Eye-catching Capital Attraction under Raisi Administration
Ali Forouzandeh
Director General of Public Relations

One of the main policies and agendas of the Petroleum Ministry of the President Raisi’s administration is to attract investment and develop major and key projects using domestic capabilities and potentials, along with attracting foreign capital and cooperation with regional countries; likewise, Iranian Minister of Petroleum Javad Owji emphasized from the very beginning of his work in office as president that “we welcome the presence of foreign investors and companies, but we will not wait for foreigners to develop our oil industry.” His remarks were put into action; just one year after the establishment of the 13th administration, we witnessed signing some contracts and memoranda of understanding between the Petroleum Ministry and its subsidiaries with domestic firms, banks and investors, the most important of which being a memorandum of understanding for the development of the joint Azadegan oil field between the National Iranian Oil Company, banks and E&P companies worth $7 billion, signing a $2.8 billion memorandum of understanding with petrochemical holdings for the development of oil and gas fields, signing 8 associated petroleum gas collection contracts in East Karoon region with €470 million investment and signing twoMoUs for construction of a refinery and a petrorefinery.

Despite the sanctions, Iran's oil industry has always welcomed the presence and participation of foreign companies and investors. After the US and Europe imposed sanctions on Russia, due to the war between the latter and Ukraine, Iran and Russia took advantage of the opportunity and a memorandum of understanding worth $40 billion was signed between the National Iranian Oil Company and Russia's Gazprom.

Development of Kish and North Pars gas fields, pressure enhancement project of South Pars gas field, development of 6 oil fields, swap of gas and petroleum products, completion of LNG projects, construction of gas export pipelines and other scientific and technological cooperation are among the highlights of the MoU.

Iran-Russia relations under the Raisi administration have been put on a new path with the support of Iranian President and his Russian counterpart Vladimir Putin; the two countries are determined to expand relations at all economic and political levels. Currently, $4 billion of contracts with various Russian companies for investment are being implemented and foreign investment in the Raisi administration is facing a significant leap; despite all this, Iran's oil industry is still firmly in need of fresh investment.

According to Mr. Owji, Iran's oil industry needs $160 billion of fresh investment to bankroll its development plans over the next 8 years, which can be provided through domestic and foreign agreements with Russia, to turn Iran into a safe haven for domestic and foreign investors and enterprises

New Chapter in Iran-Russia Oil Cooperation

The largest investment memorandum in the history of Iran's oil industry, worth 40 billion dollars, was signed between the National Iranian Oil Company (NIOC) and the Russian Gazprom Company on July 19. The NIOC CEO declared that the document is one of the most strategic economic relations between the Islamic Republic of Iran and Russia. This, however, comes after a $4 billion contract to develop seven oil fields, of which the two fields - West Paydar and Aban- are among joint fields. All the deals were signed under the 13th administration.

In January, Iran's President Ebrahim Raisi paid a state visit to Russia, and Iran’s Minister of Petroleum, Javad Owji, met with Russian senior executives. The visit opened up a new chapter in the oil relations between the two countries and led to the signing two oil contracts with the Russians. Of course, negotiations were also held in various economic sectors. During the trip that Mohsen Khojastehmehr, the NIOC CEO, had to Russia, he held a meeting with Alexey Miller, the CEO of Gazprom, in St. Petersburg, as a result of which a high-ranking Russian delegation from Gazprom visited Iran, and on the sidelines of Vladimir Putin's visit to Tehran in July, signed the $40 billion memorandum of understanding.

At the highest levels of Iran and Russia, there is a firm will to bring this oil memorandum to fruition, as the Supreme Leader of the Revolution stated in a meeting with Russian President Vladimir Putin and Iranian President Ebrahim Raisi that, "these memorandums shall follow their implementation phase.” Ahmad Asadzadeh, Deputy Petroleum Minister for International Affairs and Trade, said in this regard that Iran and Russia are deepening the level of their cooperation in the oil industry step by step.

What’s Inside the MoU

The core issues in the memorandum of understanding between the NIOC and Gazprom are: Investment in the development of oil and gas fields, investment to complete the incomplete Iran LNG project, definition of new floating LNG (FLNG) and small-scale LNG (MiniLNG) projects, gas swap, oil products swap, construction of high-pressure export pipelines and technology transfer concerning oil and gas.

Therefore, out of the $40 billion memorandum signed with Gazprom, $25 billion will be spent on the development of the Kish and North Pars gas fields and the completion of the LNG project, and $15 billion will be spent on the development of 6 oil fields, including Karanj, Azar, Changuleh, Abteymur and Mansouri. Moreover, boosting the pressure of South Pars field, gas and products swap, construction of gas export pipelines and scientific and technological cooperation are other parts of the memorandum.

Mohsen Khojastehmehr, who is also the Deputy Petroleum Minister, stated that the implementation of these projects will take between four to seven years. “The format of the contracts may have different forms, from the most common contracts which are EPC and EPD, to the latest models, including the new model of Iran's oil contracts.”

Expressing optimism for signing a number of development contracts by next year, he also says: “The signing the gas swap contract is now in the final stages of negotiations.”

Constructive Interaction rather than Destructive Competition

Iran and Russia sit atop the world’s largest gas reserves. Critics always believe that these two countries are rivals in the gas market and it is impossible to imagine a clear prospect for cooperation between them, while Iran and Russia have a high capacity for the swap and transit of Russian gas through Iran which can be a win-win game for both parties. According to oil officials, the development of Iran's gas fields by Russia will be implemented based on the principle of "constructive cooperation instead of inhibiting competition". Even in the oil market, Iran and Russia enjoy strategic cooperation and are not considered competitors.

Likewise, the NIOC CEO says: “There is no competition between the two countries in the regional markets. When strategic relations are established between two countries, constructive cooperation will be applied rather than inhibiting competition even in common markets.”

Futile Sanctions

Iran is still targeted by the crippling, unilateral US sanctions, and there is a concern that the continuation of these sanctions or the failure of the Vienna talks will lead to disruption in implementation of this memorandum and its finalization, but the CEO of the National Iranian Oil Company says it is clear that the sanctions will not create any problems in the MoU and signing its contracts, as Iran and Russia have firmly decided to define strategic ties notwithstanding the sanctions.

It is noteworthy that had the Russians not been determined in signing the memorandum, they would not have signed the $4 billion contract earlier. The contract for the development of Shadegan field was signed in Moscow by the two parties in Jaunary. Koupal field also signed off on in the same trip and now both of the two contracts have entered the implementation phase. Furthermore, the Russians are to build downhole pumps and are now installing the equipment in southwestern Khuzestan Province.

The NIOC CEO has said: “Russian companies did not abandon Iran's oil projects under any circumstances following the failure of the JCPOA, and right now, while the sanctions continue, they are operating in Iran's oil fields using the capacity of domestic contractors. The Russians are implementing projects in some fields: West Paydar, Aban, Dalperi, Cheshmehkhosh and East Paydar.

Iran, Russia Holding 30% of World's Gas Reserves

Based on oil and gas production plans, it is predicted that by 2030 and by investing $160 billion, Iran's crude oil production capacity will hit 5.7 million barrels per day and natural gas production capacity 1.5 billion cubic meters per day. The NIOC CEO has said that cooperation with oil majors is one of the company’s strategies, adding that for this purpose, “we have defined a part of the investment portfolio of the National Iranian Oil Company with a valuable and important share for Gazprom.”

The aforesaid memorandum was signed between Iran and Russia while the world is ever more dependent on gas, a rather clean fuel of choice. Iran and Russia hold more than 70 trillion cubic meters of gas reserves, which constitutes 30% of the world's total proven gas reserves, indicating the important role of these two countries in the world’s energy security.

Energy diplomacy under the 13th administration has been activated more than ever while Iran is still under the US strict sanctions, but the energy crisis, the increase in global demand for oil and gas, the lack of investment in these sectors, which has led to an increase in their prices, and the post-COVID economic recovery all indicate the world's thirst for sustainable energy sources from countries like Iran that possess massive hydrocarbon reserves.

Iran has the world's largest oil and gas reserves, but due to the US unilateral sanctions, global markets have been deprived of Iranian crude oil. Meanwhile, by changing its approach while building markets and expanding relations with countries, in addition to providing investment opportunities in Iran's oil industry, Iran’s Petroleum Ministry has prepared itself to return to the global oil markets.

Iran’s Minister of Petroleum Javad Owji has repeatedly stated that if Iran was not subject to the US cruel sanctions, it would have been able to contribute greatly to the global oil supply. Despite the fact that Iran's oil export has increased under the 13th administration, the country has the ability to bring its oil export level to the pre-sanctions era immediately after removal of the sanctions and add about 1.5 million barrels per day to its export volume.

Iran and Russia signed the $40 billion memorandum while some critics believed that Gazprom is not able to make such an investment, but it is worth mentioning that the company is one of the largest international companies in oil and gas field development and according to Khojastehmehr, it is one of the world’s energy giants. In the past, a lot of efforts were made to cooperate with this company, but to no avail. He says: “Due to the change in international conditions and the new world order, Iran and Russia have entered into the deepest strategic relations, which include all economic dimensions of the two countries.”

Cooperation between Iran and Russia is moving forward with the vision of creating long-term infrastructure. It should also be added that Russia is now one of the largest crude oil producing countries and their skill is to produce oil in very harsh and difficult climates. According to Mr. Khojastehmehr, Russian companies enjoy very high capabilities and technology with regard to oil production, and as a result, they will undoubtedly be able to cope with the development of Iran's oil and gas fields, although their history in Iran also shows this.

The relations between Iran and Russia have always witnessed ups and downs in different periods of history, the two oil majors sometimes came together as friends and sometimes as rivals. But what is clear is that Tehran and Moscow have decided to play a role in various economic and political fields together as friends, with the support of Ebrahim Raisi and Vladimir Putin, the presidents of Iran and Russia.

Russia, a Serious Partner?

 Mohammad Sadegh Jokar

Head,Institute for International Energy Studies (IIES)

To begin with, let’s see "Why should the Russians' new cooperation tendencies with Iran be taken seriously?"In my view, the behavior of governments vis a vis other governments, especially neighboring ones, is shapedby the interactions and the international power distribution system, and their view towards international order and not stereotyped mentalities towards each other, especially when it comes to diplomacy.

The Russians' view of the international order has been different from that of ours (Iran) in various periods and even in some cases it has been conflicting. For instance, the Russians had a differing view than that of the Islamic Republic on the continuation of the Trump administration. The Russians sought to prevent the Democrats from winning the US presidential electionand by releasing certain documents tried to help Donald Trump become president in the first term and prevent Hillary Clinton from being elected as the president of the United States. They were also very hopeful that Trump would be reelected as US President because they did not want the democrats to win the office. This is contrary to the Rouhani administration that hoped Hilary Clinton would win the election for the survival of the Joint Comprehensive Plan of Action (JCPOA).

During the 3 decades after the Cold War, Russians never resorted to hard balancing with the Americans (i.e. the traditional balance of power using military capabilities and official military alliances such as NATO), but in the case of Iran, they have held a give-and-take approach. They have had a similar approach towards the US in many cases, such as the 1929 resolution, which alignedcertain matters with the US, but also moderated some others, such as the pressures of the US at that time regarding the extent of the threats they wanted about 1929 resolutions.

Growing need of Russians for Iran

Governments change their behavior in the dynamics of the international system, and now is the time that the developments of the international system have drawn the Russians towards Iran, and if we consider the "balance ratio of the need for interactions", it is the Russians whose need for Iran is growing.

For years, Iran has been targeted by the maximum pressure policies from the West, but now given the international status quo, theRussians have faced scenarios conflicting their interests. In this situation, they (the Russians) are trying to create an escape route to reduce or neutralize the pressure against themselves by developing interaction with countries that are not on the front of Western pressure against Russia.

What is the evidence for this claim? In March 2021, when the US National Security Strategy Interim Directive was published, Joe Biden explicitly placed Russia and China in the position of Adversaries, one step away from being an Active Enemy, and based on this, he followed cooperation with his allies on the axis (as they say) of the return of western democratic ideals and isolate Russia and China to speak.

Russia's Fear of International Isolation

This was the same fear that the Russians had predicted: Trump sought to “make America great again,” and did not care for any international alliance-building attitudes with the cooperation of the West against the Russians; that Trump is gone and now Biden has come, who is clearly pursuing this policy. In the case of Ukraine, the US tried to put Russia in a

 security dilemma with the same alliance-building mentality and with thesupport of its Western allies. That isto say, had the Russians not engaged in military action, Ukraine would have become a member of NATO, to be followed by Georgia and then others. On the other hand, with Moscow engaging in military action, it would create a united front against the Russians, both in terms of society and international governments.

In the current situation, the Russians are looking to see which countries are not on the front of Western and American pressure. The fear of expansion and continuation of sanctions has now become the driver of the Russians' behavior, and their strategic fear is to be isolated internationally, so they have turned towards countries that are not on this front; countries that do not have extensive interaction with Europe or are frowned upon by Europeans and Americans, such as Iran, or countries that have tried to maintain a positive balance, such as India. The Russians are now looking for such countries, so they should be taken seriously because they are willing to pay the price.

The Russians are almost certain that if the Western sanctions against them have not turned into secondary sanctions, the dispute between the U.S. Department of the Treasury, the State Department and White House officials is partly due to the fear of the negative impacts of these secondary sanctions on the global economy, and as soon as the West is able to manage the aftermath of the secondary sanctions against the Russians, they will not hesitate to disrupt the economic interactions with other non-western countries.

The recent whispers of "price ceiling" in the sale of Russian oil at the G7 Summit is proof indicatingthat the preparations are under way for the secondary sanctions of the Western alliance against Russia at the global level. For this reason, the Russians are already seeking to stabilize their interactions with countries that are not on the front of Western pressure against them.

Today's Russia is different from the Russia that did not fulfill its commitments to Iran after Trump withdrew from the JCPOA, and Russian companies aligned with Western companies withdrew from Iran after the US pulled out of the JCPOA. Russia is now the target of the sanctions system that was used by the United States and other countries; sanctions that the United States has tried to make more intelligent, focused and result-oriented in the past few years.

Why does Iran welcome Russia?

Under the current circumstances, Iran is under the pressure of the sanctions that are still ongoing, on the one hand, and the greediness of the Americans who ignore the legitimate demands of Islamic Republic of Iran in the JCPOA, given that the main issue is Iran's economic benefit from the deal, and they would not guarantee it, on the other. Therefore, Tehran welcomes this approach and the desire of the Russians for various cooperation, including cooperation in the field of energy.

There are two reasons for Iran's acceptance of cooperation with the Russians: firstly, economic benefits. In a situation where the Russians are ready to pay for interacting with Iran, they will benefit from the ensuing economic benefits, and secondly, the development of interaction, which is requested by the Russians and accepted by Iran, can provide Iran's bargaining tools against the western regime or front that behaves too greedy in the JCPOA talks, and engage Iran with more powerful tools in negotiations with them. It seems that the Russians should be taken seriously now because they are nowseeking the interactions.

Russian Gas

Let’s have a look at a picture of Russian energy structure. According to various statistics, the Russians now have between 75 and 95 billion cubic meters of available gas, which they either exported to Europe or had an export plan. For example, they wanted to launch Nord Stream 2 project, which should have become operationala year or twoyearsearlier, and Nord Stream 1, which is currently operating at less than 40 percent capacity (55 bcm/y); in practice, a gas market for a capacity of 75 to 95 bcm does not exist currently and it is not easy to change the route to non-European markets due to the weak interconnectors;technically speaking, the Russians cannot divert 90 bcm of gas from west to eastern markets. Even if they can, there are not many major consumers, excluding China, for the gas. Now considering that they sort out all the technical problems, the Russian infrastructure in the short term allow it to transmit its gas to the East. This has been already considered in the Pivot to Asia strategy by Moscow based on which Russia’s eastern fields were planned to send 38 bcm/y of gas to China through Power of Siberia Pipeline project.

The Russians are looking for a market for gas in the western sector. This is a key opportunity for Islamic Republic to send this gas through the most operational possible route via Turkmenistan and by reversing the CAC pipeline that connects Turkmenistan gas to Russia and has a capacity of 30-50 billion cubic meters, take advantage of the spare capacity of the pipelines of which Turkmenistan only uses 5.5 bcm annually. The Turkmens do not seem to show stubbornness with the Russians in the current uncertain situation. Another important point is that Iran has two pipelines that can receive gas from Turkmenistan with a final capacity of 20 bcm/y.

Of course, in the initial step, there is no need to reverse Russian gas flow urgently in the short term, and Russia can transfer to Iran the same contract of 5.5 bcm of Gazprom with Turkmenistan, which is valid until 2024. This is an opportunity for Iran to enter into this interaction for its domestic gas balance in order to fulfill

its obligations to its export markets by purchasing Russian gas.

Pakistani Gas Market

The Russians are willing to invest in some Iranian export projects, especially pipelines, for the development of trade, swaps and transit in the gas field. Pakistan is currently facing a gas crisis. For years, Pakistan has been buying LNG cargoes on the spot market to meet part of its demand for gas without entering into any long-term contracts. Right now, spot prices have soared and Pakistan has practically suffered from a budget deficit, as it cannot afford its expenses, which some statistics say are up to $30 billion a year for importing gas.

The Russians can sell their gas to Iran by developing the project to transmit Iran's gas to the east in a situation where Tehran currently does not have a high gas export capacity, and Iran can export gas to the South Asian markets under its own terms of a contract; of course, Islamic Republic is not looking for transit and swap, but it is seeking gas trade and buying Russian gas and selling it with its own plan so that it would maintain the market share if its gas resources are developed in the future.

