memorandum is a good opportunity to use the benefits of this model of development. Although this field does not have a large volume of reserves and no significant production is expected from it, for some reason, its joint development with the cooperation of Oman can bring positive points and achievements for the upstream sector of the country's oil industry. The main positive points and achievements are as follows:

Although the Hengam field does not have significant in-place and recoverable oil reserves, its joint development with Oman may set a precedent for this kind of projects in Iran. Although a memorandum for joint development has been concluded with Iraq over the years and some steps have been taken to develop some joint exploration structures, no efforts have been made in practice to sign a contract for the development of these structures. Therefore, joint development of the Hengam field could be considered a valuable experience in the field of joint development of fields Iran sharing with other countries. On the other hand, due to the small oil reserves in both Iranian and Omani sides of the field, legal, contractual, performance evaluation of the joint development method can be pursued in a field that is associated with residual reserves risk and low production commitment to gain experience in this field in order to use experience from this field for similar projects. It is obvious that by monitoring the measures taken and the progress of this contract or agreement and recording technical and contractual challenges in the implementation phase of the development of this field, chances of success in implementing similar cases in larger and more important fields can increase.
Some fields in Oman are considered as pilot projects or operational methods of enhanced oil recovery (EOR) in the world. Various research centers around the world have carried out or are carrying out their EOR study projects based on some fields in Oman. In Oman’s fields, various methods of thermal, chemical and miscible gas injection methods are being performed experimentally or full field. Given this volume of EOR study project activities in Oman, concluding a contract or cooperation agreement for the Hengam field can provide Iran with the opportunity to include the relevant clauses in the field development agreement and benefit from Oman's EOR experience. Given that the development of the Omani section of this field has been done by international companies and as the Omani section is fractured, the experiences and actions taken by those companies could be considered as significant in operating similar projects.

Conclusion

In joint fields, the advantages of joint development far outweigh the advantages of independent development by each of parties. The most important challenge in independent and non-cooperative production is the issue of fluid migration to each party and consequently drilling and construction of competitive facilities. In case of cooperation and development in the form of integrated development, the issue of fluid migration will be resolved and drilling and construction of competitive facilities will be replaced by implementation of optimal operations agreed by the parties. The most important achievement of such collaborative developments is the reduction of additional costs due to the accumulation of field activities (elimination of drilling unnecessary wells and/or construction of similar facilities) and the avoidance of duplication on both sides and the optimization of joint field production.
Although the Hengam field does not have significant oil in place or recoverable reserves, joint development of the field with Oman can be considered as a significant experience of this development model for our country. Although an integrated development memorandum has been concluded with Iraq in recent years to develop some joint exploration structures and some steps have been taken, so far no efforts have been made to conclude a contract for the development of these structures. Therefore, joint development of the Hengam field can be considered as a valuable experience in the field of integrated development of joint fields of Iran with other countries. On the other hand, due to the small oil reserves remaining on both sides of Iran and Oman, legal, contractual, performance evaluation of integrated development methods, etc. can be pursued in the field that is associated with residual reserves risk and low production commitment to gain experience. It is obvious that by monitoring the progress made and the progress of this contract or agreement and recording technical and contractual challenges during the implementation of the development of this field, chances of success in implementing similar cases in larger and more important fields can be increased.

Subsea 7 to Install Spread Offshore Brazil

Petrobras has awarded Subsea 7 an engineering, procurement, construction and installation (EPCI) contract for the development of the Búzios 8 Field in the presalt Santos Basin offshore Brazil.

The location is about 180 km (112 miles) from the coast of Rio de Janeiro in 2,000 m (6,562 ft) water depth.

Subsea 7 will perform engineering, procurement, fabrication, installation and precommissioning of about 126 km (78.3 miles) of rigid risers and flowlines, 98 km (61 miles) of flexible lines and 88 km (54.6 miles) of umbilicals. It will also install the FPSO mooring lines and manage hookup.

VAALCO Makes Find in Gabon

VAALCO Energy Inc. has successfully drilled the South Tchibala 1HB-ST well from the Avouma platform in the Etame Field offshore Gabon, according to a recent company news release.

VAALCO discovered significant columns of multiple hydrocarbon bearing sands in the Dentale

UK Imposes Extra Levy on Oil/Gas Profits

Britain’s government has responded to public pressure to help alleviate rising energy prices by introducing an Energy Profits Levy.

This is a new 25% surcharge on what the government describes as “the extraordinary profits” the UK oil and gas sector is achieving in the current market, with oil prices nearly doubling since early last year, and gas prices more than doubling over the same period.

The government expects to raise about £5 billion ($6.3 billion) over the next year from the new measure, some of which will cover rebates of £400 ($504) for each UK household’s energy bill later this year.

Favorable Gas Market for Mako Field

Coro Energy said a final investment decision could take place next year for the 495-Bcf Mako gas field in the West Natuna Basin offshore Indonesia.

Conrad Petroleum operates the surrounding Duyung PSC (Coro 15%).

According to Coro, the present macro environment is creating the incentive for negotiations of the current heads of agreement for Mako to be finalized via a binding gas sales agreement. First gas could follow in 2025.

To date, six wells have been drilled on the field including two successful appraisal wells in fourth-quarter 2019.

Cbus Acquires 10% Stake in Australia Windfarm

Cbus Super (Cbus) has acquired a 10% interest in Copenhagen Infrastructure Partners' (CIP) Australian offshore wind project, Star of the South—Australia’s first offshore wind project.

This follows Cbus’ investment into CIP’s flagship fund, Copenhagen Infrastructure IV (the majority owner of Star of the South).

CIP specializes in energy infrastructure investments and is one of the largest developers of offshore wind projects globally, and Cbus is an Australian building and construction industry super fund.

India Energy Challenges

Shuaib Bahman

India has moved towards significant economic growth over recent years. One of the drivers of this economic growth has been the growing consumption of energy in the country. Rapid economic growth, rising middle class and growing purchases of vehicles have been among the factors that have increased India's energy needs in the industrial and household sectors.

Although India, the third largest importer of crude oil in the world, has taken steps to find clean energy sources and cut off fossil fuel consumption, and intends to reduce this type of energy consumption to zero by 2070, the country will still need oil and gas as its main source of energy in the foreseeable future. According to Indian government plans, the country will experience $5 trillion growth by 2025 and $10 trillion by 2030. Undoubtedly, achieving such economic growth requires energy supply at a balanced price, as well as high security of access to oil and gas.

Daily Growing Demand

According to the International Energy Agency (IEA) estimates, India will surpass the European Union as the world's third largest consumer of energy by 2030, and will account for the largest share of energy demand growth in the next two decades with 25%. India's energy consumption is also expected to almost double as India's GDP grows to about $6.8 trillion by 2040.

According to the IEA, India's oil demand is projected to reach 8.7 mb/d by 2040. Thefigure was about 5 mb/d in 2019. Meanwhile, the country's refining capacity is expected to reach 6,400,000 b/dand 7,700,000 b/d, respectivelyin 2030 in 2040. On the other hand, India's imports of liquefied natural gas (LNG) will quadruple to 124 bcm, by 2040, which will account for about 61% of total gas demand by 2040. In 2030, the figure is estimated at 76 bcm, or about 58% of world gas consumption.

India is currently the world's second largest importer of net oil after China. The country currently imports about 76 percent of its crude oil needs, but India's dependence on oil imports is expected to reach 90 percent by 2030 and 92 percent by 2040. Rising oil demand could double India's oil import spending by 2030 compared to 2019, to about $181 billion, and by 2040, nearly triple to $255 billion. The growth of India's consumption in the coming decades shows that the country will be the main driver of growing demand for energy in the world, and will alone account for 25% of the growth in demand for energy in the world.

However, India's growing energy needs have made New Delhi more dependent on fossil fuels imports. This is because the country's domestic oil and gas production, despite the government's policies to promote exploration and production of oil and renewable energy, has not been much improved. Hence, India has always wanted to increase the global supply of crude oil, and considers any disruption in this regard to its detriment. For Indians, given that energy consumption is rising rapidly, if oil and gas supplies are insecure, prices will rise.

Accordingly, India has been one of the countries that has never welcomed the decisions of the Organization of the Petroleum Exporting Countries (OPEC) to impose restrictions on oil supplies within the framework of the OPEC+alliance. It even criticized OPEC+ decision to increase monthly oil production to 400,000 b/d in March, stressing that this increase could not have much impact on supply constraints and high oil prices.

Challenges and Opportunities

India will face at least three serious challenges in the future due to its dependence on energy imports:

The first challenge is the imbalance in oil and gas prices in theworld markets, which, is although usually driven by supply and demand, has serious implications for other issues as well. In recent years, for example, the corona epidemic has had a very serious impact on global energy supply and demand.

The second challenge is the security of energy transfers to India, which may be affected by insecurity on sea routes or the occurrence of wars or terrorist or sabotage attacks. These kinds of events may boost India's imported energy prices.

The third challenge is competition in the field of consumption with its powerful neighbor, China, which in itself may affect some energy producers in future interactions and divert oil and gas resources.

Accordingly, over recent years, India has sought to diversify its energy imports and has tried to put this policy on the agenda seriously. It has contracts for energy imports with the United States, Russia and Mexico. This trend shows that New Delhi, which in the past relied more on energy imports from the Middle East, is now attempting to diversify its suppliers. Of course, New Delhi has also faced challenges in this direction.

For instance, US sanctions against Iran have prevented India from supplying part of its oil imports through Iran. Also, US pressure over recent years, along with India's long-standing dispute with Pakistan, has prevented New Delhi from building a peace pipeline. Undoubtedly, this pipeline could play an important role in supplying part of India's gas needs.

At the same time, it should be noted that global insecurity has not always had a negative impact on India's energy imports. Just as the Russia-Ukraine war in recent months has given India access to cheaper Russian oil. While prior to the war, Ural crude and Brent crude were normally offered at the same price in world markets, in March, the price of Ural oil fell so sharply that the differential between the two types reached a record high.Russia was therefore forced to offer a discount of up to $30 a barrel on Ural oil. Under such circumstances, it is quite natural that India would be very willing to buy Russian crude oil at such low prices. Although such opportunities to buy cheap energy are rare, New Delhi has always taken advantage of these opportunities to supplypart of its energy needs.

OPEC+, Decision Stability viaSmart Flexibility

The 29thMinisterialMeeting of OPEC and Non-OPEC Producing Countries called OPEC+ was held on June 2against the backdrop of uncertainties and speculation about the decisions the OPEC Member and its allies would adopt.

Ramped-up pressure by the West, and the United States in particular, on OPEC+ producers to increase oil supply, failure of some OPEC+ producers to lift output and comply with output obligations, the Russian foreign minister’s consultations with oil producing nations during the Gulf Cooperation Council (GCC) meeting regarding Russia’s prospective cooperation with OPEC+and finally, speculations about the possibility of suspension of Russia’s cooperation with OPEC+ were among the most important events whichindicate the significance of the 29thMinisterial Meeting of OPEC+ and its decisions.

The Meeting was concluded in less than 15 minutes and the OPEC+ finally agreed to add 648,000 b/d to its total output during July and August this year. OPEC+ said in a statement following the Meeting that it had been agreed to “advance the planned overall production adjustment for September and redistribute equally the 432,000 b/d production increase over July and August 2022. Therefore, July production will be adjusted upward by 648,000 b/d as per the attached schedule.”

This decision means that OPEC+ would end its output cut one month ahead of schedule. Therefore, any decision-making about the framework of the Cooperation amongthe OPEC Member Countries) and their partners would depend on the August Meeting.

Now the question here is “to know the connection between the elements highlighted in the run-up to the 29th OPEC+ Meeting and the decision made at the end”. In other words, to what extent did the OPEC+ decision match circumstantial evidence? The short answer to this question is that the OPEC+’s decision was a smart flexibility in compliance with the global oil market developments and circumstances, which would prevent any escalation of tensions in the oil market at least for some time. However, by outlining more aspects, OPEC+’s last decision may be analyzed more profoundly.

Easing Pressure of the US on the OPEC+

The crude oil and natural gas price hikes in recent months has pushed consumers, particularly the US, to ratchet up pressure on OPEC+ producers to add to their supply in a bid to contain the upward trend of prices.Increased pressure by the Western media, adoption of tough position by the US and European officials against OPEC+, as well as the US Congress move to revive the No Oil Producing and Exporting Cartels Bill (NOPEC Bill), are all among the most important examples of ramped-up pressure on the OPEC+ nations to raise output.

OPEC+’s recent decision to supply more oil than agreed may help ease psychological pressure on the oil producing countries at least temporarily. Although the fundamental reasons of the oil market fluctuations including geopolitical tensions between Russia Ukraine and falling demand by China continue to exist, the key message of the OPEC+ to the market translates into the oil producing nations’ readiness to take action based on the oil market conditions meeting the consumers’ demand which in response, the consumers welcomed the message quickly.

Future of the Cooperation

According to the Russian foreign ministry’s statement, Riyadh and Moscow heaped praise on the OPEC+ coalition’s performance during the recent visit to Riyadh of Russia’s Foreign Minister Sergey Lavrov. The statement highlighted the “stabilizing impact of close cooperation between Russia and Saudi Arabia on the global hydrocarbon markets in this strategic sector”. 