Iran, Russia: Different Sanctions?

Today's Russia should be taken seriously and stereotyped mindsets, many of which have correct historical examples, should not be allowed to affect future interactions. This is not to say that we should ignore the past. Not at all. It is the Russians who, in the current international situation, are forced to interact with countries that do not participate in the front of Western pressure against them. They are seriously pursuing the North-South project, the use of non-dollar transaction system in interactions, etc. Incidentally, in the meeting with Putin in Tehran, the Supreme Leader smartly pointed out this pathological point of the interaction between the two countries, saying that "Both sides should carry forward the plans and programs to the end and the implementation stage." In my opinion, he subtly mentioned the mutual dependence of the two countries and explicitly reminded the Russians of their need for Iran and that the game is no longer one-sided.

It should be also noted that although Russian sanctions are not secondary sanctions and are different from the type of sanctions system that has been applied against Iran, their think tanks have come to the conclusion that it is possible that currently the sanctions on European and American citizens with the Russians have not become secondary and have not had a negative impact on the interactions of the Russians with non-European and non-American countries, such as China and India, which is also due to the disagreement between the U.S. Department of the Treasury, the US State Department and the White House.

Secondary Sanctions Imposed on Russia

According to the U.S. Department of the Treasury, if secondary sanctions are applied against Russia, it would negatively impact the economic growth of Western countries and the global community. The Russians have come to believe that European and American sanctions are not secondary due to the negative impact of these sanctions on themselves, otherwise, as soon as the US and Europe pass through thesituation by replacing energy in the short term and manage the negative impactof secondary sanctions, they will not hesitate to impose secondary sanctions against Russia, which will also affect the Russians' economic interactions with non-Europeans and non-Americans.

As a third factor in their engagement drive, the Russians have become more insistent on moving towards countries like Iran and India that have not been on the front lines of Western sanctions against Russia, as they see their future as bleak. Therefore, the Russians want to improve the level oftheir interactions with countries such as Iran and the Persian Gulf Cooperation Council and event strengthen the north-south corridor, before the concern of the US Treasury regarding the intensification of Russian sanctions and its negative impact on the world economy growth and they impose secondary sanctions on this country.

There is a prospect of an agreement and the lifting of sanctions for Iran, but in the case of Russia, the prospect that they draw in their think tanks is bleak and may move towards secondary sanctions, which will affect their interactions with other countries and has prompted the Russians to expand cooperation with Iran.

Chance for Iran

Iran needs toapply an active approach and in line with itsnational interests, especially in the gas market, in a situation where the Russians need interaction. If Iran does not actively use the opportunity of tension between Russia and the West in the current situation, which has forced the Russians to find new markets for their gas export capacity, the Russians may think of other scenarios. One of Russia's scenarios is to recognize the Taliban and export gas from Afghanistan to Pakistan. Global community has gotten out that the Russians have entered into talks with the Taliban formaking TAPI pipelineoperational. Due to the fact that Turkmenistan does not have a large export capacity to export gas through TAPI, Russia may think of supplying gas to this pipeline. This is an issue that should be taken into considerationin the macro geopolitical perspective, whether we should ignore Russia, which has been pressured by the West and is moving towards interaction with the South and East.

$7bn MOU Signed for Azadegan Development

A $7 billion memorandum of understanding has been signed by National Iranian Oil Company (NIOC) and Iranian banks and E&P companies to develop the entire giant Azadegan oil field.

President Ebrahim Raeesi, overseeing the signing ceremony, said investing in production, benefiting from local technical capacity and investment would contribute to economic growth and national progress. Minister of Petroleum Javad Owji also said that development of the Azadegan field, which Iran shares with Iraq, would earn the country more than $115 billion in revenue. He said Azadegan’s output would reach 570,000 b/d over seven years.

The Azadegan oil field lies in Abadan Plain, about 80 km west of the city of Ahvaz and along the Iran-Iraq border, covering a total area of 1,500 square km. It is known to be Iran’s largest joint oil field with about 32 billion barrels of oil in place. Azadegan is also ranked the 10th largest oil field in the world. It is Iran’s most important greenfield with high capacity for oil output hike. The Iraqi side of this giant field is named Majnoon.

The MOU for Azadegan’s development was signed with six Iranian and as many E&P companies. Bank Melli Iran, Bank Mellat, Bank Tejarat, Bank Parsian, Bank Pasargad and Bank Shahr are to provide necessary investment for the project that would be developed by the “Khatam al-Anbia Construction Headquarters”, Persia Oil and Gas Industry Development Company, MAPNA Oil and Gas Development Company, Sina Energy Development Company, Petropars and Oil Industries and Engineering Construction Company (OIEC).     

Owji said Azadegan, divided into North Azadegan and South Azadegan, is currently supplying 190,000 b/d.

One of the reasons that led the PetroleumMinistry to sign this MOU with a consortium consisting of banks and Iranian E&P companies was the issue of financing because due to sanctionsIran is facing restrictions in attracting international capital. It has been decided to finance the project by Iranian banks and major economic holdings.

380,000 b/d Hike in 7 Years

With an investment of nearly $7 billion, the production capacity of this field will reach 220,000 b/d in the second year of its development, thereby bringing output to 570,000 b/d in the next seven years. That would also strengthen Iran’s position within the Organization of the Petroleum Exporting Countries (OPEC). Iran's oil production capacity is now nearly 4 mb/d.

Owji has said that with an oil barrel at $80, Azadegan would yield Iran over $115 billion in revenue over a 20-year period, let alone create 24,000 job opportunities.

The integrated development of the Azadegan field would require drilling more than 420 production and injection wells, building five manifolds and laying 315,000 to 320,000 km of pipeline, which would be entirely handled by local contractors and manufacturers.

Economic Mobilization

Raeesi said achieving an 8% economic growth rate required attracting investment in the production sector. He said the MOU signed for the development of the Azadegan field would mean that top companies would team up for a big project. 

He said implementation of the Azadegan development project would mean mobilizing internal capacity and enhancing private sector investors’ confidence to contribute to such big projects.

Minister Owji said investment was the main element in the development of the petroleum industry.

“One of the first measures taken by the Petroleum Ministry was drawing up an investment plan which showed that we would need at least $160 billion in investment in the petroleum industry over eight years,” he said.

MDP

Eight international companies had prepared a master development plan (MDP) for the development of Azadegan. Except for China’s CNPCI that developed part of the North Azadegan field, others pulled out of Iran due to sanctions. That prompted the 13th administration to go ahead with the project by relying on local knowhow and potential without waiting for international firms.

In the first step, the drilling fleet increased 60%, thereby bringing 20 wells to production. As Minister Owji and CEO of NIOC Mohsen Khojasteh-Mehr have said, completing the development of this field is a priority for the current administration.

Recovery Rate

In addition to development of this field, enhanced recovery from this giant reservoir is also envisaged. Water injection has been suggested as a method for enhanced oil recovery.

About 420 wells are planned to be drilled in the field, 187 of which expected to be used for water injection. That would constitute the largest water injection project in the country.

In order to supply necessary water, a 150-km pipeline will be built stretching from the Persian Gulf. Furthermore, transfer of this amount of oil requires laying 430 km of pipeline.

New Firm Eyed

The banks and companies involved in the MOU are expected to establish a joint company to be named Azadegan Exploration and Production Company (AEPCO), 80% held by 6 domestic banks and 20% by 6 E&P companies. 

AEPCO should invest $7 billion in the development of the field over a seven-year period. As the IPC model is envisaged for this project, AEPCO is not required to provide the necessary investment at the beginning of the project. The client is required to start reimbursing the contractor from the second year of work in proportion to the level of development and production. 

The Azadegan development project is more consequential than all projects handled by former administrations. France’s Total pulled out of the $4.8 billion South Pars gas project after investing only several million dollars, but in the Azadegan project, financing is entirely local.

According to estimates, the project would be yielding about $115 billion by the end of the 20-year time considered for development and production.

This project may create 24,000 direct and indirect jobs in the country.

Improved IRR

Another advantage with the Azadegan project pertains to the internal rate of return (IRR). The banks are also expected to invest in Petroleum Ministry projects. Beforehand, they only allocated facilities to projects.

This project would significantly increase domestic manufacturing potential in oil installations and provide an opportunity to equipment manufacturers and EPD and EPC contractors.

This major investment is entering the most generative section of the economy, which would bring about the highest yield for Iran. Iranian banks’ investment in this project is indicative of supporting domestic manufacturing, particularly knowledge-based job creation.

New Record set in West Karun Drilling

Iran’s Petroleum Ministry is determined to develop the Azadegan oil field, a massive joint field with Iraq, with the help of an Iranian consortium consisting of E&P companies and banks.

The South Azadegan field is being developed by Petroleum Engineering and Development Company (PEDEC). According to Ismail Bagheri, the director of the South Azadegan oil field development project, the drilling and completion of the Well No.190 of this field will be completed in 76 days.

Drilling Well No. 190 in South Azadegan Field in Sarvak Formation is planned to be completed within 88 days at a depth of 2,750 meters, 12 days ahead of the planned schedule with the orchestrated efforts of PEDEC and Tadbir Drilling Company, setting a new record in drilling the West Karoon fields.

Referring to the completion of the above-mentioned well by the leased Rig 201 of Exploration Operations Company, the operator of the South Azadegan project said: “The drilling rig is moving to Pad 64 to start new drilling operations.”

According to the planning made, by using the capacity of Iranian contractors, the production capacity of South Azadegan field should reach 220 tb/d by the end of the calendar year of 1401 which started on March 20, 2022.

The joint fields of West Karoon are among the youngest oil fields in Iran. The five joint fields: North Azadegan, South Azadegan, North Yaran, South Yaran and Yadavaran, have an estimated total of 64 billion barrels of oil in place. Azadegan oil field is located in Abadan Plain, about 80 km west and southwest of Ahwaz and along the Iran-Iraq border covering an area of ​​about 1,500 square kilometers. The field was discovered as the largest joint oil field in Iran in 1997 by the exploration directorate of the National Iranian Oil Company, and it was estimated that the field is holding roughly 32 billion barrels in its in-situ oil reserves in the four formations: Sarvak, Kazhdomi, Gadvan, and Fahlian. The daily production capacity of the field is currently 190,000 barrels, and it is planned to reach 570,000 barrels per day in seven years. The oil in place of South Azadegan is roughly 25.34 billion barrels and the oil in place of North Azadegan is estimated at about 5.6 billion barrels.

The volume of Iran's recoverable crude oil reserves is about 157 billion barrels and the volume of its gas reserves is about 33 trillion cubic meters given their current recovery rate, but in terms of total oil and gas reserves, Iran sits atop about 330 trillion equivalent cubic meters of hydrocarbons. However, in terms of the volume of in-situ oil and gas reserves, there are a total of more than 1200 billion barrels of oil-equivalent reserves of gas liquids and gas condensates in Iran’s underground reserves.

The memorandum of understanding for the integrated development of the joint Azadegan oil field as the largest investment project of the 13th administration was struck on July 5 while President of Iran was in attendance, between the National Iranian Oil Company and the Khatam-al-Anbiya construction headquarters, Persia Oil & Gas Industry Development Co., MAPNA Oil and Gas Development, Sina Energy Gostar Holding, Petropars and Oil Industries Engineering and Construction (OIEC) as well as Melli Iran, Mellat, Tejarat, Parsian, Pasargad and Shahr banks. This project is one of 22 projects that Javad Owji, the Iran’s Minister of Petroleum, has promised to start in the current calendar year (started on 21 March 2022). Minister Owji has announced that the value of the projects whose implementation operations will begin this year is $30 billion. A master plan has also been prepared with the aim of integrated development of the field, according to which production from the entire field will reach 570,000 barrels per day in a matter of seven years.

The first barrel of oil was pumped from South Azadegan back in 2007. Cumulative oil production of the field until 21 March 2022 was 250 million barrels. The number of wells drilled and completed until May was 160, while 36 new wells will be spudded this calendar year. The number of active rigs in this field is going to increase to 13.

Before the end of the year 1400 (20 March 2022), 13 wells with a production rate of 15,000 b/d were completed and launched. Also, according to the ongoing activities, during April and May, 6 more wells came on stream.

Azadegan’s crude oil production capacity is planned to see another jump by 70,000 b/d with the completion and operation of 40 new wells in the massive joint field during the current calendar year.

In the South Azadegan field, Sarvak crude is heavy with an API of 17 to 21, while the oil produced in Kazhdomi, Gadvan and Fahlian formations is light with an API of 29 to 35.

CTEP Integrated Development

The Central Processing Unit (CTEP), despite all the implementation challenges of the past, is being carried out by tapping all the available facilities in an integrated manner with other sectors of the field. In order to speed up the operation of this project with the priority of setting up two oil processing trains, receiving and installing most of the late-delivery goods based on their priority has been expedited in a way that installation of pipe racks, implementation of underground pipelines, and construction and installation of storage tanks for oil and firefighting water, as well as construction of processing unit buildings have progressed significantly.

The unit’s output includes refined oil which is sent to the West Karoon pressure boosting station through a 28-inch pipeline with an approximate length of 50 kilometers, and sour gas separated from oil which is sent through a 24-inch pipeline after traveling a distance of 15 kilometers to the NGL 3200 Plant.

Iran Polymer Exports at $3.32bn

Iran’s export of polymer industries amounted to $3.32 billion over the course of the previous Iranian calendar year (ended on March 20), showing a whopping %23 year-on-year growth.

According to BarmakQanbarpour, member of the Board of Directors of Iran National Polymer Industries Association: "The export of polymer products is acceptable compared to raw materials, and the export of polymer products has not been second to petrochemicals."

Referring to the direct export of polymer industries, he said: “Last year, theindustry was one of the leaders in the export of non-oil industries, with $1.25 billion in the export of secondary polymer industries and $2.07 billion in indirect exports that were made possible by around 8,000 industrial units.”

He noted: “The total direct and indirect export of polymer industries last year was $3.32 billion, showing a growth of 23% compared the preceding year.”

Noting that the share of hard currency earnings of polymer industries from the non-oil exports of the industrial sector was 73 percent, he said: “Iran's total non-oil exports was $48 billion, and the share of polymer industries from the total non-oil exports is estimated at 7 percent.”

Entering the markets of African countries along with Eurasian countries, Arab countries and Pakistan are the priorities of Iran National Polymer Industries Association.

National Gas Hydrate Project 62% Complete

Iran’s National Gas Hydrate Scheme has progressed 62 percent 39 months into its 48-month implementation phase, said the project’s manager.

Nasser Keshavarz, in charge of the gas hydrate project of Iran, said: “Currently, seven technical phases of the gas hydrate project are active and two technical phases have been completed, the report of the relevant activities has been sent to the client of the project (Exploration Department of the National Iranian Oil Company) and has been approved, and the rest of the technical activities will be completed bythe end of the implementation period.”

The manager of the project further said: “The Research Institute of Petroleum Industry(RIPI) has submitted numerous reports and data to the client of the project, who is also considered a professional supervisor of technical activities, and the approval of the results indicates that these activities have been implemented at high quality.”

90% Cost Saving by Reviving Low-Yield Oil Wells

The head of Oil and Gas Innovation and Technology Park said that an average investment of $10 million is needed to extract oil from a new well, adding with only $1 million a low-yield oil well could be revived.

Emphasizing that the Oil and Gas Innovation and Technology Park is in the startup phase, Mohammad Ismail Kefayati said a project to revive low-yield and inactive wells has been defined as the key project being pursued in the park that has been approved by the Economy Council.

He added that according to the plan, the first contract for implementation of the project will be struck with knowledge-based companies during September.

Kefayati added: “After signing the contract, the project will start. This is the first time in the country's oil history in the upstream sector that we are benefiting from the power of technological and knowledge-based companies in this manner.”

According to him, the Economic Council has earmarked $700 million of credit for reviving low-efficiency and inactive wells for an annual production of 80 million barrels of crude oil, and after the lisencing round and legal procedures, so far nearly 40 companies have declared their readiness to join the project and ink a contract in this regard.”

Tehran-Moscow Seeking Technical Oil Ties

Technical interactions between the National Iranian Oil Company (NIOC) and Russia’s Gazprom entail three groups of technologies for which talks will continue between the two sides, an NIOC official said.

The director of research and technology of the National Iranian Oil Company (NIOC) stated that one of the main components for the development and production of the country's oil and gas fields is attraction of capital, adding: “The more the amount of capital attraction, the more fields could be developed and even the projects of enhanced recovery could be implemented. Based on this, production from more oil and gas could be achieved, and besides achieving the oil and gas production goals of NIOC, efforts will be made to use the capacity of investments to empower knowledge-based and domestic technology companies, so that more effective steps will be taken in ehancing the 5% share of the knowledge-based economy in the country’s GDP.”

Extensive MOP Planning to Balance Oil, Gas Production, Consumption

HoushangFallahtian, deputy minister of Petroleum for Planning, said: "In order to balance production and consumption in the oil and gas sector, Iran’sPetroleum Ministry has made extensive plans, fields are being developed and the investors are being selected based on the same plans."

Emphasizing that Iran’sPetroleum Ministry seeks to improve the status of the country and facilitate diplomacy, he said about sending the executive regulations of the Budget Law for the Iranian calendar year 1401(began on 21 March) to the cabinet: “All the executive regulations related to the Budget Law for 1401 concerning Iran’sPetroleum Ministry except for LPG and Note 14 that are up to the Program and Budget Organization, have been submitted by the cabinet and signed off on.”