The successful experience of the OPEC+ Cooperation since beginning of 2017 has yielded valuable achievements for all producers engaged in this agreement but also relative stability in the oil market. Protecting the achievements against external pressure is of particular importance. Saudi Arabia is seriously willing to continue the Cooperation with Russia and has engaged Russia in the OPEC+ deal. To that end, OPEC+ would make decisions so as not to create the impression of replacing Russia with an alternative in the market. Therefore, the 29th OPEC+ Meeting’s decision has been supported by the two big producers and the amount of oil output hike agreed upon is not big enough to imply replacing Russia’s oil supply on the market.

OPEC+ Market Share

Shale oil supply remains a potential threat to the OPEC and itsAllies. Although the US crude oil output has declined in the past two years, the significant growth in the oil prices and oil companies’ jump in revenue may provide a good chance for the renewed supply of shale oil by the US and other non-OPEC member states, thereby posing a threat to OPEC+’s oil market share despite the high costs of shale extraction. While Western consumers continue to talk about reducing the share of oil in their energy mix and fossil fuel transition, increasing oil market share constitutes a key impetus for OPEC member states and their allies in making decisions collectively. Despite the reduction in OPEC’s spare production capacity and the fact that only some OPEC+ producers are able to enhance their oil supply, the 29th meeting’s decision may be considered a measure for maintaining or probably increasing the OPEC+ share in the oil market.

In conclusion, OPEC+’s decision for a higher supply than agreed earlier, is representing as flexibility and a goodwill gesture on the part of producers vis-à-vis energy market developmentand global oil prices in addition to compliance with the OPEC+ Declaration of Cooperation and safeguarding the interests of nations involved in the historical Cooperation of the OPEC and Non-OPEC Producers..

Last but not least, the global oil market situation, including expectationsforsome possible declines in the global oil supply until the end of 2022 coincidence with higher demand in the second half of the year, show that Iran’s return to the oil market could potentially supply customer needs helping to securethe market stability in the interest of producers and consumers. That would create an opportunity for a further oil supply on global markets, indicating the fact that the world is looking forIran’s oil and gas more than ever.

OnceUpon a Time REPowerEU plan

Intelligent action or Political game

Afshin Javan

Director General and National Representative to OPEC & GECF

As tensions between Russia and Ukraine escalate, the world is worried about possible spillover of concomitant instability. Uncertainty after the covid-19-induced two-year damage on the global economy has confused the world. The natural gas market is a particular and the most important channel for transmitting these impacts.The disruption of Russian natural gas exports to Europe and the winter ahead is one of the concerns of the energy market in the short-term.Europe is seriously looking forward to replacing Russia natural gas imports withthe REPowerEU plan.

In 2020, Russia supplied about 44% of the EU’s natural gas consumption, with Germany and Italy being the top two recipients. Approximately, one-third of EU members (Germany, Austria, Bulgaria, Estonia, Finland, Hungary, Latvia, Poland, Slovakia, and Slovenia) import more than half of their natural gas from Russia; some of which is re-exported to other countries. Europe’s domestic production of natural gas has declined for more than a decade and production in 2020 was about 59% lower than in 2011. Although not an EU member, Turkey is a large importer of Russian natural gas. Additionally, Russian investment in European natural gas infrastructure such asstorage and distribution companies provide Russiawith additional leverage over certain countries.

Energy prices are at record highs and remain volatile in recent months. Just before the Russia-Ukraine political tensions, natural gas wholesale prices were around 200% higher than that of a year ago (February 2022)due to low natural gas inventory level and compared to the 5-year average. Strong global energy demand in the post-covid-19 period and significant economic recovery significantly impact the high energy prices, and additional Russia-Ukraine tension is provokingthis crisis.It is quite clear that an escalation of Russia-Ukraine tension could put up to 168 Bcm/y of Russian natural gas export to Europe at risk, if the tension causes Russia to suspend natural gas deliveries to Europe, not to mention the impact of uncertainty on theprice volatility.

Natural gas storage in the EU is apparentlyenoughto meetvarious sectors’ needs bythe end of winter 2023, even in case of full disruption of supplies from Russia. The storage level across Europe is just under 30% now. Member states already have contingency plans, as required by the Natural Gas Security of Supply Regulation that couldbe activated if necessary to guarantee supply. But the question is to know how and from where?The EUrelies onaninterconnected pipeline between member states gas network (including the availability for reverse flows) and LNG terminals. The European Commission believes that all regions now have access to more than one source of natural gas, but is it true? The European Commission has been monitoring the situation very closely and has remained in permanent contact with the member states. Europe has also made efforts to diversify energy supply routes and sources. The Southern Gas Corridor bringing gas from Azerbaijan is operational, and there iscooperation notably with Norway, Qatar, Japan, South Korea and the US, among others.

So why has Europe displayedpassive behaviorin suchan uncertain situation? Do all European countries agree with this action? Which part of Europe suffers the most from Russian gas cuts? Which European countries have the least import diversity?

Europe seems to be ignoring these questionsand intends to imposea raft of sanctions on a selected number of Russian companies, mostly based in Europe, including Gazprom Germania, a Gazprom subsidiary, and EuRoPolGaz SA. An announcement released on May 3, 2022, indicated that these sanctions prohibit Russian companies active in US, Europe and Singapore fromcontinuing business, including fulfilling commitments

in the existing contracts. The decree explicitly highlights exports ofraw materials.But the extensive list of Russian sanctioned companies still remains vague.

Even though a total halt of Russia’spiped natural gas is doubtful,in case it comes true, it would put a big strain on European gas markets in winter 2022. Natural gas storagelevel has reachedfive-yearaverage lows, international LNG and European Hub prices are highly volatileand the completion of Nord Stream 2 pipeline from Russia to Germany was halted and depriving Europe of 56 Bcm/yof natural gas.Therefore, Europe’s gas market will facerisky conditions in the coming months.

In terms of LNG regasification as alternative to natural gas, liquefaction plants are already running at100% capacity in Western Europe.

In Eastern Europe,Poland and Lithuania have the leastsurplusLNG regasificationcapacity.We can see significant spare import capacity in Southern Europe, but it seems thereis not enough utility for compensating Russiannatural gas,and the Europeans have to choose piped natural gas importsfrom suppliers like North Africa,Azerbaijan, Turkmenistan and Iran.

SindreKnutsson, vice president for gas and LNG market analysis at Rystad Energy, believes: “Despite Europe’s hidden policy to reduce its dependence on Russian natural gas asdemonstrated by the significant build-up in LNG import facilities on Western Europe’s coast in recent years,Russia plays a pivotal role in helping meet the region’s natural gas needs. As a result, any military conflict could have serious impacts onEuropean natural gas supply.”

In terms of natural gas security and due to energy diversification, most Western countries are properly secured and are resilient to Russia. The situation for Eastern European countries is quite different; however, as they are striving to find some sort ofsolution in the run-up to winter.