Stating that efforts are being made to cooperate with the MPs as much as possible, the Deputy Petroleum Minister for Planning said about the process of developing the 7th Development Plan in the Petroleum Ministry: “The draft of the plans of the Petroleum Ministry is being prepared, which will be submitted to the Islamic Consultative Council following its finalization.”

West Should Adopt a Rational Approach to World Energy Security

Sustainable and constant cooperation in OPEC+ coalition could help consumers remarkably in the current conditions, Iranian Petroleum Minister said on Wednesday)3 August 2022(, expressing hope that major western governments understand the sensitivities properly and adopt a rational approach to achieve world energy security.

JavadOwji made the remark on the sidelines of the 31st OPEC and Non-OPEC Ministerial Meeting held via video conference on Wednesday, August 3, 2022, adding, “This winter is very important for Europeans and the world and they should think about it now.”

The meeting was held in a situation that the output cuts by OPEC+ member states will come to an end by the end of August 2022 as it was decided months ago within July 2021 agreement, he said.

OPEC+ decided to gradually raise oil supply to the market on a monthly basis and the oil output by its members has returned to the levels before the start of the agreement in July 2021, he said, adding: “However, it was agreed to extend OPEC+ agreement until the end of 2022 and the producers seriously want to continue cooperation in order to support stability in oil market and safeguard the achievements of the agreement.”

During the meeting, all member countries highlighted constant cooperation among OPEC and non-OPEC countries in maintaining and improving stability in oil market, he added, stating: “The Islamic Republic of Iran also emphasizes and supports continuous cooperation among OPEC and non-OPEC producers at the highest levels.”

As some OPEC+ producers pumped less oil and did not deliver on an oil output increase pledged under the deal and due to a decline in commercial crude and oil byproducts inventories in some major consumer countries, members agreed at the 31st Ministerial Meeting to raise their total production by 100,000 bpd for September, he said.

Also OPEC+ will continue to monitor market developments with holding monthly technical and ministerial meetings and take any necessary measures to maintain stability in oil market, the minister added.

Latest statistics and reports showed that OPEC+ members’ compliance reached 320 percent in June 2022, mainly caused by a drop in some members’ oil production, he highlighted, saying: “Global oil market is moving towards balance and stability despite concerns over the consequences of geopolitical tensions on world economic growth and possible damages to demand.”

Gazprom to Fund, Develop 8 Iran Oil, Gas Fields

National Iranian Oil Company (NIOC) has signed a memorandum of understanding (MoU) with Russia’s Gazprom based on which the latter will bankroll development of 8 oil and gas fields in Iran.

The CEO of the National Iranian South Oil Company (NISOC) said according to the MoU, Gazprom is going to invest in the development of 6 oil fields and 2 gas fields, and this matter will be implemented soon.

Touching on the strategic memorandum that was signed between the National Iranian Oil Company and Gazprom, AlirezaDaneshi said: “The memorandum is a turning point in the relations between the two friendly countries, Iran and Russia, and is important for strategic, effective and sustainable cooperation in the field of energy. It may help to create technical, scientific and technological exchange.”

According to the CEO of theNational Iranian South Oil Company(NISOC), the cooperation between Iran and Russia is unprecedented in this scale and it could undoubtedly help the economic growth of the two countries because a huge amount of investment and activity is included in the memorandum, as well as the transfer of experiences which will benefit both countries.

Tehran Oil Refining Company Building 500-MW Solar Farm

The CEO of Tehran Oil Refining Company announced construction of a 500-MW solar farm for the first time in the plant.

HamedArmanfar said: “Due to the high consumption of fuel in the country, the performance of refineries has become more accurate.”

Referring to the fact that last year 50% of the country's jet fuel was supplied by Tehran refinery, he stated: “Tehran Oil Refining Company's vision is to move towards renewable energies, and it will be the first refining company in the country to build a 500-megawatt solar farm in line with clean and renewable energies development, which will be implemented by launching tenders in the near future. In the new perspective, in addition to providing fuel, we have an eye on providing energy for the country.”

Moving towards Petro-Refining

Regarding improving the quality of the company's products, completing the value chain and preventing crude sales, he added: "Tehran Refinery will be doomed to failure in the future if it is satisfied with the sale of current products

Plant Saves €3.7m by Localizing Parts

The CEO of Amirkabir Petrochemical Company said his company has been successful in the domestic manufacturing of 600 parts, adding: “Only from localization of 166 items, € 3.7 million has been saved for the company.”

YadullahMossadeghiFard told the Annual General Assembly of Amirkabir Petrochemical Company that the localized items include chemicals, parts and their repair; moreover, localization of various types of oil, reactive items, pentane, peroxide and DMDS has started in the facility and some items have passed the laboratory test and operational sample stages.”

The CEO of Amirkabir Petrochemical Company noted that the company is seeking to minimize the demand for foreign purchases and benefit from the domestic manufacturing capacity with the help of Iranian knowledge-based companies.

Abdol Karim Mohammadizadeh, the commercial director of Amirkabir Petrochemical Company, also pointed out the continuous profitability of the company in the past years, and attributed this success to continuous production, and timely elimination of production bottlenecks.

Iran Petchem Industry Heading towards Value Chain Completion

The deputy petroleum minister for petrochemical affairs said the industry’s strategy is moving towards completion of its value chain.

MortezaShahmirzaei, who is also the CEO of the National Petrochemical Company (NPC), stated that NPC has planned to complete the sector’s value chain within the coming years.

He said that according to the plans, within the next four years, Iran intends to achieve complete self-sufficiency in the industry of catalysts required by the country's petrochemical complexes, adding: “Iran's 60-year-old petrochemical industry has not developed in a balanced manner in the value-added chain sector in the past years. For example, right now we are on the threshold of bringing methanol annual production capacity to 14 million tons, while most of it is set for exports in raw form.”

He added: “By the end of the Iranian calendar year 1411 (March 2033), according to the existing plans under way, Iran's methanol production capacity will reach 40 million tons per year, therefore, at least 14 to 15 million tons of this output shall be consumed in the downstream sectors of the industry.”

PGPIC Ready to Bolster Ties with German Firms

The CEO of the Persian Gulf Petrochemical Industries Company (PGPIC) voiced the holding’s readiness to cooperate with German companies that excel in chemistry and petrochemical industry and take great steps for the interests of both countries.

According to PGPIC, Iran's largest company hosted a delegation consisting of the president and members of the Federal Association for the Support of German Economy and Foreign Trade, Iran's ambassador to Germany Mahmoud Farazandeh, head of the German desk in Iran's Ministry of Foreign Affairs, and Ehsan GhazizadehHashemi, a member of the parliament.

In the meeting, which was held with the aim of cooperation in the production of petrochemical products, facilities and equipment, and the revival and expansion of relations between the two countries in the petrochemical industry, Mahmoud Farazandeh, Iran's ambassador to Germany, referring to the 20-year history of this association with 1,300 companies as members, said: “The Federal Association for the Support of German Economy and Foreign Trade, which is represented in more than 70 countries, is cooperating with the world's largest companies, and this is the association’s first visitin Iran.”

Referring to the background of this union in the field of energy, he added: “This union seeks to find new markets for German products and meet the needs of this country from new destinations, and the petrochemical field is one of the attractive fields for this prestigious and long-standing union.”

Michael Schoon, the head of the Federal Association for the Support of German Economy and Business, expressed his satisfaction with visiting Iran, stating: “Preparations for this trip started two years ago; we have come to work with Iranian companies with mutual trust, and the correct the false images that are on both sides. We seek constructive and mutually respectful relationships.”

Abdul-Ali AliAskari, CEO of PGPIC, also said in this meeting: “We hope that this trip will create a better impression of Iran as a fertile, young and talented country.”

He added: “In a situation where countries like the United States are struggling with several thousand billion dollars in debt, Iran is a country that not only has no debt at the international level, but also has significant demands due to unscrupulous sanctions, and this is a suitable capacity for economic development.”

The CEO of the Persian Gulf Petrochemical Industries Company (PGPIC) emphasized: “Iran, with its remarkable human capacities, is a country that is so prone to grow every economic and technical seed planted in it, given that during the unscrupulous era of the American embargo, its growth continued and we are progressing.”

ACECR Supplying Technical Equipment

Iran’s Academic Center for Education, Culture and Research (ACECR) has been serving the petroleum industry for more than 3 decades now. Thanks to the technical knowhow of university professors and students, ACECR has largely managed to meet oil, gas and petrochemical needs. Last March, Iran’sPetroleum Ministry and ACECR signed four memoranda of understanding and agreements for further engagement of ACECR in the petroleum industry.

“Iran Petroleum”has interviewed Mohammad Reza Pour-Abedi, vice president of ACECR for research and technology, to learn about the activities of the center in Iran’s petroleum industry.

What plans does the Office of ACECR Vice President for Research and Technology have in cooperating with the petroleum industry?

One of the missions assigned to ACECR as a leading research entity is to identify challenges the industry, services, agriculture and healthcare sectors are faced with. It seeks to identify these challenges in a bid to quickly find a knowledge-based response to them in specific domains. For ACECR, the petroleum industry plays a determining and leading role in national economy. Once the industry keeps running, so do other industries. ACECR has been assisting the petroleum industry for more than three decades with a view to reducing its dependence on foreign companies. We have managed to minimize this dependence in some areas and todevelop the technologies needed by the petroleum industry, or to work with the best foreigners to transfer technology. Excellent work has been done in the past and we are faring very well. We hope that with the changes that have taken place, the activities of thecenter will expand in cooperation with the petroleum industry.

How are you cooperating with the petroleum industry?

Most of our discussions are about developing products or providing services. We are not just looking for research and surely the research we do should lead to a product or service that can solve one of the problems of the oil industry. We have long been involved in UPS chargers for the petroleum industry in a bid to ensure power supply to instruments. We have done a lot for petrochemical plants and refineries. In most phases of South Pars, we have used these UPS chargers. On the other hand, we have entered the issue of construction of drilling rigs and so far we have built and delivered two drilling rigs and we hope to deliver the third rig by the end of this year. Measures have been also taken to build drilling rigs as one of the strategic equipment of the petroleum industry.Based on this, we have on the agenda the construction of 9 drills in different sizes, which are among the 10 items of the oil commodity group that we are building. More than 200 drills have been delivered to the employer so far. We are waiting for the final test, and if it is built, production will begin.We are also planning to build oil loading arms, which are very large robots that are used to transport oil and liquids from platform to sea and from ship to platform, which is also being done successfully. In the discussion of downhole pumps, considering that our oil wells have reached the second half of their life and these pumps should be used. Also, regarding enhanced recovery, these pumps should be used. In this regard, good work has been done. The engine has been built and the final design is currently underway.

Which field are these pumps destined to?

A contract has been concluded with a private company in this regard, which is designed for one of the fields in West Karoun. Because each of these pumps has a different design based on the specifications of the well, the designs are done based on the order that is given.

How many wells are to be used for?

At the moment, according to the contract that has been concluded, we are going to make a prototype, which is being done, and when the construction is completed and the final test is done, we will enter mass production.

ACECR has reportedly engaged in the development of downhole hydraulic motors. Can you tell us more?

Yes, one of the new activities that ACECR is doing is downhole hydraulic motors, which are especially needed for directional drilling in joint fields. Development of this motor is in the final stage, which must be finally tested and then churned out.

What other domains have you been involved in?

ACECR has moved to build a 50,000-barrel desalting plant for the North Yaran field. Another measure is using drilling starch. Based on studies carried out so far, starch may be used in drilling due to its high resistance to temperature. It has been done using potato wastes in Ardebil. A pilot plan is currently doing the job. Another measureperformedis in the field of activated carbon to prevent the sale of raw bitumen. As you know, bitumen is sold in raw form in Kermanshah and the western provinces of the country. It can be used extensively in the sanitary and wastewater treatment industries, as well as in the oil industry, which will create more added value. A pilot plan for this issue has been launched for 200 tonnes a year in Kermanshah province. Earlier, an agreement was reached for a 100-tonne pilot, but with an agreement reached with the PetroleumMinistry, the capacity was increased to 200 tonnes per year. In this regard, ACECR has designed a plant in Kermanshah.We have done a very good job for widely-used chemicals and we hope to be able to make these substances, which are mainly supplied from abroad, with the domestic raw materials that we have, especially demoxifiers that are used for the purification of oil and separation of water and brine.

How about catalysts?

We are using catalysts in the Ceramic Modern Substances Research Center in Yazd. Refractory catalysts for steelmaking and other catalysts used in the oil industry. Of course, we are also carrying out activities in car catalysts and we hope to open a production line of 300,000 tonnes of car catalysts by next year.

How about high-tech equipment?

Yes, manufacturing coiled tubing, which is high-tech, is among our latest activities. We have signed an agreement with the Directorate of Commodity Procurement and Manufacturing for the delivery of 100 coiled tubings. 

Have you been engaged in first-manufacture products?

Yes, drilling bits for example. Coiled tubing manufacturing was also in this category.

How are you communicating with leading scientific and international centers and companies?

Wehave communications with them and on this basis we have tried to export our products through Iranian contractors operating abroad, while so far the products have been exported to Kenya, Turkmenistan and Iraq. Good relations have been established with Azerbaijan, which we hope we can use.

Drilling Structure, Infrastructure Fully Iranian

Among oil and gas-rich nations in the world, Iran remains one of the leading extractors of oil and gas.More than a century has passed since the William Knox D’Arcy team, led by Marriot, drilled the first oil well in Iran. The first oil well in Iran was drilled in the Chia Sorkh, or ChahSorkh (literally red well) northwest of Qasr-e Shirin. The well struck oil in summer 1903 at the depth of 507 meters.

Later on, the drilling team struck oil in the first exploration well in the Masjed Soleimanin 1908, while exploration operations continued to discover new reservoirs in other areas. Haftgol, Aghajari, Gachsaran, Paznan, NaftSefid oil blocks as well as Lali, Ahvaz, Binak, Bibi Hakimieh, Maroun and Karanj fields were discovered.

One year after oil recovery from the first oil well in Iran and the discovery of new oil reservoirs and fields, oil exploration, extraction and exports were assigned to foreign countries, and for many years Iranian oil was the source of growth, industrial growth and economic prosperity of Western countries, especially Britain and America. In the meantime, not only did nothing benefit Iran, but it became the source of many disasters and economic, social and political turmoil in the country.

Thanks to the increased political awareness of Iranian people and continued struggles, the process of production from oil and gas reservoirs was partly nationalized. However, the drilling industry remained in the hands of foreign states due to its special features. Even after nationalization of petroleum industry, foreign companies were not ready to lose their key role in this sector. That lasted until 1979.

Over this time, foreign governments struck colonialist agreements in a bid to pillage Iran’s oil resources. With the victory in 1979 of the Islamic Revolution, cultural, social, economic and political entities and subsequently the petroleum and drilling industry experienced fundamental changes. Following the Islamic Revolution and the outbreak of the imposed war on Iran, Iranian technicians and engineers managed to preserve Iran’s oil output capacity even without foreign companies’ assistance.  

For instance, after the revolution until March 2021, National Iranian Drilling Company (NIDC) drilled a total of 4,866 oil and gas wells, including 411 offshore ones. They include 2,467 development wells, 118 appraisal wells, 148 exploration wells and 2,133 workover wells. The drillings total 9,668,811 meters, including 1,884 directional wells measuring 876,914 meters. Furthermore, 37,620 meters of core sampling has been also done.

Meantime, 172,343 operations for providing technical and specialized services have been performed. Before the revolution, more than 40 foreign companies provided such services, but now everything is done in the country.

It is true that the drilling industry in the past decades has always been successful in drilling oil and gas wells and the need for foreign companies in this part of the oil industry has never been felt, but while different countries around the world are looking for technologies and strategies to reduce the time and cost of drilling, in Iran, due to sanctions, many drilling rigs have not been operational due to the lack of some spare parts needed for drilling during the operation, well eruption, pipe blockage and many unexpected events that occurred during the drilling operation.

Drilling, Main Pillar of Oil/Gas Recovery

Official data shows that Iran’s recoverable hydrocarbon reserves have reached 160.12 billion barrels. A total of 390 oil and gas reservoirs have been identified across the country, 258 of which are oil reservoirs and the remaining 132 contain gas. Of them, 171 reservoirs have already been developed while 209 remain undeveloped. Among oil reserves, 141 (45%) have been developed and among gas reserves, 30 (70%) have been developed. These figures show that drilling is the key industry for the persistence and enhancement of production.

The drilling industry is one of the pillars and perhaps the main pillar of exploration of and production from hydrocarbon reservoirs, and the realization of the country's oil and gas production goals will not be possible without planning to organize and develop this industry. In other words, drilling is a specialized and capital-intensive industry that is done for exploration, development, description,maintenace, injection and operation of oil and gas reservoirs. The total number of Iranian drilling rigs operating in the onshore sector is more than 160, about 60% of which is owned by NIDC and the rest by private domestic and foreign companies. In the offshore sector, 62% of the rigs are owned by Iran and the rest are leased by domestic companies.

In recent years, leadinginternational drilling companies such as Schlumberger, Baker Hughes, and Halliburton have quitted their activities in Iran, thereby offering no services to Iran’s oil sector. However, Iranians involved in the drilling industry have been able to do well. The Iranian drilling industry is in a good position in terms of manpower and somehow has access to modern knowledge.

There are currently about 1,000 offshore oil and gas wells, some of which are over 25 years old. It is natural that these wells need constant maintenance. Currently, a significant portion of these wells operate at less than 50 percent efficiency and in some oil fields up to about 20 percent. At the same time, according to National Iranian Oil Company (NIOC) development strategies, hundreds of new wells need to be drilled in order to maintain and upgrade the current production ceiling.