The EU decision to lowerdependency on Russian natural gas importsis a critical decision,as there may be no way back. In the meantime, achievingfull diversification takes time whether existing long-term contracts remain in placeor not, and if LNG regasification capacity is not enough. Economically the Europeans have to compare investment costs for alternative natural gas sources with that of Russia.

The degree of dependenceon Russian natural gas is different for European consumers. In terms of flexibility, it seems that LNG importers will be the biggest winners. Wood Mackenzie believes European LNG imports will double to more than 200 Bcm/y by 2030 from 114.8 Bcm/y in 2020.

Natural gas prices inthree major gas hubs dropped torecord lows due to covid-19 lockdowns in 2021.The EU gets about 40% of its required natural gas from Russia for heating homes, generating electricity, supplying the industry needsand supplying the required feedstock of fertilizer plants. That amounts to around 31% of the EU’s total natural gas consumption, with dependency rising to 65% in Germany.

Against the backdrop of this challenge, how can Europe replace Russian natural gas imports? On March 8, 2022, in response to Russia-Ukraine tension, the European Commission proposed a framework of REPowerEUto make Europe independent of Russian fossil fuels well before 2030, starting with gas.

This plan also outlines a series of measures to respond to the rising energy prices in Europe and to replacenatural gas stocks for the next winter. Europe has been facing increased energy prices for several months, but now uncertainty on supply is exacerbating the problem.

REPowerEU will seek to diversify gas supplies, speed up the rollout of renewables and replace gas in heating and power generation. Accordingly, the EU demand for Russian gas is expected to drop by two-thirds before the end of the year.

REPowerEUwill rapidly reduce EU’sdependence on Russian fossil fuels throughfast-forwarding the clean energy transition and adapting the green continent’s industry and infrastructure to different energy sources and suppliers. Additional investments of €210 billion are needed between now and 2027 to phase out Russian fossil fuel imports, which iscurrently costing European taxpayers nearly €100 billion ayear.

REPowerEU is the European Commission’s plan to put an end to dependency on Russian fossil fuel imports. Itis alsoa plan for saving energy, producing clean energy, and diversifying energy supplies. It isbacked by financial and legal measures to build the new energy infrastructure and system that Europe needs. RepowerEU actions significantly reduce the EU’sdependency on Russian fossil fuels already this year, and accelerate the energy transition trend. Building on the “Fitfor 55” packages of proposals and completing the actions on energy security of supply and storage, this REPowerEU plan puts forward an additional set of  measures to be taken on the following:

Energy saving;
Energy  diversification;
Accelerating clean energyprojects and quickly substitute fossil fuels by accelerating Europe’s clean energy transition; and
Investment and reform and combininginvestments and reformssmartly.

Escalation of Russia-Ukraine tensionsbrings abouteconomic consequences for the global economy and international trade as well. Inflation in the Eurozone hit a new record of 8.1% in May, up from 7.4 % in April 2022, amid rising energy and food prices fueled in part by this politicaltension.All over Europe countries arefacing rising commodity prices, with Europe's expected economic bounce-back from the coronavirus pandemic remaining vulnerable.

In reality,Russia-Ukrainetensions haveexacerbated the energy crisis by driving global fears it may lead to an interruption of oil or natural gas supplies from Russia.The UN World Food Program (WFP) and Food and Agriculture Organization (FAO)supposed prices would hit an all-time record in February 2022 and again in March 2022, and the World Bank forecasts that wheat prices could rise more than 40% this year.How can this be managed?

Mission Impossible in Short-Term

The European Commission has adopted the following strategies in the short-term:

Common purchases of natural gas, LNG and hydrogen via the EU Energy Platform for all Member States whichwant to participate, as well as Ukraine, Moldova, Georgia and the Western Balkans;
New energy partnerships with reliable suppliers, including prospectivecooperation on renewables and low carbon gases;
Rapid rollout of solar and wind energy projects combined with renewable hydrogen deployment to save around 50 Bcm of gas imports;
Increase the production of biomethane to save 17 Bcm/y of gas imports *Approval of first EU-wide hydrogen projects by the summer;
An EU Save Energy Communication with recommendations onhow citizens and businesses couldsave around 13Bcm/y of gas imports;
Fill gas storage to 80% of capacity by 1 November 2022; and
EU-coordinated demand reduction plans in case of gas supply disruption.

As mentioned, it seems Russian natural gas replacement in the short term isdifficult and Western Europeis moving toward a dangerous game.Which European players could compensate for the huge quantity of Russian natural gas exports to Europe?This game may put pressure on Russian economy but Europe cannot escape from its harmful spillover impacts. Escalating this game will amplify inflation and will increase recession possibility in the Eurozone in the midterm.

The Eurozone appears to include two categoriesof natural gas importers from Russia; the first category has more dependency on gas imports from Russia and the countries in the categoryare located more or less in Eastern partof Europe but the second one has less dependency on Russian natural gas imports and the countries in this category are located in the western Europe.

The first category is more flexible andeven more cautious than the second one, and they look forward to finding a significant solution for the ongoing political tension, but the second category has a rigid political stance against Russia.

In addition, this winter is a critical time for the Eurozone and it depends on certain major factors such as natural gas demand growth, level of natural gas storage and degree of weather in the coming winter.

In Baku Energy Week in May 2022, some eastern European countries hadserious concerns about the coming winter.They were unsatisfied in terms of Russian natural gas suspension and struggling for finding temporary source of supply for this year.EuropeanCentral Bank (ECB) recently estimated thata total cut-off could mean 5 percentage points of lost European.

economic output and higher inflation.

TheEuropean Commission publishedREPowerEU back in March; likewise, the IEA published a similar ten-point plan asalternative for Russiannatural gas. However, its foreseenreductions are more conservative than those in REPowerEU.

The IEA estimates that more than one-third of Russian natural gas exports to the EU would be eliminated.

The IEA calculates that entering no new gas contracts with Gazprom could save 15Bcm/yby the end of 2022 and replacing Russian gas with alternative sources could save another 30Bcm/y. Switching to renewable energy sources such as solar and wind, and maximizing generation from bioenergy and nuclear, could reduce gas usageby another 19Bcm/y. Finally, energy-saving measures focused on consumers and heat pumps could also save 14Bcm/y in 2022.

The IEA's numbers add up to savings of more than a third of current Russian gas supplies to Europe, but the agency subtracts some of the gas from alternative sources to replenish gas storages, ending up with total savings of “more than 50 Bcm/y”.

Bruegel-aGerman think tank institute-suggests that in theory, the EU should be able “to replace Russian natural gas flows entirely”, even in the short term. While recognizing this is complicated in practice, Bruegel analysts calculate that the EU has a spare gas import capacity of 1,800 terawatt-hours (TWh) from alternative suppliers of LNG and pipeline gas,i.e., more than the 1,700TWh Russian gas accounted for in 2021.

In sum, based onthe most conservative estimates, the EU should be able to reduce its reliance on Russian gas by at least one-third by the end of 2022. Based on REPowerEU plan,European Commissionhas the most ambitious scenario, with the biggest reduction in the shortest periodof time.

Assuming that 168 Bcm/yfor Russian gas imports to Europe in 2021 does not change in the coming years, and in an optimistic scenario developedby the REPowerEU plan, Europe urgently needsa minimum of 66 Bcm/ynatural gas and LNG, more or less equal to the North Stream 2 capacity.

How can the Europeans prepare this quantity in the next 6 months?

The following unsustainable alternative sources could work in the short-run:

Increasingnatural gas production from domestic sources such asthe Netherlands and Norway;
New natural gas spot  cargo purchasesfrom Azerbaijan,Turkmenistan and Iran or spot LNG SPA from the US and Qatar to ramp up the level of gas storage before winter; and
Increasingthe capacity of nuclear power and renewable energy generation.

Possible Mission in the Long-Run

The European Commission has adopted the following strategies in the mid-term:

Implementing new national REPowerEU Plans under the modified Recovery andResilience Fund – to support investment and reforms worth €300 billion;
Boosting industrial decarbonization with around €3 billion of frontloadedprojects under the Innovation Fund;
Introducing new legislation and recommendations for faster permittingof renewables especially in dedicated ‘go–to areas’ with lowenvironmental risk;
Investments in an integrated and adapted gas and electricityinfrastructure network;
Increased ambition on energy savings by raising the EU-wide target onefficiency for 2030 from 9% to 13%;
Increasingthe European renewables target for 2030 from 40% to 45%
Offering new EU proposals to ensure industry has access to critical raw materials;
Regulatory measures to enhanceenergy efficiency in the transport sector;
Constructing ahydrogen accelerator to build 17.5 GW by 2025 of electrolysers to fuel EUindustry with homegrown production of 10 million tonnesofrenewable hydrogen; and
Developing amodern regulatory framework for hydrogen.

In this case, medium-termmeasures are to be fulfilledby2027. The possibility of replacing Russian natural gas in the longer term by the Eurozone is high.The European Commission and IEA scenarios are aligned with the EU's ’Fit for 55decarbonization goals’ but do not predict investing in fossil alternatives to Russian gas. Europeans’commitmentsto new infrastructure such as LNG ports, requires longer-term commitments to justify the expenses.

In mid-term,German think tank Agora estimates that by investing in energy efficiency, energy saving and renewable energy alone, 80% of Russian natural gas imports could be replaced by 2027. If combined with alternative gas supplies such as LNG, it could even be 100%, Agora suggests.

The Agora study finds that 49bcm/ycouldbe reduced from buildings by renovation, connecting homes to district heating networks and ceasing the installation of gas boilers. Another 23Bcm/ycouldbe saved in industry, and gas use couldbe reduced most of all in the power sector, with a potential saving of 51Bcm/y from maximizing renewables utilization.

Conclusion

The Europeans are trying to reduce their dependence on Russian gas as much as possible.

In Eastern Europe, there is more dependence and less diversity in the energy mix,whileIn Western Europe, countries have less dependence and more diversity in their energy mix.

Inflation, due to rising energy and commodities prices, is a thoughtful problem in the European economy. In the short-term, Europe's game against Russia could have detrimental consequences for both players. This winter also intensifies this fragility.

REPowerEU is the European Commission’s plan to put an end to dependency on Russian fossil fuel imports. REPowerEU is a plan for saving energy, producing clean energy, and diversifying EU’s energy supplies;however,it is unlikely to help Europe in the short-term.

Europe faces a dual policy with Russia. On the one hand, Eastern Europe will have to suffer a lot if Russia completely cuts off natural gas flow, and on the other hand, the domino impactof inflation couldsignificantly reduce economic growth in Europe, and the result of this game is lossfor all parties.

If Russian exports paused completely, Europe would fight to meet its gas needs from various LNG or pipeline supply of various sources in the short-term. Eastern Europe would be most severely hit, as the region is the most dependent on Russian gas imports;however, in theory, Western Europe could fill the loss with increased LNG imports, primarily from the US. Western European countries have nearly enough LNG import capacity to replace all Russian natural gas, but would need an extra8Bcm/y of domestic production to make up for the difference to 2021 levels.But is it possible in the reality,? How much infrastructure investment is needed? In addition, how long does this replacment take? What will happen to the countries, which are strongly dependent on Russian gas? Who will support energy security of them?

In my opinion, the only way to get out of this crisis for Europe is findinga peaceful and diplomatic solution with Russia, asthe escalation of tensions will definitelyexacerbatethe crisis.

The world can no longer tolerate another major crisis after the recent pandemic.

Europe Russia Gas Alternatives

Gholam-Ali Rahimi

Director, Energy Economics Research Center, Institute for International Energy Studies

Europe’s options to find alternatives to Russian gas imports include putting preplanned projects on hold, cutting 50% of Russian gas imports over five years and thoroughly quitting Russian gas imports over ten years.

In the first scenario, due to the suspension of the Nord Stream 2 pipeline project, with an annual capacity of 55 bcm, Europe has to seek an alternative. In the second and third scenarios, given a planned 87 bcm and 175 bcm cut from Europe’s Russian gas imports, Europe has to seek the same amount of gas from other sources.

Europe may receive 50 bcm of gas from Eastern Mediterranean reservoirs, including Leviathan, Aphrodite and Zohr in the future although there are ambiguities.

In the aftermath of the 2009 and 2010 gas discoveries in the Eastern Mediterranean region, many expected this region to turn into an energy hub. One decade later, the EastMed natural gas pipeline is faced with numerous challenges, not to mention the impact of the coronavirus pandemic.

Gas Discovery

When more than a decade ago, the Eastern Mediterranean saw the first gas discoveries, many analysts expected this area to become an energy hub. However, market conditions have grown for worse over time and the region remain still in a state of political limbo. From the very beginning, challenges were numerous and the number of state actors with competing interests was on the rise. The outbreak of COVID-19 just worsened the situation.

The International Energy Agency (IEA) has reported that the COVID-19 crisis would in the long term affect natural gas markets, saying no midterm perspective is in sight. EastMed was designed to carry gas from the Eastern Mediterranean to Central Europe; however, it is not clear whether or not this project would finally become operational.

COVID-19 has largely impoverished governments and private investors. The European Union is likely to not spend its limited budget on the projects which would not sufficiently guarantee its energy security, rather than that it invests in green energy. Furthermore, Eastern Mediterranean gas deposits are meager on the global scale, but some actors may push for pipeline construction with political motivation.