Self-Reliance in Drilling Rigs

Oil and gas productionfrom deep reservoirs requires equipment, machinery and technical and engineering knowhow, among which, drilling oil and gas wells is one of the most complex and at the same time the most important elements.

Although satellite studies and other advanced facilities and equipment are used in the field of underground resource exploration today, the drilling rigs continue to maintain their top position. Iran recently managed to manufacture a drilling rig which is installed about 150 feet above the ground. It can support one million pounds of weight. It is fitted with a 500-tonne top drive, a rotary table and three 1,600-horsepower mud pumps. This rig has so far helped drill 15 wells measuring 51,000 meters in depth. The manufacturing of 700,000 items of widely used parts in the drilling industry in the past two decades has pushed scientific and research centers and local manufacturers and industrialists to consider full construction of an offshore drilling rig in Iran.

Local manufacturers are not able to supply drilling structure and infrastructure 100% for a drilling rig. In terms of drilling machinery, 70% is guaranteed by local manufacturing companies. Mud mixer, shale shaker, top drive, drilling fluid tank, water tank, butterfly valve and rotary valve have already been manufactured while drawworks and drilling mud are under construction. 

The technology for drawworks manufacturing was until recently monopolized by a limited number of industrialized nations, but now MashinSazi Arak is building drawworks. A drawwork is the primary hoisting machinery component of a rotary drilling rig. Its main function is to provide a means of raising and lowering the traveling block. The wire-rope drill line winds on the drawworks drum and over the crown block to the traveling block, allowing the drill string to be moved up and down as the drum turns.

12 Refining Quality Projects Operated

Activities aimed at improving the quality of refineries and treatment facilities’products are among the predetermined goals in the country's refining industry, which the country’s refineries are required to reach. The Oil Refining Industry Employers Association (ORIEA) is the regulatory body in running eight private refineries. “Iran Petroleum” has conducted an interview with Nasser Ashouri, secretary general of ORIEA.

Would you please tell us about the necessity of establishment of ORIEA?

ORIEA comprises the country's major refineries, which were hived over to the private sector based on necessity and by virtue of the Constitution in execution of Article 44. They are major refineries that are active in the refining and production of petroleum products such as liquid gas, gasoline, kerosene, gas oil, heating oil, bitumen, sulfur, aviation fuel, jet fuel; and supply more than 80% of national needs.After the privatization of these refineries, a huge management gapwas felt in these refineries. The problem was resolved after setting up ORIEA to prevent smuggling and arrange refining. In fact, ORIEA is leading these refineries and is legally required to set prices. We always try not to deviate from the framework of regulations and laws and sometimes we do not fully use our powers. We may have authority in selling products, but we also have frameworks for pricing that we are required to follow.

How much feedstock do you receive from the government and how is this feed calculated?

We receive about 2 million barrels of oil feedstock from the government, and its price is calculated based on the Persian Gulf FOB rate minus 5%.

What is the pricing formula for products?

In product pricing, we use the item, dollar rate, crude oil price and Persian Gulf FOB or Platts, so these can be price variables in reducing or increasing the price of our products.

How are products priced?

This pricing is done every 15 days. But we are going to change duration of this pricing to one month in the near future based on the request of associations.

Are you independent in product pricing?

Yes, we are independent and we set the price ourselves. In this field, we have a working group that determines the price.

Who are the working group members?

The marketing and sales managers of refining companies are members of the association and the managers of the association are members of this working group.

Do government refineries follow these prices?

They follow the price of our products. But they also set prices themselves. Usually the prices are close to each other and the same.

In total, how many refineries are members of the association?

Eight refineries and two petro-refining complexes– Aftab and Zagros – with a capacity of 25,000 to 30,000 barrels are members of this association. It is necessary to explain that the policy we had last year was to make minor refineries and low-capacity petro-refiningcomplexes members of the association. Therefore, a number of petro-refining complexesapplied for membership in this association, and after necessary review, two petro-refining complexeswere recognized as eligible.

How many refining-petrochemical complexes had applied?

Seven petro-refining complexesapplied, of which two petro-refining complexeswere qualified based on the existing regulations. In the future, we plan to continue this routine because these petro-refining complexesneed support. Probably, in the next month, upon the request of the Ilam petro-refining complex, which is currently operational, it will be examined for membership.

What measures have been taken regarding the insurance of these refineries?

In the past, these facilities, which have all big capitals, were not reinsured. In light of the necessity of insuring them, a consortium comprising 11 insurances agencies, led by Iran Insurance, was established. This consortium provided insurance coverage for the entire eight refineries which are members of ORIEA. Now, if they are damaged they will be indemnified.

What are the conditions for export?

We offer 40 special products on the stock market, and the unions and companies, whose feedstock is ourrefined products, receive products from us. The surplus of these products is supplied to traders and marketers.

Do you have any restrictions on the supply of products in the export floor?

After meeting the needs of the country, now, we do not have any restrictions. The purpose of these refineries is primarily to provide the fuel needed by the country and to provide special products for the country's factories. In such a way that the country's needs for the products produced by these refineries should be met first. After that, some products which include VB and vacuum bottom are supplied through the stock exchange, other products which include solvents and oils are also sold through the stock exchange to traders for export.

Have you got any new products to be sold on the stock market?

Yes, last calendar year, a new product – reformate – was produced at Tabriz refinery. It was priced and then offered on the stock market. One task assigned to the working group is to explore new refined products to be priced and supplied domestically and internationally.

How is the quality assessment of products produced by refineries?

Regarding the quality of refinery products, wedothe same process that state companies, do for the same process. It's not like we are left alone because we are a private sector, with the interaction and coordination we have with all government institutions, the process of monitoring the quality of products takes place and there is no problem in this field.

One of the priorities of the administration is to improve the quality of products. What plans have you considered in this regard?

We suggested that the administration and parliament make arrangements for boosting the quality of refined products. For instance, the government may submit a motion for the privatization of all refineries and allocation of 50% of their margins to quality enhancement. Such revolutionary decision will help upgrade the quality of products at refineries, while all refineries have European standards. National Development Fund of Iran (NDFI) is expected to allocate budget to refineries. The government is also authorized to invest up to 20% in these refineries.

How many projects have been approved in this regard?

There are 12 refinery projects approved for quality improvement. They are in Isfahan, Shazand, Tehran, Bandar Abbas and Lavan refineries.

MoU Promises 600 kbd Rise in Iran Refining Capacity

Two memoranda of understanding for financing and participation in construction of two major refining projects have been signed in the presence of Iranian President EbrahimRaisi and Minister of Petroleum JavadOwji. Once operational, the two projects will add 600,000 b/d to the country’s refining production capacity. 

The documents are aimed at construction of MorvaridMakranRefinery with a daily refining capacity of 300,000 barrels of heavy and extra heavy crude oil in Jask and ShahidQassemSoleimaniPetrorefinery with a daily refining capacity of 300,000 barrels of heavy crude oil in Bandar Abbas and are to be built in line with the implementation of the law protecting the development of downstream oil and gas condensate industries using public investment.

During the signing ceremony of the deals, SeyedEbrahimRaisi underlined construction of petrochemical and petrorefinerycomplexes as one of the needs and necessities of the country, and added: “The realization of the country's goals in the field of economic growth depends on large investments and these memorandums are among the measures and effective groundwork for attracting small and large capitals on the path of construction and development of the country.”

Stating that signing the documents is a step towards realization of the economy of resilience, and Dr. Raisi added: “This memorandum is also an effective step toward neutralizing sanctions, preventing crude oil sales and converting crude oil into products with higher value added, meeting the country's needs for oil products and creating fresh export capacities.”

Raisi also noted the consensus of economic experts on the point that directing liquidity towards production will remove concerns about the growth of liquidity, and said: “These memoranda that were signed are one of the successful examples of directing liquidity towards production.”

The president considered implementation of these projects to be a source of prosperity and progress for Bandar Abbas and especially Makran coasts, and said: “Implementation of these science-based projects could create sustainable employment and boost production, especially in the downstream industries of the oil industry.”

Implementation of Refining and Petrorefinery Projects Rendering Sanctions Ineffective

JavadOwji, Minister of Petroleum, also underlined the many challenges for the sale of oil and gas condensates under the sanctions, and said: “The implementation of the ShahidQassemSoleimanipetrorefinery and the MorvaridMakran refinery will make the sanctions ineffective.”

He said: “The refining capacity of the country is now close to 2.3 million barrels per day, and according to the trend of gasoline and oil gas consumption in the country, especially with the increase in travel following the reduction of the spread of coronavirus, consumption has exceeded production on many days. In this way, the country's energy security will be challenged.”

Noting that these projects had been under implementation for a long time, he added: “The most outstanding challenge of these projects was the provision of financial resources, which were contributed by the initiative of the first vice president, large economic holdings and banks were involved in this field, and you may make sure that within four or five years they will be put into operation.”

Stating that the sale of oil and condensate is both a crude sale and there are many challenges for its sale due to the sanctions, the oil minister said: "When these projects reach production, we will not have any problems in selling petroleum products and petrochemical products. This action makes the sanctions ineffective.”

Owji emphasized: “The most important issue in the implementation of these projects is the entry of capital and liquidity of society into the production sector, and in addition to preventing raw sales, high value added will be created. At the same time, together with the supply of fuel, the downstream feed of petrochemical plants will also be provided.”

He pointed to the addition of 600,000 barrels to the daily refining capacity of the country with the implementation of these projects, and stated: "Iran’sPetroleum Ministry has 8 other projects in this field and we are sure that these 600,000 barrels will reach the desired result with the participation of these capable shareholders."

The Minister of Petroleum continued: “With the plans made, the MorvaridMakran project will be operational in the next 4 and a half years, and the ShahidQassemSoleimaniPetrorefinery will come on-stream in the next five years, considering the current 10% progress.”

Production Boom, Economic Development and Job Creation

Mohammad Mokhbar, the first vice president, also addressed the ceremony. Referring to the extensive investment for the national economy projects, he said: “Directing liquidity towards production, increasing the value of the national currency, creating jobs and economic development are among the results that could be achieved by investing in national economic projects.”

Referring to the participation of the people in the implementation of these projects, he expressed hope that with the implementation of these plans, the people will taste the sweet taste of this investment.

The first vice president referred to people's participation and investment as one of the features of ShahidQassemSoleimaniPetrorefinery and MorvaridMakran Refinery, and added: "People have severely invested and participated in the implementation of these two projects, and after their implementation, they could become shareholders of these big projects."

Maximum Use of Domestic Manufacturing Equipment

Mofid Economic Group and Mellat, Tejarat and Parsian Banks have signed the MoU for construction of MorvaridMakran Refinery with a daily refining capacity of 300,000 barrels of heavy and extra heavy crude oil in Jask with an estimated investment of about $7 billion.

The maximum use of domestically manufactured equipment and the benefit of the law of feedstock sale on credit are the features of the MorvaridMakran Oil Refinery.

ShahidQassemSoleimaniPetrorefinery is to process heavy crude oil and is to be developed with an estimated investment of slightly over $11 billion. The MoU for its construction has been signed between the Melli, RefahKargaran, Mellat and Tejaratbanksas well as Tadbir Energy Group, Persian Gulf Petrochemical Industries Company (PGPIC), Ahdaf Investment Company and the National Iranian Oil Refining and Distribution Company (NIORDC).

The composition of the products produced in the ShahidSoleimaniPetrorefinery will be 65% fuel and 35% chemical products, and this project is supposed to be further completed after five years.

The shares of each of the parties to the MoU are as follows: Tadbir Energy Group 15%, PGPIC 15%, Ahdaf Investment Company 15%, NIORDC 10%, Bank Melli 15%, RefahKargaran Bank 15%, Mellat Bank 7.5% and Tejarat Bank 7.5%.

Creating value added and preventing crude sales in the path of aligning with the administration’s view, preventing the import of gasoline into the country, enhancing the refining capacity and production of petroleum products, creating job opportunities and using the potential of domestic companies and the capacity of knowledge-based companies, actively dealing with sanctions and preventing sanctionability, directing liquidity towards productive investment, moving away from refinery construction and moving towards construction of petrorefineries, and continuation of Iran's presence in global markets are chief among the goals of these plans.

Reviving Iran’sEnergy Diplomacy: Step by Step

MahdiaAbolhasani,

Energy Expert

Holding17.3% of the world's proven natural gas reserves, Iran is only second to Russia.Meanwhile, Turkmenistan ranks sixth with 3.8%. In 2021, Turkmenistan produced 83.7729 billion cubic meters (bcm) of natural gas and exported about 34 bcmto China, the largest importer of Turkmen gas, and that iswhy China has a high bargaining chip against Turkmenistan, encouraging the latter to seek to diversify its export destinations not to depend on a single buyer. According to BP and Azerbaijan's Ministry of Energy, the volume ofRepublic of Azerbaijan's natural gas reserves in 2021 was estimated at 2,500 bcm.

Turkmenistan has two gas export pipelines to Iran: one is the 200-km Korpeje–Kordkuy pipeline and the other is the Dauletabad–Sarakhspipeline.

November 28, 2021 may be considered the starting point for the revival of Iran's energy diplomacy after the five-year gas dispute between Iran and Turkmenistan and in coincidence with the cessation of gas imports from Turkmenistan, following the bilateral meeting between Iranian President EbrahimRaisi and IlhamAliyev, President of Republic ofAzerbaijan, on the sidelines of the ECO Summit, which led to an agreement between the two neighbors for tripartite gas swap between Turkmenistan, Iran and Republic of Azerbaijanthat was signed by the oil ministers of the two countries.

The purpose of the agreement was to import 1.5 to 2 bcmof gas from Turkmenistan annually from the north-east (Sarakhs region) and to deliver Iranian gas to Republic ofAzerbaijan from the north-west of the country (Astara). According to the agreement, Iran takes a certain amount of the imported gas as swap fee; in effect, this method is independent of any financial relations between the countries involved in the deal.

Following the agreement and on the sidelines of the visit of Iranian Minister of Petroleum JavadOwjito Republic ofAzerbaijan, another agreement was struck with the aim of doubling the volume of gas swaps. According to MinisterOwji, Iran has the capacity to triple or even quadruple the current volume of gas swap between Republic ofAzerbaijan and Turkmenistan. This could be considered the next important step towards the revival of energy diplomacy and a precursor for the steps to come.

Previously, Hassan Rouhani, the former president of Iran, during his trip to Ashgabat in 2018, had discussed with his Turkmen counterpart, implementation of gas swap contracts for Turkmenistan through Iran, possibly to Armenia or Republic ofAzerbaijan, but the negotiations between the two never went beyond any further than preliminary stages.

The swap dealis important for Iran for several reasons: chief among them is to contribute to the stability of gas supply in the northern provinces. This volume is an aid to supply part of the gas of the five provinces of KhorasanRazavi, North Khorasan, South Khorasan, Guilan and Semnan, and is more economically viable for the country; but its other advantage is to help expand and consolidate the country's relations with neighboring countries and revive Iran's energy diplomacy. On the other hand, considering the ongoing tension between Russia and Ukraine, the European Union is seeking to wean itself off Russian gas and find replacement for it, and considering the fact that Europe has been looking for Turkmen gas for years, RepublicofAzerbaijanis in a good position for this replacement.

Regarding the fact that Iran needs energy conservation, enhanced energy efficiency and full utilization ofits gas reserves in order to control its devastating domestic consumption and export any potential surplus gas to Europe, this swap is a positive step towards paving the way for Iran to win a share in the European market and the suspension of the Trans-Caspian project in the shadow of the expansion of ties between the country and its neighbors.

In 2021, Republicof Azerbaijanexported 8.2 bcmof natural gas to Europe, and according to the plan, this amount is expected to increase to 9.1 bcmin 2022, and in 2023, 11 bcmof natural gas is expected to be exported to European countries.

In 2004, Iran signed a gas swap agreement with the Republic of Azerbaijan, according to which Iran used the gas received from Republic of Azerbaijan in Astara and delivered its own gas to Nakhchivan.

Ten Fields of Iran, Cuba Energy Cooperation

Iran’s Minister of Petroleum Javad Owji during his trip to Latin America in May, met with Cuban President Miguel Díaz-Canel and signed two memoranda of understanding on energy and agriculture. Mehdi Safari, Iran's deputy foreign minister for economic diplomacy, considers bartering with Cuba very instrumental in the relations between the two countries.

Accordingly, Mr. Safari argues, Iran's need for grains will be provided by Cuba in exchange for crude oil from Iran. He also considers Cuba to be a very important market in Central and Latin America for the export of Iranian products.

In a report prepared by the Institute for International Energy Studies (IIES), the opportunities for cooperation between Iran and Cuba have been outlined in 10 sectors: bartering crude oil with agricultural products, refinery development, upgrading and construction, focus on the sales network of petroleum products in Venezuela to Cuba, cooperation in the field of oil and gas, exploration of oil and gas in the offshore sector, export of E&P technical and engineering services and labor, establishment of joint companies in this field, cooperation in the field of renewables, using new methods for energy production, dams construction, electricity production, especially hydroelectricity, cooperation in the mining and metals sectors, import of mineral products, developing chemical production industries.

Also, considering the US oil embargoes on Iran, the sale (barter) of crude oil against goods may be one of the suitable opportunities for cooperation between the two countries, and finally, considering China's position in Cuba's economy, as well as the Belt and Road project, the country's potential to transfer Iranian goods, especially oil, can be taken advantage of.

Vast Potential for Iran-Cuba Cooperation

Despite the vast possibilities for a dramatic improvement in the level of economic cooperation between Iran and Latin American countries, this necessity has always been neglected in the post-revolution administrations in Iran to varying degrees. Iran's relations with Latin America in the political and economic fields have had ups and downs under different administrations, the peak of which was under the 9th and 10th administrations in the years between 2005 and 2013, when cooperation in the fields of water and electricity was the case. Under the 11th and 12th administrations, given the type of approach of the Rouhani administration and its priorities, the ties continued less seriously, and mostly remained at the level of a few diplomatic exchanges.

Relations between Cuba and Iran began in the aftermath of the 1979 Islamic Revolution. Although Iran and Cuba have a long history in economic, scientific, military, security, and intelligence arenas, figures indicate that the two countries have not been successful in expanding bilateral trade relations. There are significant capacities and potential for economic and commercial cooperation between the two, even though in this direction, transit and banking relations are two serious obstacles that must be carefully dealt with.

Cuba: Big Energy Importer

Cuba is an archipelago in the Caribbean Sea with a population of 11.2 million people. The country almost imports all its energy needs through imports, but the potential of oil and gas in its offshore sector could help reduce its dependence on imports. Cuba has struck many contracts with various countries in exploration and drilling arenas. However, as a result of the US trade embargo against Cuba, American companies cannot possess Cuban oil assets but are allowed to participate in drilling, as well as technology and equipment transfer merely with executive permits.

Due to the fact that Cuba has included economic improvement and development in its master plans, it seeks to develop renewable resources with the aim of diversifying its energy sources, and in 2014, the policy of developing renewable energy resources and efficient use of energy until 2030 was approved, which is designed for gradually curbing fossil fuel consumption and providing 24% of energy from clean and renewable sources by 2030. The policy is also aimed at encouraging foreign investment in large and small local projects with the aim of improving energy efficiency and self-sufficiency through facilities connected to Cuba’s national electricity grid. According to some estimates, to develop more than 2,000 megawatt hours of new power generation capacity through renewable sources over the next 9 years, more than $3 billion of funding is needed in this Latin American country.

Expanding Use of Renewables

Cuba's electricity demand is increasing as a result of new economic reforms. However, stagnant power generation causes occasional power shortages and blackouts. Cuba ended 2020 with an installed capacity of approximately 300 MW/h of renewable resources, some of which were supported by international institutions and causes. Recent studies show that the expansion of renewable sources may reduce the use of fossil fuels in electricity production by 2.3 million tons, and curb emission of carbon dioxide by 8 million tons per year.

Net Oil Importer but Self-Sufficient in Gas

Cuba is a net importer of oil. In 2019, it produced about 48,000 barrels per day of oil and other liquids and consumed 164,000 barrels per day. It imports most of its oil from Venezuela. Due to the economic and political crises in Venezuela, the arrival of crude oil shipments from Venezuela to Cuba has decreased.

According to the US Energy Information Administration, Cuba has 100 million barrels of proven crude oil reserves. The prospect of oil discovery in the deep waters off the northern coast of Cuba has attracted many oil and gas companies from around the world to the country. However, as a result of geological and technological challenges, deep water exploratory drilling has so far yielded no results.

Cuba has four refineries, all of which owned and run by the state-run Petroleos Company with a total crude oil refining capacity at 134,200 barrels per day as of January 2016, according to OGJ. The second largest of the four refineries, Nico Lopez, has a crude distillation capacity of 36,400 barrels per day.

Cuba's natural gas reserves stood at 2.5 trillion cubic feet and natural gas production was 34 billion cubic feet in 2019. Also, Cuba’s natural gas consumption in 2019 was about 34 billion cubic feet, which is almost equivalent to the domestic production of the country. In other words, there is no need to import in this field and all the required gas is supplied from domestic sources.

Oil, Gas Production Drop since 2015

According to the US Energy Information Administration, Cuba’s oil and natural gas production has fallen since 2015. Coal consumption is 0.5 million tons per year, which is fully met via imports. Most of the electricity generation in Cuba is supplied using fossil fuels, and renewable energies still play a very small role in power generation. The electricity output of the country in 2020 was about 19 billion kilowatt hours, which has remained almost unchanged since 2016. One of the reasons for the lack of growth in electricity production despite having production capacity is the lack of required and accessible fuel reserves in the electricity production system, which inevitably affects the supply of electricity. For Cuban families, the current crisis is reminiscent of the long blackouts of the early 1990s, when Cuba lost its main fuel supplier after the collapse of the Soviet Union. Sanctions disrupt access to financial credits for the purchase of parts and equipment and cause delays in the necessary overhauls and maintenance of thermal power plants.

Analysts warn that Cuba's electricity grid is in a critical state, and the high level of dependence on fuel imports is considered a vulnerability for the country, as it undermines the energy sovereignty and independence in Cuba. All of Cuba's thermal power plants, which were mainly built with the old technology of the Soviet Union and the socialist bloc of Eastern Europe, have passed their 30-35-year lifespan, and according to Cuban industrial‍ executives, it costs about $40-80 million in capital to repair each of these plants.

Currently, the policy of the 13th administration of Iran is to develop energy diplomacy and constructive cooperation rather than inhibiting competition, therefore, during the last 10 months, Iran’s Minister of Petroleum visited several neighboring countries and Latin America, and of course, he also hosted his counterparts from these countries. Considering the good relationship between the two countries, we expect to see the expansion of relations between the two countries in the energy sector and Iran's cooperation with Cuba in this sector in near future. It is noteworthy that Iran holds the world’s largest oil and gas reserves combined, and considering the growing need of countries for fossil energies and the slow transition of energy, it could be a reliable partner for buyers of oil and technical and engineering services.

What Iran Has in Common with Uruguay and Nicaragua

Latin America comprises 20 developing countries with a population of about 650 million people, maintaining good relations with Iran and seeking better ties. The region's economic size is significant, with Latin America's gross domestic product (GDP) estimated at $5 trillion by 2020. In terms of energy, about 20% of the world's oil reserves are located in this region which is considered a large market for international energy transactions. Some Latin American countries, including Venezuela, have significant oil reserves and are important oil producers. They also have large international oil companies such as PDVSA and Pemex, which operate in the global oil market and facilitate exchanges and joint ventures in the oil and gas industry. In general, the economic and energy indicators of this region indicate that there is great potential for development and the desire of the countries in this region to expand relations with non-US and European countries has provided good opportunities for development of ties with Iran.

Uruguay Energy Sector

As Uruguay's newly elected president, Luis Alberto Aparicio Alejandro Lacalle Pou, seeks to liberalize the country's energy sector as part of his ambitious reform agenda, plans have stalled in 2021 due to the political and economic implications of covid-19. His effective response to the coronavirus pandemic, coupled with high public satisfaction, has strengthened his political authority and he is expected to advance key parts of his policy agenda in the coming months.

Uruguay is a small, open economy with a strong dollar system and high participation of state-owned banks. The system has resisted the coronavirus pandemic in part because of widespread policy support by the authorities. Uruguay will see rapid economic growth in 2022 as it benefits from the normalization of economic activity and strong export growth driven by global demand for agricultural commodities. However, Russia's war Ukraine will push up commodity prices, especially fuel, causing inflation to remain above the Central Bank’s target range.

Labor unrest is likely to be due to lower real wages. Among the current strategies of this country in the framework of macro-prudential policy are action to counter the dollarization, crisis management arrangements and financial integration. The World Bank will also focus on the role of government and the prospect of further development of capital markets.

Uruguay’s Ministry of Industry, Energy and Mines oversees the energy sector through its National Energy Administration, with the exception of the Salto Grande hydroelectric complex shared by Uruguay and Argentina, which is under the direct management of the Ministry of Foreign Affairs.

The bulk of Uruguay’s oil imports are crude oil. The country's single refinery, Teja, has capacity to process 50,000 b/d. In 2020, the volume of crude oil reached 2 million tonnes, up from 0.5 million tonnes in 2017 when overhaul was effective. The country mainly imports oil from the United States (58%), Angola (26%) and Nigeria (13%). Argentina supplies Uruguayan gas needs.

Some key points with the energy sector in this country are as follows:

The country's energy policy aims to diversify the energy mix, reduce its dependence on oil and hydropower and improve energy efficiency. ANCAP is the main oil and gas company. The share of wind, biomass and solar in electricity generation has increased from 11% in 2010 to 64% in 2020. Energy prices are one of the highest in Latin America. For example, the final price of electricity for households in 2020 is $21.6 per kilowatt/hour under normal tariffs (-13% compared to 2019) and $11.6 per kilowatt/hour for the industry (-5%).
Biomass is the main source of energy with 43% of total energy consumption in 2020. Industry is the largest consumer of energy.
Uruguay is 100% dependent on fossil fuel imports.
In 2020, the share of renewable energy in the primary energy mix was 59%.

The average primary energy consumption per capita is 1.5 tonnes, which is about 3300 KWh in capacity (2020). Uruguay's total consumption increased by an average of 4.3% per year between 2010 and 2016 and has remained almost constant since then (5.2 million tonnes in 2020.). Biomass is the main source of energy in the total energy composition (43% in 2020 compared to 33% in 2010). Oil’s 2020 share was about 40 percent.

While there are natural gas-fired power plants in Uruguay, oil-fired power plants constitute the bulk of the country's thermal power supply. Rising costs for oil-fired power generation prompted the government to prioritize the diversification of Uruguay's electricity sector through the development of non-renewable hydropower and natural gas sources in its energy strategy for the years 2005-2030.

While the strategy has focused on successful renewables, Uruguay has sought to increase its reliance on gas-fired power generation. Given the recent development and uncertainty on the

development of the liquefied natural gas import terminal in Uruguay, the forecast for its thermal power generation by 2030 is only the growth of oil-based electricity generation. As there are no specific plans for the new thermal power plants, it is expected that Uruguay's thermal energy capacity will remain below 1.2 GW by the end of the 10-year forecast period.

In many countries, the electricity sector has changed rapidly in recent years due to the growing penetration of variable wind and solar energy. At least nine countries generated more than 20 percent of their electricity generation from variable renewable energies in 2020: Denmark, Uruguay, Ireland, Germany, Greece, Spain, the United Kingdom, Portugal and, for the first time, Australia.

In 2017, Uruguay introduced its NDC after COP21. The goal is to reduce CO2-related greenhouse gas emissions by 24% by 2030 (compared to 1990) using domestic sources. The goal can be achieved with additional tools and increase up to 29%. In 2019, Uruguay committed to zero carbon by 2050. It is also predicted that its greenhouse gas emissions will be halved by 2025 compared to 1990 levels due to the widespread deployment of renewable energy sources.

Energy Cooperation

Finally, it is noteworthy that Iran's economic opportunities in Latin America are still unique and it is necessary for Iran to adopt foreign policy, especially in the economic field in the countries of the region with the intention of expanding relations.

Uruguay is devoid of fossil energy resources, and Iran could use the existing void in this country, in addition to energy exports, to invest in technology and technical and engineering services, and in light of the skilled and specialized workforce in Iran with training. Manpower in the country in the fields of technology and engineering, industry should be promoted and due to the creation of these conditions by investing in manpower in the long run, Iran’s influence in such countries will increase.

In addition to providing the raw materials needed in this country, there is enough room to invest in other sectors along with fossil and renewable energy, due to the existence of fertile lands in the agricultural and livestock sectors, and return on investment in this sector is guaranteed.

Nicaragua

Nicaragua has a small economy with a GDP of $12 billion in 2021, but has grown by an average of 4% in recent years other than during the pandemic. Forecasts indicate that the previous growth trend will continue in the coming years. The population of the country is estimated at 6.6 million, which is a sign of small size, but on the other hand, the country has a young population. About half of the population is less than 25 years old.

Its economy is non-industrial and dependent on agricultural and livestock products. The country has been the main exporter of coffee to Iran in recent years, and Iran has mainly exported agricultural products and industrial printers to this country. Iran's trade with this country in 2020 totaled around $100,000.

Oil and gas reserves have not been discovered in Nicaragua but are better off in terms of other mineral resources such as gold, silver and copper. It has no oil or gas production. Nicaragua imports oil and petroleum products from the United States, Venezuela and Costa Rica. Consumption of its petroleum products is about 35,000 b/d, which is supplied through the country's only refinery and imports. The refining capacity of the refinery operated by Puma is about 20,000 barrels.

Currently, two important programs in the field of energy are being pursued: The Ministry of Energy and Mines has planned an electricity generation program (2013-2027) under the title of various scenarios of the country’s energy demand for electricity generation from renewable sources. The National Plan for Sustainable Electricity and Renewable Energy was also introduced in 2012 and is still being pursued. What is certain is that the country is more concerned with the development of renewable energy than with its emphasis on fossil fuels. As can be seen from the supply of various types of energy, supply from solar and wind sources has a higher growth than other sources, especially fossil fuels.

Oil and Gas

In recent years, oil exploration efforts have been made by the Norwegian oil company Equinor, as well as the Canadian company in Nicaragua, and contracts have been signed with these companies. Also in 2019, in order to encourage oil production, companies operating in the hydrocarbon sector were exempted from paying taxes under the new law.

Equinor has been exploring for oil offshore and is now leaving the country due to international pressure, and the Nicaraguan government is looking for a partner to develop the offshore oil industry.

The LNG import terminal (FSRU) is under construction to supply fuel for the power plant with a capacity of 420,000 tons per year and is in the final stages by New Fortress Energy and is scheduled for operation in 2022.

Due to the recent sanctions following the presidential election, the country's oil and gas projects have been hampered and international companies are under pressure to leave.

Strengths

Appropriate economic growth, young population, lack of development of oil and gas industry and lack of capacity, government willingness to expand relations with non-US and European countries are the strengths of the country.

Weaknesses

Long geographical distance, small economy, lack of development of internal structure of oil and gas industry, low consumption and import of oil and gas are the weaknesses of the country.

Threats

Existence of trade competitors close to Nicaragua, including Venezuela, focus on the development of renewable energy, interventions of major powers in the country are the threats in the countries.

Opportunities

The government’s willingness to develop the oil and gas industry, the presence of non-US and European oil and gas companies due to the unwillingness and impossibility of the presence of international companies due to sanctions, offshore oil development and construction of a refinery are the opportunities in the country.

Grounds for Energy Cooperation

Cooperation in the field of development and upgrading of the refinery and construction of a new refinery
Given the government's willingness to drill offshore, as well as the departure of the Equinor after several years of exploration operations and the unwillingness of international companies to work due to sanctions, there is an opportunity to take part in this sector.
The government is interested in building a refinery, and Venezuelan oil company PDVSA has announced its intention to do so. So there is an opportunity to work with the Venezuelan oil company to develop the refinery.
The Venezuelan oil company has a long history of operating in Nicaragua in the oil and refined products trade and investment, so cooperation and joint projects with this company in development projects will facilitate multilateral relations.
Existence of refining potential of oil-for-agricultural products trade

Energy Security Redefined

Fereydoun Barkeshli,

Energy market analyst

European Union unanimously decided to impose sanctions on seaborne crude oil deliveries from Russia. Europe’s energy future is now woven by hasty opportunistic policies using Russian- Ukraine conflict as a new crowbar to open the door to dismantled US Northern Atlantic alignment and flawed energy transition policies.

Using high crude oil and natural gas prices, Brussels is enforcing its will on member countries and citizens.

Having being hit by severe demands from its members not to push too fast and too soon, and spare gas during the conflicts and energy transition, while even tentatively suppressing nuclear energy plants, Brussels EU Commissioner took different but unconventional and possibly economically dangerous road. This might surprise you that I engaged with energy transition in the middle of a bad war.

You are right to be surprised that renewables, people and climate change enthusiasts are actually happy to see the war happening and consider the war and EU reliance on Russian energy as an opportunity to push even harder for transition.

Oil Sanctions

Right after the start of the conflict between Russia and Ukraine, international oil prices shot up dramatically. Brent crude well passed $100 per barrel and practically fluctuated in the vicinity of $110. What surprised everyone including myself is that it didn’t fluctuate wildly as previously anticipated. It’s no secret by now that OPEC and the OPEC plus have ran out of spare capacity. There’s no country or group of countries that can compensate for the lost Russian crude (and products). Russia delivered some 5.7 million barrels per day just some weeks ago. Markets are taking it easy. Wind, sun, water or air have enough energy to compensate for the lost Russian oil and two other major oil producers namely, Venezuela and Iran.

There are now confirmed reports that the United States is buying Russian oil in daylight, though sometimes through gray zones at discounts and sell their own shale oil mostly from to Europe. Russian oil is bad for Europe and the alliance of the sanction team but not for the US. In the meantime, within the European Union, the EU 3 or EU 3+1 ( Germany, France, Italy plus Britain ) also buy Russian oil and gas and pay for it in Ruble and prohibit other EU members from engaging into business with Russia. This went as far as some smaller members of the European Union like Denmark and Ireland asked for their own European Union away from the big 3 who dictate their own version of sanctions policies on the rest of the Union.

Here are therefore some answers to the puzzle of the security of supply in Europe. Russian oil and products exports are down some 9 percent since the formal approval and imposition of sanctions but the leading members of the alliance keep buying and reselling Russian oil and products to other EU members.

Russia-Ukraine crisis has virtually surfaced an old debate that in this European Union all are equal but some are more equal.

Within the alliance of oil producers, those countries with their limited spare capacity are the winners but the United States remains in the forefront of Russian oil embargo gains. US is, of course, wining in other fronts too that include sales of arms and military equipment.