Zionist Regime made significant offshore gas discoveries – Leviathan and Tamar fields – in 2009 and 2010. Minor discoveries were subsequently made in Cyprus and occupied Palestine. Occupied Palestine is racing ahead of its neighbors in terms of offshore gas recovery although domestic market is favored over exports. Zionist Regime decided in 2012 to limit its gas exports to only 40% of its potential reserves in a bid to guarantee domestic supply for 25 years.

Eastern Mediterranean Fields

The Eastern Mediterranean is a politically fragmented region, thus limiting the region's capacity as a gas hub. Syria has been in the midst of a civil war since 2010. Zionist Regime and Lebanon are still formally at war with each other and have conflicting claims over their maritime borders. There are still arguments between Turkey and Cyprus. Turkey has disrupted the exploration activities of international oil companies in the Cyprus Economic Zone (EEZ) due to maritime border conflicts.

To further complicate matters, in December 2019, Turkey and Libya reached a maritime agreement establishing an EEZ zone off the southern coast of Turkey to the northeastern coast of Libya. This agreement has been strongly condemned by Greece and Cyprus. At the same time, Zionist Regime and Egypt – which support insurgent forces fighting the Ankara-backed Libyan government – have expressed severe concerns about the project's implications for regional stability.

The EastMed pipeline is on the European Commission's Projects of Common Interests (PCI) list, defined as "key cross-border infrastructure projects linking the energy systems of EU countries", aimed at helping the EU achieve its policy. Taking into account energy and climate goals, it could be argued that energy is safe, secure and sustainable for all citizens, and the long-term decarbonization of the economy is in line with the Paris Agreement.

Apart from linking EU energy systems, it is difficult to see how the EastMed project meets the criteria set out in the lines above. The pipeline, priced at around €6 billion, will initially supply about 2% of the EU's total gas imports and then will increase by another 2%.

Investment in the EastMed pipeline was expected to begin in 2022 and gas transmission from the pipeline to be completed in 2025; however, at present it is unlikely that these schedules will be met. The pressure on the EastMed pipeline appears to be more politically motivated. Greek state television ERT has described the project as a "shield against Turkish provocations".

LNG Imports

The second European scenario is an increase in foreign imports from the United States. US energy production in 2021 was about 71 million tonnes and is expected to increase to more than 160 million tonnes per year in the next 10 years, an increase of about 90 million tonnes per year (equivalent to 117 bcm per year). Therefore, a large part of the increase in organic production can be allocated to the European market.

But the latest European scenario is an increase in foreign imports from Qatar. Qatar's production capacity in 2021 was about 79 million tonnes, and is expected to increase to more than 110 million tonnes per year by 2025, and to more than 126 million tonnes per year by 2027, an increase of about 47 million tonnes 61 bcm per year. Therefore, a large part of this increase in energy production can be allocated to the European market.

In general, production in the Eastern Mediterranean will increase by 50 bcm, the United States by 117 bcm and Qatar by 61 bcm by 2030, which will provide an accumulated capacity of about 228 bcm. Undoubtedly, given that part of this increase in production in the United States and Qatar is planned for export to Asian markets, it cannot be assumed that the entire increase can be exported to the European market.

Natural Gas Market

The global gas market is expanding. While most of the gas transit is still through pipelines, LNG trade increased by nearly 13% in 2019, the highest growth since 2011. According to the IEA, this development is promising for the security of natural gas supply.

Floating Storage Regasification Units (FSRUs) have facilitated imports to the Middle East, North Africa and other places. FSRUs are not costly. Furthermore, floating liquefied natural gas (FLNG) facilities have facilitated access to gas resources.

Sensitive Conditions

Regarding Iran's opportunities to enter the gas-thirsty market, with the introduction that Europe's short-term energy situation has become very sensitive and the energy crisis in Europe has made the continent very critical, it should be noted that gas prices in the UK are about 4 times higher than that of last year. The rise in oil prices to over $100, and the consequent rise in gasoline prices, has caused many problems for Europeans. According to The New York Times, about 38 percent of Europe's gas resources come from Russia. This highly powerful lever has made it not easy for Europe to impose sanctions on Russia. Any cut-off of Russian gas to Europe could lead to the closure of many European factories and products.

Five countries accounted for approximately 56% of the world gas production. The United States was the world's largest gas producer in 2020 with 914.6 bcm (23.7%), according to BP. Russia accounts for 16.6 percent of world gas production with 638.5 bcm. With a production of 250.8 bcm, Iran has a 6.5 % share of world gas production. China and Qatar are next with 194 bcm and 171.3 bcm, respectively.

Russia's LNG gas exports in 2020 amounted to 40.4 bcm and through the pipeline 197.7 bcm. In the same year, Russia exported 238.1 bcm of gas and imported only 11 bcm. Russia's balance sheet in 2020 was about 227 bcm, which indicates that it has a strong leverage as the largest exporter of gas.

About 6.5 % of the world's gas is supplied by Iran, and given the current situation, Iran has a great opportunity. Given the current situation, Iran may increase its share and income from gas exports in various markets, while if the United States returns to the 2015 nuclear deal, Iran would be able to develop its gas fields and subsequently enhance output.

Knowledge-Based Companies on Vendor List

Mahnaz Mohammad-Qoli

Benefiting from cutting-edge technologies in the petroleum industry and the necessity of integrating these activities with a view to making this sector knowledge-based, is an approach that has been underscored since the start of the current calendar year. Given the significance of this issue, “Iran Petroleum” has interviewed Borzou Qanbari, director of manufacturing logistics and commodity procurement at National Iranian Oil Company (NIOC), about the company’s plans for increasing knowledge-based companies’ presence in the petroleum industry and maximum use of domestic manufacturing potential.

The Petroleum Ministry plans to make the petroleum industry knowledge-based. What measures are being taken by the NIOC Directorate of Manufacturing,Logistics and Commodity Procurement to that effect?

Before the current calendar year was named the knowledge-based and job-creating year, during the two months leading to the start of the current year, Mohsen Khojasteh-Mehr, CEO of NIOC, established the “Knowledge-Based Technologies Progress and Development Task Force” within NIOC. The NIOC Directorate of Manufacturing, Logistics and Commodity Procurement is a member of this task force. Regarding the use of knowledge-based companies and how to interact with these companies, we have specified programs. In the first place, we have set up a system that identifies knowledge-based products, processes and services that these companies may provide positive services to NIOC.On the other hand, knowledge-based companies have always had problems getting into the Petroleum Ministry’s vendor list, including the evaluation criteria on the Petroleum Ministry’s vendor list, which include financial, equipment, and manpower issues.Therefore, due to the fact that these companies meet the minimum conditions, they did not obtain the necessary points to enter the PetroleumMinistry’svendor list. Based on this, we prepared a new instruction and submitted it to the Office of Deputy Minister of Petroleum for Engineering, Research and Technology. According to this instruction, the problems of these companies regarding entering the ministerial vendor list and using them will be solved in an appropriate and desirable manner.In the case of products, for the first time, in coordination with the Office of Vice President for Science and Technology, after counting the products, equipment and services of the processes, the companies in which they operate will be identified and negotiated with. Then the sectors which we are interested in, would be announced.