America is also winning in that the burden of NATO military expenses has now shifted from Washington to Europe. United States skillfully changed the Russian/Ukraine war into the war of energy and tightened its grip on oil flow and energy security that was undermined by Russian oil and gas exports and close engagement with OPEC. President Biden militarized energy in a war that is fought some seven thousand kilometers away from its own land. America has skillfully converted Ukraine into a proxy battleground for NATO against Russia. I reckon that for Washington, Ukraine is the European version of Yemen.

Welcome to America’s new oil sanctions show. Direct purchase of Russia’s oil by Europe contradicts principles of democracy but buying it from America through US intermediate at a higher price is in defense of democracy and principles of the Northern Atlantic Treaty Organization. It is a sanction comedy.

Russia-Ukraine Conflict

Russia produced some 10.4 million barrels per day of crude oil and condensate. Russia’s total exports of crude oil and products was about 7.5 million barrels per day four months ago, prior to the war in Ukraine. Some three-fourth of Russian oil and condensate and products were exported to Europe by ship or through pipelines. Russia satisfied around ten percent of global oil demand.

For natural gas, Russia is in second following the US, producing some 1.7 billion cubic meters per day compared to 2.5 billion cubic meters produced in the United States. All Russian gas is exported through pipelines to Europe. Around 40 percent of Europe’s gas requirements is supplied by Russia. However, it’s not evenly distributed. Germany relies on Russian gas by around 50 percent, while some others rely as much as 20 percent. Such a huge dependence of European countries on imported oil and gas and even coal from Russia, means that Europe could sooner or later enter a process of de-industrialization that has never experienced before in the textbooks of development economy.

Once Europe go down economically, China and Asia will begin to experience recession, too. Most of Europe’s industrial goods is exported to China and other Asian countries and most notably to the ASEAN countries. In return, Europe buys a lot from China and Asia. Therefore, the supply chain is distorted and Europe as the leading continent is to enter the new era of industrial civilization and will go down in history together with Asia as an inspiring continent to experience growth and prosperity.

A peculiar characteristic of fundamentals of energy concept is that, once price of oil increases, it doesn’t stay there and within oil itself. Chain reactions follow. High oil price rapidly involves several other products and items: directly and indirectly. It’s infectious. The chain reaction rapidly spread throughout the economy.

No sector of economy is immune. From food to chemicals, industrial products and services are impacted by higher oil prices. Within the energy sector too, price of gas, electricity or coal is also directly oil- related. Having said that the global energy security fundamentals got to be redefined

or redesigned. Many things have changed. President Biden visited Asia in May this year but refused to go to the Middle East.

Not even Saudi Arabia and Zionist Regime. Saudis are no more considered close allies and strategic friends. Saudi Arabia is now a rival in international oil markets. Biden is reviving shale oil and shale gas production and exports like no other president since mid-1990’s when shale oil and gas appeared in the US energy map. Shale gave geopolitics of oil, gas and energy a new meaning.

I intend to say that we need to differentiate between the concept of “Geo-politics” and that of “Geo-strategy”. Back in early 1980s, the victory of Islamic Revolution in Iran and then the war of Saddam against Iran, eliminated over 7 million barrels per day from the market. Market was perplexed and in total panic. Uncertainty prevailed in a way not seen since early 1970s.

Markets and consumers felt the pain. However, there were adjustments in the course of time. Supply/demand equation was restored and markets stabilized. Other producers entered the scene and raised production. Prices were down again and markets witnessed series of severe market share wars amongst members of OPEC. At some points of time prices went as low as $10 per barrel. This is what I called geopolitical impact of oil crisis. Geopolitical developments are adept to adjustments.

On the same page if we examine the oil market fluctuations and turbulences back in 1996-97, when Asian financial and monetary crisis started after infamous November 1997 conference of OPEC ministerial conference in Jakarta, Indonesia, oil prices fell overnight and stayed low for as long as the Asian financial crisis lasted. A much more powerful turbulence occurred when 2007-2008 US market crash started. Financial crisis of the United States started from housing sector with no direct relations with oil and energy. But it was more than a market crash. It redesigned the whole international oil market. Prices moved to a higher corridor after an initial crash.

Emergence of environmentalists and climate change advocates began to shape up. Solar and wind were no more considered major substitute and new sources of energy as were once referred to for fossil fuels substitute. Fusion, hydrogen and other forms and brand-new sources of energy emerged in Europe and elsewhere. This is an era of geo strategy. This left a lasting and deep impact on the global oil (and gas) markets. 1970s and 1980s oil crisis erupted from inside the oil industry. 1990s and 2000s crisis erupted from the financial sectors, stock exchange or financial systems that malfunctioned. Outbreak of pandemic in late 2019 onwards was from outside the oil and energy sector, too.

In Russia/Ukraine war, we now have a combination of the two. World has lost a huge volume of oil and oil products. A huge quantity of gas is on the verge of elimination from the global markets because of war and sanctions. On top of all that, there’s a sanction on Russian dollar currency reserves with the US and international banks that has discredited US Federal Reserve as a safe haven for international reserves currency.

Some $370 billion of Russian reserves is blocked and out of reach. China has over $1 trillion of reserves in the form of bonds, treasuries and cash with the Federal Reserve of the United States. Japan, South Korea, Taiwan and many more countries keep dollar and dollar-denominated assets with the US Federal Reserves. They are friends and allies of America for now but future relationships may change. Panic prevails. Countries with huge dollar reserves from Beijing and Tokyo to the Middle East and Persian Gulf states are now worried about the destiny of their reserves in dollar.

Global Divide

As mentioned earlier, global financial system is fragmented. Business houses, banks and individuals are partially or totally distrustful of current financial system that prevails since 1971 when Richard Nixon dismantled gold standard and US dollar was made to replace gold as the international monetary backbone. When gold standard was introduced in Bretton Woods in 1947, United States had won the Second World War and possessed the largest stocks of gold. With the war in Vietnam and Korea before that, plus the gradual reemergence of Europe, Washington changed its financial policies and replaced dollar for gold.

In later years, Swift was introduced. America was made the master of the world financial system. One important factor here was that since the American companies ruled the international oil market and virtually owned or operated in the Middle East and America itself, dollar was unanimously accepted as the single most commonly and accepted medium of international oil pricing system. Back then, no single commodity was more widely traded than oil. As such, dollar owed most of its power and influence to oil.

What has now happened is that under US sanctions on Russian oil, Moscow has demanded its own currency, Ruble to be accepted as the medium of oil trading settlement. This is going to spread to other currencies and transactions. More countries including the Middle Eastern are now trading their oil in currencies other than the US $. This is a major aspect of geo-strategic developments that is already gaining momentum. A new World Oil Order is shaping up.

When foreign ministers of BRICS, an association of Brazil, Russia, India, China and South Africa met late May this year, no country came up in condemnation of Russia for the war in Ukraine. In fact, two-thirds of the world population is one way or the other are against US/EU sanctions on Russia. Surprisingly, individuals such as Henry Kissinger who was US chief foreign policy architect for the last four decades has condemned Washington-designed sanctions against Russia.

This is an enormously complex situation. North-South divide has never in recent history been vivid as today. This has to be seen in the context of the complex North-North relationship. Just two years ago, Americans had a president

in the White House who openly asked NATO to be dissolved and that US had nothing to do with NATO. There’s now a president who promotes expansion of the North Atlantic Treaty Organization. The perplexing question that people in Europe keep asking is; what next. What’s going to be in store if the next president of the White House charge mind and feel like distancing from NATO again.

This is a dissipating situation. There are five neutral sovereign states in Europe namely; Sweden, Finland, Switzerland, Austria and Latvian. Two of them have officially submitted their request to join NATO. An organization that could have been dissolved back in 2020 when it fell out of favor by Donald Trump.

There’s already some sort of suspicion in Europe that Washington might have indirectly persuaded Russia to go to war in Ukraine. President Biden kept repeating that Russia wants to enter Ukraine months before the Russian army actually engage in fighting in Ukraine. President Biden is repeating the same mantra for China. The Americans are repeating and emphasizing that China intends to occupy Taiwan. President Biden encourages wars in different countries. Keep selling arms and persuade others to fight.

United States is in the business of Afghanistanization of Ukraine, a term other than Balkanization. That is to be interpreted as a forever war. A situation of no real peace or war. A permanent source of tension that lures Europe into more reliance on the US. Sharing a greater burden of keeping NATO and still selling more weapons. This will ultimately mean a weaker Russia, too. As the war may prolong, so do the costs.

Engaging Russia on the European front also means paying less attention to southern borders and Asian neighborhoods.

Climate Change Diplomacy

Paris climate change accord of 2015 was the most aggressive climate gathering in the history of countries advocating environmental protection. Several deadlines, too many recommendations and punishment measures against the counties that cannot adhere. This year in Glasgow, the mood had changed but the motives and agendas behind the motives had not been changed a bit. Europe has designed to weaponize the climate issue. A war by the North on South. This is a weapon by which affluent western countries design to influence countries of the South.

War in Ukraine greatly changed the attitude of the European Union. They realized or faced with three painful realities:

1- Oil and gas are the dominant players and major sources of energy far beyond 2050

2- Most of oil and gas is located in the east

3- Oil and gas aren’t available in abundance

War in Ukraine helped major oil and gas consuming countries to take another look at oil and gas and refresh their understanding of the situation and redefine their ambitions on climate policies.

However, it is needless to say that oil and gas producing countries have to address the issue of environmental factors and climate change. OPEC and OPEC plus have no common or unified climate policies. They often make contradicting decisions and policy approaches without digging the depth of Europe’s environmental protection policies. Undoubtedly, West is going to weaponize climate change issues sooner or later. Penalties will be imposed on countries using fossil fuels to sustain their development plans and well-being of their society. Europe and the US are in alliance for putting a cap on Asian growth and prosperity. Imposition of restrictions on energy consumption of choice is an important tool that can only be achievable through tough international sanction regimes for the pattern of energy production, consumption and distribution.

New Energy Century

In conclusion, the Russia-Ukraine crisis highlighted the significance of the energy security. Energy security is redefined, in that energy supply security is against the energy demand security. Consuming countries cannot keep fighting oil and gas in one front and then get back to OPEC and other producers and beg for oil at the time of crisis and hardships.

Nevertheless, I do not envisage a global financial re-set as an eminent characteristic of the new energy century yet. It depends on how the war in Ukraine proceeds and evolution of regional pacts and groupings such as Shanghai pack or ASEAN and BRICS. We are entering an era of de-globalization and regionalism.

Shanghai pact constitutes 40 percent of the world population. This number of population with average age of below 35 need oil and gas to develop and survive. If we add ASEAN, BRICS or ECO, two-thirds of the world population live in between Asia and Latin America. They do not share the view that they must support Europe in sanctioning Russia or any other countries’ oil and gas. Let Europe go alone. The world is united against sanctions on energy.

As for Europe, the continent has to grow out of the mindset that Europe’s problems are the world’s problems but the world’s problems are not Europe’s problems. Climate and environment and Ukraine are Europe’s problems and they have to solve it on their own. It’s too selfish and self-centric to demand that the world must bow to Europe’s priorities.

In conclusion, it is however important to watch how the world economy and the US economy in particular performs. US Federal Reserves considers the average rate of inflation at 8.5 percent for the first half of 2022 which is at twenty -year high. In such junctures, America historically needs a war to survive. This time, United States is in fact at war but a proxy war fought at the expense of others in Ukraine. The Russia-Ukraine crisis is a gift for the United States. Russia and China are both excluded from major international scenes and North-South divide deepens.

The new energy century is yet to arrive, though not all from renewables.

OPEC+ Unwinding Historic Supply Cuts

The Organization of the Petroleum Exporting Countries and its allies, led by Russia, a group known as OPEC+, held their 31st meeting and is set to raise its oil output goal by 100,000 barrels per day in September.

Informed sources announced that the amount of OPEC+ compliance with the grouping’s declaration of cooperation (DOC) in June was 320%, meaning that the coalition has produced about 3 million barrels per day less than the quotas set for June. But many thought that the meeting would be the last cooperation between OPEC and its allies.

During its 5-year existence, OPEC+ has gone through many ups and downs; the most important fall should be the historic failure of the March 6, 2020 meeting and Russia's opposition to OPEC's proposal to reduce oil output by 1,500,000 barrels, and the most important rise without a doubt was the more-than-10-hour meeting in April 2020 and the agreement of 23 members of the OPEC+ with the 9.7 mb/d production cuts.

OPEC+ in Existence:

The Declaration of Cooperation between OPEC countries and non-OPEC volunteers was concluded on December 10, 2016, after two years of falling oil prices in the world oil markets and was enforced in January 2017. Consultation and joint policy making among 10 oil-producing countries including Russia along with 13 OPEC members became known as OPEC+ and the members of this coalition continued to cooperate in the turbulent oil market where prices ranged from negative $40/b to a mere $20/b up to more than $100/b.

OPEC+ Lows:

6 March 2020 should be noted as the day the coalition failed to reach an agreement; the day when Russia rejected the proposal to reduce OPEC oil output by 1.5 million barrels per day; OPEC members had agreed in their 178th meeting to reduce production by 1.7 million barrels which would be valid until the end of March 2020. Following the failure of negotiations in March (2020), Saudi Arabia, the UAE and Russia announced their readiness to increase oil production from 500,000 barrels to 2.5 mb/d after the end of March. Saudi Arabia reduced the price of its crude oil exports, and Iraq and Kuwait also lowered the price of oil to follow the suit. This ignited a price war between Saudi Arabia and Russia, and in March 2020, the oil market, which was already suffering from a supply glut, saw a historic price slump. The price of crude oil fell by more than $20 in the third month of 2020 due to the unexpected Russia-Saudi Arabia tantrum. After this meeting, OPEC+ was believed to have been comatose.

OPEC+ Highs:

While the oil market and the world were disappointed with OPEC+ after the March meeting and oil prices were on a downward path, the fledgling coalition returned to the main decision-making center of the oil market in a historic return in April 2020. The 23 OPEC+ members, having seen the stubbornness of Russia and Saudi Arabia at the March meeting, and the market being flooded with oil and the COVID-19 pandemic having choked off demand by 5 mb/d, on April 9, 2020, after Russia and Saudi Arabia and even the consumer countries were convinced to adjust the conditions of the oil market in the 10th meeting, negotiated with each other via video conference. Hard, intense and exhausting negotiations that lasted for more than 10 hours and ended in failure due to Mexico's opposition to the allocation of the production reduction quota, but OPEC+ was not going to give up again like in March when the market was flooded with oil. On April 12, this was announced to the world: "The 23 member countries of OPEC and its allies have agreed to cut total production in three stages: 9.7 mb/d for two months, 7.7 mb/d for 6 months and 5.8 mb/d for one year and four months, and the deadline for this agreement will be April 30, 2022." This historic agreement entered the implementation phase on May 1, 2020, and OPEC members and its allies took steps to implement it. Oil in those negative days (April 20, 2020 for WTI) had become a worthless commodity that producers were willing to pay to get rid of

Moscow, Kazakhstan Cold Snap:

Since the beginning of 2021 and the second wave of the COVID lockdowns, OPEC+ members held their 13th videoconference meeting on the cold days of January (January 4, 2021); the meeting was extended to the second day (January 5, 2021) due to the failure of the four-hour negotiations on the first day; in the 13th meeting, there were two conflicting proposals; a group were in favor of continuing the agreement to keep output cuts at 7.2 mb/d while another group sought unwinding cuts by 500,000 b/d and bringing the cuts to 6.7 mb/d. Russia and Kazakhstan were in the second group arguing that due to the cold and increased domestic consumption, would not favor extension of the cuts. Eventually they managed to persuade others to enhance their output and it was decided that the two countries add 75,000 to their output in February and March 2021, while other OPEC+ members would keep their output untouched in the two months. With this decision, OPEC+ cuts for February reached 7.125 mb/d and 7.05 mb/d in March. The 13th meeting had another decision, too; Saudi Arabia underwent to reduce its output in February and March by 1 mb/d voluntarily.

The Emirate Block:

OPEC+ held somewhat calm meetings after the 13th meeting until the 18th, but the meeting on August 2, 2021 became somewhat nervous. In the meeting (18th), the UAE and Kazakhstan demanded to change the baseline for their production; according to the April agreement, the basis for calculating the production baseline of Saudi Arabia and Russia was 11 mb/d, and the production baseline of 18 other countries was determined based on their October 2018 output. This was the reason for the UAE to protest. Despite intensive and long negotiations in this meeting, the Emirates did not forgo its request and this meeting remained unfinished. The opposition to the UAE's proposal took place while before the UAE expressed its concern and protest, Nigeria had expressed dissatisfaction with the same issue and was trying to increase the baseline of its production, which it achieved another way. The fear of the failure of the OPEC+ alliance once again gripped the world and oil prices rose. After the meeting, the negotiations continued informally until the 19th meeting on July 18, 2021, the words of the UAE came to the fore and OPEC+ members agreed to change the production baseline of Russia (500,000 barrels) and Saudi Arabia (500,000 barrels), UAE (332,000 barrels), Iraq (150,000 barrels) and Kuwait (150,000 barrels) as of May 2022. The increase in oil prices during the recovery period of the global economy had stimulated all OPEC+ member countries to boost their output and make the most out of this opportunity.

End of Commitments:

OPEC+ members from the 19th to the 27th meeting agreed to ramp up production by 400,000 b/d (August to December 2021 and January to May 2022), in the 28th meeting to increase production by 432,000 b/d (June 2022) and in the 29th and 30th meetings to increase 648,000 b/d (July and August 2022). On paper, the OPEC+ agreement and an increase in supply by 9.7 mb/d have reached the end of the line; but has all this amount entered the market? Observers and analysts believe that due to the inability of some countries to produce at the level of allocated quotas, this amount has never been released to the market in some months. Reuters has recently stated in a report that the OPEC+ alliance produced about 3 mb/d less than the quotas set in June due to the lack of oil supply in the global markets.