With this solution, do you want to facilitate the presence of these companies in the vendor list of the PetroleumMinistry?

Certainly, with the new instructions that have been prepared, we will facilitate the presence of these companies in the vendor list of the PetroleumMinistry. Previously, it would have been almost impossible for start-ups with less than 3 years of experience to enter the Petroleum Ministry’s vendor list, but now it is the right time for these companies to easily outsource equipment, use financial sponsors and other conditions.

Haven’t you overstepped current standards?

Not at all. In the standard discussion, we will never deviate from the criteria set out in this guideline, even for knowledge-based companies. Considering the various tests that will be required during the production and field tests that will be among the requirements of these products, we have definitely considered the standard discussion and observing the exact technical specifications for the use of oil companies, and these companies are required to evaluate these standards carefully.We do not sacrifice quality for quantity. The quality of the debate is something that the PetroleumMinistry and NIOC are particularly sensitive to, and will not go beyond its position in any way. Knowledge-based companies will provide more accurate standards and specifications according to the various tests they have to do, especially the field and on-the-job tests they have to do, and we will be sure of the quality of the work they offer. Knowledge-based will also rank well in this regard.

Has the Petroleum Ministry’s vendor list been updated?

To update the Petroleum Ministry’s vendor list, instructions have been prepared and submitted, and companies will make a self-declaration in the system that has been set up for this purpose, and evaluations will be done in NIOC, following these evaluations in the group. The existing goods will be included in the long list of qualified manufacturers of the PetroleumMinistry.

Will the vendor list contain the same 10 groups of prioritized commodities or will new commodities be added thereto?

Although the Petroleum Ministry’s list of 10 priority commodity groups did not meet our expectations, we could have done much better. This year, we have defined more than 67 items needed by the oil industry to be supplied in the current calendar year. In this regard, contracts related to parts and equipment of the upstream oil sector are underway. Its contracts will be concluded in order to move towards the internalization of the priority items of the PetroleumMinistry.

What percentage of petroleum industry equipment and commodities have been domestically manufactured?

In the downstream oil sector and petrochemicals, about 85% and even in some cases up to 90% of the equipment has been manufactured domestically. In some cases, in some packages, some items have not been done due to the facilities that exist in the country. In the upstream oil sector, about 80 to 85% of domestic manufacturing has been done.

Do your plans focus on the upstream or downstream sector?

Our priority is the upstream sector. But in many cases, we also focus on the downstream sector for procuring widely-used equipment.

How does the NIOC Directorate of Manufacturing Logistics and Commodity Procurement interact with science parks?

There is good interaction. According to the process we have defined for using knowledge-based companies, all things are connected like the links of a chain. If a contract is to be concluded, it must be accompanied by a technological contract.

Would you please explain about the production of first time production items?

Our focus is on contracts that offer a first-time product. In this regard, we have announced 67 cases, while 239 items have been equipped and items have been counted, for which we plan to use them according to priority. In this regard, information is constantly obtained. Proposals will be reviewed and based on that, a decision will be made in NIOC. About 1,800 knowledge-based companies cooperate with the PetroleumMinistry. Knowledge-based companies cover a large number of our companies, and some of these companies offer first-time products that we use.

How do you assess the future of these companies according to the existing guidelines?

The use of these companies in the oil industry will be a very effective and decisive step, and with careful planning and proper implementation over the next 3 years will have very significant results. Both to raise the level of companies and to meet the essential needs of the PetroleumMinistry in terms of equipment and knowledge-based processes.

What vacuum was there in the Petroleum Ministry in using the power of these companies?

Before this, we welcomed knowledge-based companies with special conditions. Financial, equipment, manpower issues were limitations that did not allow us to easily enter into contracts with knowledge-based companies, but now, according to the new definition and instructions that have been provided, all these issues have been resolved and we are ready to cooperate with them. Proposals of all knowledge-based companies, which will present their products for the first time to the PetroleumMinistry, will be definitely reviewed,and in case they meet our standards they will be purchased.

How has the Iranian Oil Industry Ventures (IOIV) helped knowledge-based companies?

The issue of financial support is on the side of these companies. The financial weakness of knowledge-based companies will be solved by using the services of funds and even sponsors of companies that they have in partnership with other companies, and in this regard, knowledge-based companies will be of great help in this regard.

Does the IOIV allocate any budget to knowledge-based companies?

The amount of the facility depends on the effectiveness of that equipment in the safe and sustainable production of oil and gas. But it will definitely provide the need for that company to do that activity. Following receiving the offer of these companies and reviewing its conditions and existing evaluations,the NIOC Directorate of Manufacturing, Logistics and Commodity Procurement, introduces the company IOIV for facilities.

Oil Soccer Teams Seasonal Review

The soccer league ended and the teams representing the petroleum industry in these competitions failed to meet expectations. The teams present in Iran’s soccer league used to score acceptable results owing to their presence in the pro league, first league and second league. In the pro league category, they always fought for a place in Asia and in the first and second league, they always sought victory. That was how such teams as Pars Jonoubi Jam, Naftva Gaz Gachsaran, MelliHaffari Ahvaz and Naft Omidiyeh were promoted to high ranks from low ranks.

In the last season, six teams representing the petroleum industrywere vying on the Iranian soccer clubs pro league. Sanat Naft Abadan and Naft Masjed Soleyman were representative of the petroleum industry in these matches. In the first league, the Pars Jonoubi soccer team was present and in the second league was present Naftva Gaz Gachsaran. Naft Omidiyeh and Naft Ahvaz were in the third league. Of course, the third league matches are not yet over and coming second, Naft Omidiyeh is likely to be promoted to the second league. However, Naft Ahvaz is not in any good condition.