The 31st Meeting:

23 members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) held their 31st meeting on August 3. US President Joe Biden visited Riyadh prior to the meeting and called for an increase in Saudi Arabia’s oil production, and shortly after this, Russian Deputy Prime Minister Alexander Novak met with Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman about cooperation between the two countries within the framework of the agreement. OPEC+ discussed that the war in Ukraine and the embargo on oil imports by the United States and Europe had caused Western countries to seek alternative sources for Russian oil, and for this reason they were putting pressure on the Arab countries of the Middle East, especially Saudi Arabia and the United Arab Emirates. The statements of Saudi officials show that they had concerns that would prevent them from complying with America's request. The most important issue is the amount of spare capacity of Saudi Arabia and the UAE, which is expected to reach 1.2 mb/d by the end of September (2022) if the current situation continues. Reducing the level of spare capacity in a situation where oil reserves and oil products are at very low levels will remove the cushion of the oil market against new shocks, so this issue by itself can increase oil prices contrary to the imagination of western countries. For this reason, Saudi Arabia does not show a desire to increase production further, while the production and export of Russian oil, contrary to previous forecasts, has not decreased so far and has even increased. This issue can also be one of the concerns of the Saudis. However, this meeting ended with an increase of 100,000 b/d of members in September.

Iran's constructive cooperation with OPEC:

Iran's petroleum minister, Javad Owji, in this meeting, while honoring the memory of Mohammad Sanusi Barkindo, the late former OPEC secretary-general, and welcoming Haitham al-Ghais, the new OPEC secretary-general, said: “Iran, as one of the founding members of OPEC, as in the past, will continue its constructive cooperation and effective support to OPEC, the new secretary-general and the OPEC Secretariat.” He said that the election of Al-Ghais will be an important step in advancing and realizing the collective goals of OPEC and its member countries and the fair and forward-looking leadership of the OPEC Secretariat. Owji expressed hope that the successes of OPEC in recent years will continue in the future under the management of Al-Ghais.

Brazil Well Data Updated

CGG has released a new GeoWells Brazil database, providing re-interpretation and digitalization of legacy geological and engineering data from 197 wells in the Santos, Campos and Espirito Santo basins.

The new release is designed to improve understanding of the presalt blocks in Brazil’s Permanent Offer initiative, helping users to access data quickly to address subsurface challenges and reduce cycle times.

A new feature is a core image interpretation workflow, which uses machine learning to predict core and thin section descriptions over hundreds of wells, and tens of thousands of images.

Mozambique to SupplyAngoche Basin 3D Data

GeoPartners has signed an exclusive agreement with Mozambique’s Instituto Nacional de Petroleo to perform a new multiclient 3D geophysical survey over the country’s offshore Angoche Basin.

The program involves acquisition of a minimum of 12,000 sq km of data over blocks to be awarded following the closure of Mozambique’s current 6th Licensing Round.

Greece Eyes Offshore Wind Project

Parkwind and Intrakat formed an official partnership to jointly develop offshore wind opportunities in Greek waters, according to a recent news release.

Greece-based Intrakat Group, having significantly enhanced its activity in renewable energy within 2021, currently has a portfolio with total capacity of more than 1 GW. Additionally, Intrakat Group has expanded its activity to the electricity storage stations with the development of nine licenses.

Parkwind is an independent green energy company that develops, finances and operates offshore wind farms. With four wind farms under operational management in the Belgian North Sea and a fifth being installed in Germany, Parkwind will soon have more than 1 GW of capacity under its management.

FPSO Anna Nery Leaves Shipyard in China

The FPSO Anna Nery has departed from the CoscoQidong shipyard in China, which marks the beginning of its journey to Brazil.

The platform will conduct navigation tests for 15 days in Chinese waters and then perform stops in Singapore and Mauritius, where it will supply and exchange the crew, until its arrival in Brazil in October, when it is planned to hold the final stage of commissioning and acceptance tests.

The FPSO is slated to start production at the Marlim field approximately 150km off the Brazilian coast starting in 2023.

MMA Awarded Vessel Contract With OMV New Zealand

The MMA Leeuwin platform supply vessel will be deployed to provide drilling support services for OMV in the Taranaki Basin, New Zealand, according to a recent MMA Offshore news release.

Commencing in late September, the contract is for a firm period of 200 days, with additional option periods totaling 150 days.

The contract value is expected to be between A$10 million and A$11 million, which includes the vessel mobilization to and from Western Australia plus the firm operational days on site in New Zealand.

Russia-Ukraine War Impact

Oil Players Displaced

Shuaib Bahman

The Russia-Ukraine war is not just a military conflict between Moscow and Kiev. Moreover, the consequences of the war are not limited to the geography of Europe. At the same time, the war is not limited to the political and military domains, and has had significant economic consequences. One of these consequences has been affecting the global energy markets. In addition to the spike in global oil prices to $120 a barrel, which is a direct consequence of the war, changes have also occurred in the field of trading oil, which, if continues, could change the trading pattern of many countries.

Russia In Lieu of Saudi

Since the start of the Ukraine war, Russian oil export to Asian customers has grown significantly.In such a way, Russian oil exports to India increased from almost zero in January to 310,000 b/d in March, and oil sales to China increased by about 70,000 barrels to 790,000 barrels in this month. At the same time, oil sales to Europe decreased by 420,000 b/d. Based on this, it could be argued that until now most of the Russian oil has overflowed into Asian markets while there is no buyer.This has caused some of the traditional suppliers of oil to Asian countries to face a downward trend in their exports. One of the most important countries that suffered in this regard is Saudi Arabia. Saudi Arabia has cut crude oil shipments to at least five refineries in North Asia, most of them Chinese, for July, according to news reports. This decrease is directly related to the supply of cheaper Russian crude oil to Asian countries.

Of course, the reduction of Saudi oil exports volume to China does not mean that the energy of this country will remain without customers. Because the Europeans, who tend to reduce energy imports from Russia and have even put this country under embargo, now look more than before to Saudi Arabia as one of the most important suppliers of their oil. However, the Saudis do not have much desire to increase production and more or less welcome the lack of supply on world markets. Because this could cause hike in prices, which in itself is a blessing for the Saudi economy.

Moreover, the Saudi Aramco increased the official selling price of its light oil over recent weeks. Saudi Arabia increased the price of its oil for sale to Asia by $2.10 compared to June, which was much higher than expected. Saudi Arabia's move pushed global oil prices beyond $120 per barrel and raised fears of a supply shortage amid peak demand in the northern hemisphere, the lifting of COVID-19restrictions in China and continued instability over Russian oil supplies.

Future Changes

Over the past decades, Saudi Arabia has played a role as a reliable source of energy for the West, but now the world conditions are different compared to previous years. If the war between Russia and Ukraine continues or European countries move towards reducing energy imports from Russia, then they will have to think about other sources for their oil supply. However, Saudi Arabia has become reluctant to act as a gas station for America and European countries in historical situations.In fact, Riyadh intends to make the most of the opportunity created at the international level. The Saudis are well aware of the West's bottlenecks in the energyfield, and they want to increase the oil price in order to gain a significant economic benefit, and in political and human rights issues, they want to keep America and Europe's eyes closed on their internal issues. Therefore, they look at the war in Ukraine as a great opportunity and use the leverage of energy against the West.

On the other hand, Russia sees China and East Asia as a significant economic opportunity in the field of energy. The Russians know very well that the future of the world economy will be determined in East Asia. Therefore, the European market is not as important for Russians as it used to be. In exporting energy to East Asia, Moscow not only thinks about economic benefit, but also thinks that the dependence of countries such as China, Japan, South Korea and India on Russian energy could act as an effective political lever in the future. Therefore, it is unlikely that even if the war in Ukraine ends, the Russians will change the strategy of developing energy exports to East Asia.

Among consumers, countries such as China, Japan, South Korea and India are satisfied with the current equation in the markets. Because in a situation where the energy price in the world market is increasing, they can buy Russian oil at a lower price. Given that the two elements of price and transmission cost have always been decisive in energy transactions, therefore, customers are always looking to buy oil at the best price and transmit it through the safest route. Certainly, for Asian customers, Russian oil has all these features. Because Western embargo against Moscow will force Russia to sell its oil at a lower price and at the same time guarantee its arrival at the destination.

Based on this, it seems that the war in Ukraine has initiated new equations in the field of energy, the consequences of which will be seen in the future. One of the most important consequences could be the displacement of traditional sellers and buyers of oil. In the future, Russia will supply more oil to the Asian markets, and Saudi Arabia will turn its attention to the West. Of course, provided that the United States and European countries accept MBS’ demands regarding political issues and human rights violations in Saudi Arabia, a scenario which is not far from expected.

Iran and Pakistan Energy Supply

Shuaib Bahman

Energy security has always been anespecially sensitive issue in the economic policies of various governments of Pakistan. Although Pakistan’s economy mainly depends on agriculture which makes up about 33% of the country’s gross national product (GNP), over recent years, the growth of energy consumption in the domestic, industrial and transportation sectors has made Islamabadmore dependent on gas imports to the extent that gas has become a key element of Pakistan’s energy mix. However, despite the advantages that gas has over other fossil fuels, it also has problems, one of which is the high cost and security sensitivities of its transmission. This problem is especially noticeable in a country like Pakistan because due to insecurity mainly in Pakistan's Baluchistan, the central government does not have much control over its security.

In fact, due to the high level of insecurity and violence in Pakistan, there is a high possibility of acts of sabotage on pipelines for political gains. Therefore, energy supply and maintaining its security is of special importance for Pakistan.

Energy Supply Challenge

Pakistan’s energy consumption has faced a significant decline over the past years, and estimates show that this growth will continue in the next decade. Global statistics show that Pakistan’s LNG consumption will increase from about 10 million tonnes in 2021 to about 30 million tonnes in 2031, which represents a 3-fold growth. In such a situation, Pakistan has to find a source and a safe way to transfer energy to its land, particularly because the country also uses LNG to generate electricity. Therefore, over recent years, Pakistan has planned to supply its energy needs through three sources:

Importing gas from Iran, which was one of the most economical and best routes for Pakistan, has not reached a definite end due to several reasons, including foreign pressures.
The TAPI pipeline, which has not had much success due to instability and insecurity in Afghanistan.
Gas supply by Persian Gulf littoral states, such as Qatar, which are mainly transported by ship due to the lack of geographical proximity and the high cost of pipeline construction.

Although currently the most important source of gas supply to Pakistan are the very large crude carriers taking between 8 and 10 cargoes into this country every month, this amount is enough for domestic and industrial consumption. Islamabad needs 14 shipments per month to generate enough electricity and meet its industrial needs. Due to insufficient imports, Pakistan's industries and transport sector suffer heavy losses every year. In the meantime, if for any reason the gas supply is stopped, then the challenges will increase. Moreover, in 2021, gas supply was stopped four times in January, June, September and then in December.

Iran Role

After Russia, Iran is the world’ssecond largest holder of gas reserves. For this reason, many gas buyers are competing to access Iran's resources, and of course Iran is also trying to implement gas production development projects despite challenges. In the meantime, Iran and Pakistan, as two neighboring countries, have great capacities to develop economic relations, especially in the field of energy. Cooperation between the two countries in the field of energy is a very new issue. Because the first negotiations for the construction of a gas pipeline between the two countries began in 1995, and following the initial agreements, Tehran and Islamabad signed a contract in this regard.In this contract, it was predicted that a pipeline would be built to transport gas from the South Pars gas field in Iran to Karachi in Pakistan. Later, India also wanted to join the gas pipeline project; and made a proposal in this regard, and in February 1999, Iran and India signed an agreement. However, India withdrew from the project in 2009 citing pricing and security issues. After that, Pakistan was discouraged from importing Iranian gas under US pressure. According to the contract, which is now in an uncertain state, Iran had to export 14 mcm/d of gas to Pakistan for 25 years. This amount of export was supposed to be increased stepwise and in two phases, first to 21 and then to 30 mcm/d. Pakistan was also expected to build its own section of the pipeline in 22 months.

Although the fate of the peace pipeline is unclear, it seems that Iran-Pakistan cooperation in the field of energy could be resumed by reviving the gas pipeline between the two countries. According to earlier estimates, the gas pipeline could supply 25 percent of Pakistan's energy needs. The project, if launched, will be able to supply 150 million cubic metersper day of gas consumed by Pakistan, and produce about 5,000 megawatts of electricity. In addition, the pipeline can become a part of the economic corridor between Pakistan and China and deliver Iranian gas to China.

Pakistan's growing need for energy and Iran’s rich resources create a suitable opportunity for both sides to strengthen their political and security relations in addition to expanding cooperation in the economic field. However, in order to take steps in this regard, the Pakistani side must first undermine pressure from third parties such as the United States, Saudi Arabia, and India. Because the pressure applied by these countries in the past years has been one of the main obstacles in the economic relations between Iran and Pakistan.

Defining Moments for Oil and Gas

Fereydoun Barkeshli,

Energy Market Analyst

Energy prices went up sharply after February 24 when first Russian troops entered Ukraine. By late March 2022, it hit above $ 120.40 per barrel for Brent briefly but retreated to around $110 per barrel, though, the average price of crude oil was $105 per barrel for the first half of 2022. The slow and cautious reaction of oil market towards such major geographical escalation that would potentially cut over 6.7 mb/d of crude and products from Russia is an interesting phenomenon worth analyzing. Let’s be reminded that the international crude oil prices touched $147 per barrel back in 2008 after the United States descended into recession.

It is also noteworthythat the international oil market has been under excessive pressures and constraints since late 2019 when first indications of COVID-19 pandemic was announced in China. Demand destruction followed and the world lost more than 20 percent of its consumption in less than three months. Such a sudden and massive decline in consumption of energy, notably oil and gas were so phenomenal that market labeled is as demand destruction. However, market has not yet seen a very drastic price escalation in line with the extents of geopolitical and supply disruptions. In fact oil prices began to move upwards after the US and European countries decided to impose sanctions against Russia.

Birth of OPEC+

OPEC+ was born in 2016 but its consolidation as a powerful oil market force was the product of COVID-19 and demand destruction. OPEC and non-OPEC kept a love and hate relationship for over three decades. Sometimes and more frequently they fought over market share. Several delegations shuttled between capitals and OPEC Secretariat in Vienna to negotiate a compromise and hardly arrived at a tangible deal.

By November 2019, world oil demand crossed 100 mb/d for the first time in history and tradable supply matched the demand. Peace prevailed and all seemed satisfied. Once the pandemic began to bite, OPEC and non-OPEC were lost in a market with more than 14.4 mb/d of capacity for which there was simply no demand in the market. Oil producers gathered together and negotiated a collective curb on production that was no more OPEC and non-OPEC but this time OPEC+.

By then OPEC+ meant mostly Saudi Arabia and Russia. These were the two countries that led the newly born group. However, most members of the newly formed coalition weren’t as happy. Saudis who had benefited most during high demand, distributed the cuts in supply to the rest of the group. Nevertheless, by September 2020, market was so desperate that they bowed to the pressure and agreed to the unofficial formation of OPEC+.

As soon as the global oil market concluded that OPEC+ is serious and has come to stay to moderate the market, prices moved up slowly but steadily. Brent moved upward from $40 a barrel and stabilized at $70-80 per barrel range by mid-2021. Most analysts subscribed to the notion that the price was right on both sides of the market and for all players. Most members of OPEC and non-OPEC adjusted their annual oil income budget at around $60 per barrel to be on the safe side. Nevertheless, market was bullish even prior to the tension in Ukraine. Price volatility was the name of the game. Markets did not miss any opportunity to jump upwards. In fact, even prior to the Russia-Ukraine crisis, prices had the tendency to surpass $100 per barrel.
With this short background, I would like to indicate that OPEC+ did a good job in maintaining price stability. However, let’s not forget that prior to thepandemic and since 2015 OPEC and the international oil market were both under severe pressure from Shale oil (and Shale gas). OPEC underwent drastic pressure and production adjustments to maintain space for shale oil and US shale producers forgot to send a thank you note to OPEC for pain it sustained to let shale in.

OPEC and OPEC+

Emergence of OPEC+ in 2016 that includes 87 per cent of the total global traded crude oil production was a milestone. 23 oil producing countries agreed to putdiscrepancies aside and pull their strength to stabilize the world oil market and prices. At the time of OPEC+ formation, oil producers were in bad shape. They were in dire need of cash to balance their budget deficit. Cooperation and compliance was the key to stabilize the oil market and boost the economy of oil producing countries. Back in 1973 when OPEC entered into its second phase of documented history, the organization of still eight members produced half of the global crude oil supply. The organization went even beyond that and by the middle of 1970’s produced around 63 percent of the tradable crude oil globally.

This came at a cost that was hardly noticed and appreciated. This meant spare capacity. That capacity was built at a cost and maintaining it cost even more. OPEC paid a hefty price to build and maintain the capacity that meant to stabilize the international oil market and often be criticized and even punished for that. While National Oil Companies pumped less oil to support prices, International Oil Companies produced at maximum capacity and benefited from higher oil prices.