Masjed Soleyman Last-Minute Survival

The pro league matches of Iranian soccer clubs finished with the championship title going to Esteghlal of Tehran. Naft Masjed Soleyman and Sanat Naft Abadan were representing the petroleum industry in these competitions. Neither managed to meet expectations and therefore they remained in the bottom of the table. On the final day, Naft Masjed Soleyman managed to guarantee its own survival to avoid dropping to a lower category. It started the season under head coach Faraz Kamalvand. The results with Kamalvand were not satisfactory and due to weak results, the team was in the bottom of the table. Kamalvand was dismissed after half-season after scoring 11 points and finishing in 15th place. In a bid to prevent the team from dropping further, managers chose Mahmoud Fekri to succeed him. Fekri was not successful either and the Masjed Soleyman team remained in the bottom of the table. Finally, Fekri was also sacked only to be replaced by Reza Mohajeri. Meantime, the CEO of the club was also replaced. HedayatYazdi who had managed to lead this team to pro league was named again as CEO in a bid to preserve the Naft Masjed Soleyman place in the pro league. By appointing Reza Mohajeri as head coach, Yazdi managed to preserve Naft Masjed Soleyman in the final days in order to save it from dropping to the first league category. By scoring two draws in a row during the final two weeks, Naft Masjed Soleyman faced Naft Abadan and finally Esteghlal and therefore managed to remain the pro league category.By scoring 22 points, Naft Masjed Soleyman finished 14th.

Middle of Pro League Table

However, Sanat Naft Abadan that had started the season with Ali Reza Mansourian finished with the same coach. It had a very poor start and was in the bottom of the table during the first four weeks. The covid-19 pandemic had deprived them of their head coach. However, after Mansourian was back, the team gradually regained its place and returned to its good days. It scored necessary points to be promoted. It finally scored 19 points to finish in 10th place by the end of half-season.

Sanat Naft Abadan had a tumultuous half-season. At home, it defeated the five-time champion of pro league by scoring two goals, but it lost points in the face of the teams of the bottom of the table. Therefore, the team failed to score more than 33 points by the end of the league and finished in 11th place. Of course, it has to be added that Sanat Naft Abadan did not play its last match because the rival did not accept to play and therefore it won 3-0. Therefore, Sanat Naft Abadan will score 36 points to come in the 10th place, the ranking it had achieved in the first half-season.

Bad Luck

The Pars Jonoubi soccer team, after dropping to the first league, did its utmost to be back to the pro league. However, it has failed to reach its goal after two years. Under head coach Mohammad Nosrati, this team had the chance to return to the pro league during the last season, but its poor performance during the last days of the season led to its failure. In the new season, under head coach Iman Razaqi-Rad, the team failed anew. It is worth mentioning that it was a consequence of the poor performance of the beginning of the season.This team was so dynamic in the first half season that it lost its chance of joining the pro league in the second half season.

In this season, Iman Razaqi-Rad led a very young team to the matches. Therefore, Pars Jonoubi did not achieve good results at the beginning of the season, but it gradually became more experienced until it scored points in the second half season. However, due to the points it had lost in the first half season, it missed the pro league and it finally scored 52 points to finish in the 6th place. It may be able to go into the pro league in the next season.

Struggling to Survive

Naftva Gaz Gachsaran failed to meet expectations despite continuing in the second league for another season. Of course, the club managers said that their goal in this season was merely survival, and continued presence in the second league so that the team would be formed. They consider setting up a new team next season in a bid to return to the first league.

Aziz Farisat was leading the Naftva Gaz Gachsaran team in this season. He finally scored 29 points to finish in 9th place.

History of Petroleum Products Distribution Industry

Part I

The transport industry, as an industry associated with refining and exporting, started its work simultaneously with the launch of the first refinery in the country (Abadan refinery) and along with this industry, it continued to grow and flourish for more than a century. In 525 BC, when King Cambyses invaded Egypt, he built a long pipeline of cowhide leather to deliver water to his troops in arid deserts, which is a historically important step in the military logistics. The first pipeline to transport petroleum products was built after the first well was drilled in the United States in 1874.

George Reynolds’ hard work in the Naftun field (Masjed Soleyman) was completed in 1908, and the first drilled oil well was put into operation. Now it was time for the black gold to reach the shores of Abadan, where the largest refinery was to be built. Although Reynolds, despite this great success, inherent perseverance and firm will, was only able to stay in his job for another two years and was fired without any formalities, his discovery resulted in the establishment of one of the largest oil companies of the time: Anglo-Persian Oil Company (APOC), which was later renamed Anglo-Iranian Oil Company (AIOC) and then British Petroleum (BP). In the early years of AOPC, when Naftun was the only oil field in the southern region, crude oil flowed to Abadan through a 6-inch pipeline built in 1911.

Charles Ritchie

Construction of the first oil pipeline stretching from Masjed Soleyman to Abadan in 1909 was assigned by AOPC to Charles Ritchie. In the absence of welding, the pipes were bolted to each other before being laid in trenches. In order to prevent rusting, the pipes were covered with tar cloth. Finally the trenches were covered. Local workers did all this. The pipes were carried on barges through the Karoun River to an area between Shoushtar and Masjed Soleyman before being loaded on mules to go through mountainous areas to reach destination. These mules had been purchased from various areas like Isfahan, Baghdad and even Cyprus. 

Bells were hung around the necks of these animals, the mules were in pairs, and the distance between the mules was adjusted according to the length of the tubes placed on their backs to transport the tubes. Wheeled carts were also used in the flat areas. More than 6,000 mules were used in the construction of these lines.

Charles Ritchie knew that without the expertise to build the pipeline, he would have to work hard, so he selected a group of 50 local nomads who had flocked to the Naftun field in search of job. He taught them how to work with pliers and large wrenches to form the technical team for the construction of the pipeline. This group was then tasked with connecting the pipes from the Naftun field to Abadan.

Construction of pipeline was one of the most important oil exploration programs carried out using local workers, in the difficult geographical conditions faced by Ritchie and his workers. At that time, the United States was the leader in the production of cast iron pipes for oil transportation, which were connected to each other in the form of screws, and the company also submitted its work order to the pipeline industry of that country. Ritchie's plan was to maximize the use of local geography to facilitate oil transportation.

Ritchie calculated that oil from these reservoirs would travel up to two miles south, and it was there that he built his pressure booster station to boost pressure. The pressure boosterstation was built in an area called Tonbi, south of Masjed Soleyman. The reciprocating piston pumps, which were powered by steam, were powerful enough to pump oil all the way to Abadan.

Thus, by pumping oil by four powerful pumps with capacity of 52,000 b/d and an output of 800 pounds per square inch, oil could be pumped from a height of 410 meters to the other side of the river.

Finally, in mid-1911, Charles Ritchie completed the initial tests on the pipeline and announced that the 230-kilometer Masjed Soleyman-Abadan pipelinewas ready for operation. This pipeline had an annual shipping capacity of 400,000 tonnes from Masjed Soleyman to the Abadan refinery, which had not yet been prepared. The construction of the Abadan refinery started in 1909 and was ready for operation in 1912.

Of course, the pumps were only able to send 250,000 tonnesper yearof crude oil, and in addition, the gas along with crude oil was a major obstacle to sending oil. The blockage of the line by gas in the heights required that some people be assigned there to unlock gas.