OPEC+ and Changing Geopolitical Landscape

According to June 2022 OPEC monthly statistics, the thirteen members of OPEC produced 28.83 mb/d in May, combined with the so called non-OPEC, total production was 42.09. The two major producers Saudi Arabia and Russia accounted for the bulk of group’s crude production.
The official coalition of OPEC+ will be ended by September 2022. The twenty-three-membercoalition will end unless otherwise renewed or extended. It’s worth noting that the group was formed to battle the demand destruction even before pandemic. Market was under pressure prior to the pandemic. Members tried hard for higher quota allocation. Mexico decided to leave the coalition after announcing that wasn’t satisfied with allocated quota. The outbreak of COVID-19 as a total disaster for the demand side further consolidated the alliance of OPEC+ amid rivalries for larger market share.

Having said that it seems perplexed if the coalition will survive after the official termination in September. Most producing members aren’t currently producing their full quota. Demand resurgence after the pandemic and wading excess supply capacity began to bite even prior to Russia-Ukraine conflict and the imposition of sanctions on Russian oil.
A sensitive oil geo strategy is at work. Saudi Arabia is a long term ally of the United States. President Biden is said to be visiting Saudi Arabia in July. Biden has a long list of agenda to discuss with the Saudis. I believe that Saudi-Russia relationship is on top of the list when it comes to oil and energy. Biden, like most of other Democrats in the White House, is interested in the Middle East.

Although Trump and Trumpified policies are still in place in Washington, Biden is now visiting the Middle East and Saudi Arabia

with a sensitive agenda. America wants to distance Saudi Arabia from Moscow. Biden wants an end to Saudi-Russian cooperation within the context of OPEC+. This coalition is not something that the US feels comfortable about. Biden wants total isolation of Russia specifically when it comes to energy.
On the other hand, Saudi Arabia’s long-policy is in staying in collision with Russia. OPEC was all powerful back in 1970’s to 2000’s. Global oil demand was less than 80 mb/d and OPEC production was around 35 mb/d. OPEC members also consumed much less of their own oil domestically. OPEC is now producing around 28 barrels per day and still consumes more oil at home. Without non-OPEC and specifically Russia, OPEC could have already waned and lost relevance to the world oil market.

Saudis realize that the OPEC+ members are important for the organization to sustain OPEC and the country’s relevance to the world energy market and economy. Saudis’ strategyis considered a smart energy diplomacy.

Russia is a member of UN Security Council. Veto right is the most powerful tool of the Russian foreign policy. For Saudi Arabia and OPEC is strategically important to have Russia in its side. Saudis have many regional and international problems. Issues related to human rights violations, regional conflicts and climate change policies of the Western countries that threatens the future of oil consumption. A Russia alienated with OPEC and Saudi Arabia is a blessing and in the interests of all members of the alliance. OPEC and oil producing countries havebeen always under pressure by the west. From taking the organization to court for violating the US cartel laws to a cap on Russian oil supply to the international markets. Russia and Saudi Arabia or better said OPEC and Non-OPEC need each other like no other time before in the history of the international oil market.

Under these circumstances, President Biden plans to visit Saudi Arabia to demand an end to the alliance. The timing is chosen close to the formal termination of the OPEC+ agreement. OPEC+ is behind Russia in so far as sanctions is concerned. No oil producing country is immune from US sanctions. Most OPEC members have experienced sanctions one way to the other. For oil producers, sanctions imposed by the Western countries is a warfare tool. Sanctions have long term consequences for the sanctioned country and the global oil market.

Sanctions and Its Future Bearing

America is now the biggest LNG supplier to Europe. The country’s LNG supply to Europe was 18 percent back in 2020. It’s astonishing to note that Europe’s LNG terminals to unload such quality of LNG is limited and US LNG cargoes have queued in Europe’s ports for over two months. This is getting more complicated as the global world oil map is under heavy constraints due to continuous sanction regimes. Not all the oil and gas that is being traded around the world is readily usable in any destinations. Oil and gas from various origins have different DNA. Europe has been using Russian natural gas for some 70 years. Europe cannot use the same oil and gas with no long-term plan and policy. Europe is now taken by a surprise and there’s no remedy in sight.

Winter and cold weather is about four months away. Nevertheless, prior to the arrival of winter in Europe a bigger problem is in store. Hurricane Season will start in the US by September. Normally there are a dozen of hurricanes, five of which is usually devastating. In the Gulf of Mexico where most of the crude, products and LNG is loaded,hurricanes often cause long delays that could be okay for normal circumstances but not for difficult times such as today.

Europe has limited storage capacity and facilities. Germany as the most industrial country in Europe can sustain some 3 to 4 weeks of storage of gas. Many decades of easy and cheap natural gas from Russia, led unburdened and easy energy supply. Gas was always there for asking. Current disruptions due to the events in Russia Ukraine fronts and consequent US sanctions has left Europeans and most notably Germany with the least energy security defense shield.

On the supply side, options are limited. Qatar, Algeria or smaller producers here and there can offer little relief. Long term supplies of gas from Iran is the most outstanding options. Iranian energy diplomacy is at work quite actually but sanctions have closed the avenues. As such supply alternatives is limited.

One important factor that has come to play is Russia’s demand to ask for Ruble for its supply of oil and gas to a number of countries. This is a determining factor in the international energy market. Saudi Arabia and the United States of America agreed to price oil in US dollars. In fact, oil has almost been priced in dollars after the Second World War. Oil alone constituted some 18 percent of the world transactions for years. The dollar owed its eminence to oil money.

OPECmembers including Iran tried to decouple oil from dollar in different times unsuccessful. However, currently Russia has officially asked certain countries to settle their payments for energy in Ruble. Russia’s foreign reserves are sanctioned and for Russia to earn its income from energy sales, the option is asking for payment in rubles. This is a game-changer. If Russia can price its energy in its own currency, other countries may follow. In fact,a couple of countries subscribe to the notion that to tie up oil and dollar would render the United States a remarkably high position to exert power on other countries. This has been spelled out by China and replacement of the yuan in different occasions. The only major obstacle; however,remains is the substitute for the dollar. How to avoid a major disruptionthat might be caused due to years and decades of dollar addiction.

As mentioned earlier, asking for Ruble for oil could prove a game-changer. Replacement needs to be worked out cautiously. A basket of currencies with weighted average could be one option.

The Way Ahead

As mentioned earlier international oil market was under tremendous pressure even before Russian-Ukraine conflict and the US sanctions that followed. I am sure that many of us still remember WTI at $37 per barrel. I mean minus $37 per barrel. At the time when WTI was traded at negative price, petrol prices at gas stations were high and in some states in the US people had to wait in queue to fill their car tanks.

By this I intend to bring to your attention that crude oil price may not necessarily mean corresponding prices for refined products. The international oil market is faced with severe underinvestment in downstream sectors, too. In the United States, no refinery has been built since 1986. In the European Union, refineries with 7.5 mb/d of refining capacity have shut down permanently. The reason was environmental policies and climate change advocacy pursued by governments.

Food prices are high. War in Ukraine is a major factor to be blamed, but even prior to the conflict,fertilizers’ prices had begun to soar. There is shortage of fertilizers that is produced from oil in refineries.

Most EU countries and notably Germany were influenced by the Green Parties for most of the last decade. Investment in oil and gas industries were considered and labeled as unethical and out of fashion. Renewables and new sources of energy was the order of the day. European leaders wanted popular vote and public support to hold to power and stay in office.

Underinvestment and marginalizing oil and gas led to stagnant upstream sector and lower refining margins. Oil and gas was considered something of the past and for the less developed countries. As such even while oil prices are going up steadily and oil companies earned a lot, there’s still limited incentive to invest in the oil and gas industries. Most oil and gas companies both NOCs and IOCs prefer to divest their additional revenues outside oil and gas.

As I have mentioned earlier, most of the oil and gas producing nations are Asian. Other than Asian countries, BRICS has now come to play a forceful role in the international economy and monetary systems. Since Europe opted to distance itself from oil and gas industries, Asia and BRICS will emerge as the 21st century economic powerhouse. Energy Diplomacy is going to be the order of the day for the oil and gas suppliers.

Coach Hopes for Better Days

As the new head coach, Reza Perkas leads SanatNaft Abadan soccer team in the 22nd Premier League of Iran. Perkas, who is originally from Abadan, has taken coaching courses and even hascoached in Germany. He has previously worked as a coach in team, and is no stranger to what is going on in Abadan and soccer in the southwestern city.

The following is the full text of “Iran Petroleum” interview Reza perkas on his reappearance in Abadan and SanatNaft soccer team and hisprospective plans for the success of the city's soccer team:

What brought you back to Abadan to coach the city’s soccer team?

First of all, I would like to say that it is an honor to work as an Abadan citizen in my hometown and for SanatNaft soccer team. Like several other alternatives, I received the offer of a head coach from the club and then presented my own plan. Finally, the club made the final talks with me and after an agreement, I am now serving the people of Abadan.

How long isthe term of your contract?

My contract is for two years. Abadan people like to consider the future when signing a contract with players. Now this is the main strategy of the club. They have signed a two-year contract with me, too, and this can promise stability in the technical team.

What are your plans for the team?

In the first place, it ismy plan to focuson the young and promising players of Khuzestan, especially the youth of Abadan. Once the road is paved forgood young people to enter soccer, we will be able to use them in the following years and have a good investment for the club for at least a few years. If you have such young people, you may say that you will continue your work in the following years with the same players and technical team. Consistency in coaching is just as effective as creating stability among players. In this sense, we must choose players who willmakeAbadan’s soccer progress. This is a city whereinsoccer is a part of people's lives. We should use this sentence in the best sense. Soccer should shine to glow people's lives.

Are you aware of the problems of the team? Don’t you think your plans may hit hurdles because of the problems?

One of the major problems is the financial problem; of course, the financial problems of the team in recent years have been resolved for this season and the club management is working hard in this field, so that every year they have used the experience of previous years and enter into negotiations to attract new financial resources. On the other hand, the MPs have promised to cooperate and the management of the club is also working seriously. I came with this approach; of course, whereasSanatNaft Club delegatesits budget to its subordinate departments, so there is a cumbersome red tape to receive the budget. However, we are probably the only club that pays the player. Payments may be time-intensive but are definite. You might say that some clubs pay first; but the subsequent payments of the player or the coach take a long time. I hope for good days.

You have been trained and coached in Germany. To what extent does this experience help you inSanatNaft?

I hope that the experience and knowledge that I gained from working in Germany or other countries in the position of head coach and technical management will be injected into soccerof Abadan, Khuzestan and Iran as a whole. I am here to help Abadan soccer first,and then soccer at national level.

Is the club in harmony with you to achieve your goals?

So far, the club officials have shown that they are very compatible with me. I would like to thank the board of directors and technical director of the club for their trust. Soccerfans and those who love the oil industry all over the world and even from the US have contacted me to welcome me to the club. It was decided that with full coordination and empathy, we can achieve the best for the oil industry soccer team this season. We should try to bring back happiness to Abadan again, as they suffered a lot following the collapse of the Metropol building. I would like Abadan, which is known in Iranian soccer, to shine again and display good soccer; because there is a lot of capacity and potential in the city.

Have you selectedcolleagues and/or members of the technical team?

Yes. Somewhat. AbdolrezaBarzegariwill cooperate with us. MasoudAalipour was with us for one or two days, but we found out that he has a contract with Foulad soccer club. For this reason, we will complete the staff in the coming days to start working more seriously and professionally.

So will a new coach join your staff?

Yes, there will be a new coach; but I needto check. Definitely, two or three more coaches will be added. One of the Brazilian coaches who worked with me in the UAE may join us. We have done the initial talks.

You were active in transfers and recruited some players, and at the same time some players left the team.

Yes, we got some good players and as you mentioned, some players left. The team should be arranged with good players. Every coach has a work philosophy and tries to work with a system and hire players based on that or according to the players he has, and recognizes the best system for the team. Definitely, the players we hire must have experience and of course they must be of high quality. We must be tactical and develop quickly in tactical matters. Native people are prioritized; native players who help the team. If we want to attract young players, priority is given to the Abadanis. Therefore, we prioritize recruiting Khuzestan players. We have to choose a combination that will work for us both this year and next year.

How do you evaluate the position of SanatNaft in the league?

It is too early to talk about the position of the team in the league; but we definitely play in a way that makes our fans happy. We want to be in the top half of the table. We must first enter the league and talk about the team’s position after a few weeks when we know our rivals better. I can say that we have a good potential to shine in the league. Rest assured that I want to bring the team to its rightful rank.

What made oil linchpin of world energy security?

From black rock to black liquid

It would be fair to say that the owners of the world's big coal mines and many governments whose countries were rich in this source of energy never imagined that when the history of mankind entered the 20th century, coal would be replaced bya substance called "oil". Let’s have a brief overview of the replacement of coal with oil in the world's energy arena.

You must have seen the faces of coal mine workers in series, movies and social networks;so black that only the whites of the eyes can be seen. There are always dark,hardly lit underground corridors and the produced items are carried through various routes shrouded in gray smoke and dust. Such images showed a world that was indebted to coal for energy. With the occurrence of the industrial revolution that began in the second half of the 18th century in England, a very important issue occupied everyone's mind. Whereshould the driving force and engine fuel of this industrial revolution have come from? All eyes were focused on coal and continuous and more complex efforts led to the development of coal mining in the world and its use as a fossil fuel to provide a large part of the energy needed for the industrial revolution. The trains, ships, factories and workshops of this great revolution depended on coal. This path went on until with the strange growth of the industry and the emergence of more unique technologies, the demand exceeded the capacity of coal and went towards another fossil fuel called "oil". At the beginning of the 20th century and around 1910, oil gradually gained strength against coal and proved itself as a reliable alternative source of energy.

Emergence of Oil in Coal Age

Coal was the protagonist of advancing the industrial revolution. The industrial sector in the world of the second half of the 18th century and the whole of the 19th century was completely dependent on coal. The more it was produced, the more it was consumed and newer industries made way to people’s lives: agriculture, textile, transportation, etc.; there was no field of human life without being affected by the developments of the industrial revolution. The industrial revolution was not limited to England and quickly spread to Europe and later America. In the book "Political-Economic Issues of Iran's Oil", IrajZoghi said: "In the era of the coal industry, wood was replaced, but this replacement took place mostly in industry, and in the field of domestic use, wood still played its role as thermal energy source. More energy density in coal causes more thermal emittance; this is to say that one kilogram of coal creates 6000 kcal of heat. The use of coal, which started in the 17th century in Europe, continued to increase in the 18th and 19th centuries. Great industrial revolutions in the 18th and 19th centuries relied on coal; even the 19th century was called the "coal" century.

With the development of the industry in the second half of the 19th century, in 1859, the first oil drilling and discovery took place in Titusville, Pennsylvania, the United States. Little by little, the Rockefellers who founded the first oil major and the seven oil sisters were formed: the world of the 20th century became an oil world. In the book "Political-Economic Issues of Iran's Oil", IrajZoghi has written about the trend of oil's role in industrial development: "In 1910, coal accounted for 90% and oil for 6% of the energy consumption pattern, and this trend gradually changed in a way that by 1990, it reached 15% for coal, 51% for oil, 20% for gas.” All the data and updates as well as historical and economic analyzes and reports show that as we approached the second half of the 20th century, "oil" played a much greater role in various industries.

Oil, the World's Leading Energy Source

When the rings of seven oil sisters, namely, “Anglo-Persian Oil Company", "Gulf Oil", "Royal Dutch Shell", "Standard Oil of California", "Standard Oil of New Jersey", "Standard Oil of New York" and "Texaco", completed, oil had become the king of global energy arena. Many political, economic, social, and even cultural and artistic theories were attached to the oil industry, talking about this black substance that had shaken the 20th century. Oil had another important feature. If coal could not supply smaller and domestic needs, oil had this important feature. Oil could enter the houses much more quietly and in a much cleaner and easier fashion to be used for heating, lighting and cooking, and in a word, people's lives. Wood was no longer burned, but oil and later gas became the mainstay of people's lives in the 20th century. According toIrajZoghi: "In the 20th century, in addition to providing thermal energy and domestic use, oil had various applications in the agricultural and service sectors. In the agricultural sector, by helping to produce chemical products such as chemical fertilizers and pesticides, it provided a great transformation and revolution in agricultural production, which was called the "Green Revolution". Perhaps nothing showed the importance of oil to the whole world more than World War I and especially World War II. Japan wanted Far East oil for its expansionist plans. Similarly, Mussolini and Churchill wanted to keep his country’s grip on Middle East oil riches. The historical event of the Nazi army getting stuck in Russia, which changed the historical course of the 20th century, was the result of oil not reaching the giant German military war machines. Oil did not reach the Germans until the communist and liberal worlds were unitedand bring down Nazism and fascism in Germany and Italy and lead the world in another direction. All plans and equations of Germany's proximity to the Middle East cannot be analyzed without oil as a variable in this region. However, the first and second world wars showed that if you want a strong military navy, you must have oil, and if you want to shell the target, you must bring oil to the military structure.

With the end of World War II and contrary to rumors that oil wells were drying up in the oil-rich countries, the world was heavily dependent on oil for another 55 years and is still dependent on oil 22 years into the 21st century. In his book, Mr. Zoghi says: "Since oil is considered as one of the important sources of global energy needs, the economy of crude oil has become international. In today's world, oil is not only an economic and industrial determining factor, but also a politicalone. In fact, oil is considered an essential factor in achieving economic, industrial, and political goals in order to provide national security. The goal of all human societies and especially the goal of all governments is to achieve a level of economic growth that can provide the welfare of the society. Achieving this goal or the desired economic growth rate requires enjoying the two factors of capital and energy. From here, the relationship between economic growth and energy becomes clear. In other words, prosperity requires economic growth, and economic growth requires the availability of energy.”

Source: "Political-Economic Issues of Iran's Oil" written by IrajZoghi