Government Two-Year Track Record

Ali Forouzandeh

Director General of Public Relations

Two years into office, the 13th administration has registered a brilliant record. Despite unjust sanctions slapped against Iran’s petroleum industry, crude oil and natural gas production and export levels have grown, investment has shot up, and petrochemical projects are coming online to boost production capacity and exports.

Oil production is now hovering around 3.19 mb/d with a production capacity of 3.85 mb/d. Natural gas production has it 1 bcm/d.

In harmony with crude oil production and export, Petroleum Ministry revenue has grown significantly as crude oil and condensate exports have hit records since 2018.

Thanks to a different approach adopted by the 13th administration, Iran’s economic growth stood at 4.8% (oil included) and 4.5% (oil excluded) last calendar year, indicating enhanced oil production and exports in the year to March 2023.

Iran’s petrochemical production capacity has reached 92 million tonnes. Twelve projects are coming online in the current calendar yearto 19 March 2023. Iran exported about 28 million tonnes of petrochemicals last calendar year. Along with 12 million tonnes of domestic sales, the petrochemical sector earned the country $27 billion in revenue.

Moreover, 34 incomplete projects, worth $12 billion, were completed last calendar year. In the current calendar year, 67 upstream and downstream projects, valued at $15 billion, are coming on-stream. So far, 25 of them, worth $7.5 billion, have become operational.

Despite all sanctions and restrictions, the Ministry of Petroleum has accomplished its plans for production, export, development, and completion of projects. It has even gone further to invest in projects overseas.

Last but not least, Iran’s petroleum industry enjoys great potential for investment in the oil, gas, refining, and petrochemical sectors. Although Iranian officials have said time and again they would not be waiting for foreigners, the oil sector remains open to both domestic and foreign investors with incentives envisaged for foreign investors.

Iran Oil Output Hits 3.5 mb/d

On the eve of the second anniversary of the 13th administration, sanctions imposed on Iran have not been eased. However, Iran’s oil production has kept rising in the process. Furthermore, gas production and export capacity as well as petroleum products export has experienced growth.

According to Mohsen Khojasteh-Mehr, CEO of the National Iranian Oil Company (NIOC), Iran’s oil output capacity would soon reach 3.5 mb/d. Majid Chegeni, CEO of National Iranian Gas Company (NIGC), has said Iran’s gas production capacity has reached 1 bcm/d, adding that gas exports to Turkey and Iraq had grown 22% and 16%, respectively. Jalil Salari, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), has said that 1.6 million tonnes of Iranian equipment had been exported to overseas refineries.

Oil Exports Double

Khojasteh-Mehr has given a positive assessment of the Ministry of Petroleum in the 13th administration, saying oil exports had doubled.

Referring to the sales of 87 million barrels of condensate, he said: “We managed to sell 87 million barrels of condensate, while it was not in our strategic tanks and was kept in rented vessels, imposing $450 million in annual costs on us for its preservation. Therefore, we decided to sell condensate in order to gain revenue.” He said no condensate was parked on the water.

Khojasteh-Mehr said Iran’s oil production stood at 2.2 mb/d when the 13th administration took office, adding that the figure would grow to 3.5 mb/d soon.

NIOC has also implemented $11 billion worth of IPC deals, he said, adding that another $3.1 billion would soon be added to that figure.

He said $8 billion agreements would be signed for developing two oil fields in the second half of the current calendar year, adding: “We’re holding numerous rounds of talks for development of oil and gas fields, which pay off gradually. They are valued at $60 billion.”

Gas Diplomacy

Chegeni said Iran’s gas consumption reached 230 bcm last calendar year, adding that 98.6% of the urban and 86.3% of the rural population in Iran were under the coverage of the natural gas supply network.

He also said that gas swap from Turkmenistan had reached 8 mcm/d, adding that talks were underway for renewing gas contracts with Iraq and Turkey.

Referring to talks held with Turkmenistan, he said: “Our talks for gas imports from this country are underway for short-term and long-term periods. We hope that the short-term part would reach a conclusion soon, but we predict the long-term part to take longer.”

Chegeni said the gas swap from Turkmenistan to be delivered to Azerbaijan started from 4.5 mcm/d, which has now reached 8 mcm/d. He expressed hope for importing 10 mcm/d of gas from Turkmenistan.

He touched on Russia’s proposal to Iran for establishing a regional energy hub, saying: “As the proposal had come from Russia, we dispatched delegates there to test the waters for an energy hub. We hope to be able to push ahead with a gas hub in parallel with an energy hub.”

He said that some European countries had shown inclination for Iranian gas as demand is on the rise globally, saying: “We’ve held talks with Oman, Russia, and Pakistan about gas trading.”

Overseas Refineries

Salari said that Iranian catalysts used in gasoline production had been sent to overseas refineries. “So far, more than 1.6 million tonnes of Iranian commodities and 21 tonnes of Iranian catalyst have been exported to overseas refineries for gasoline production,” he said.

He said that overseas refineries would help Iran find market for its crude oil, adding: “In market building, we are not only looking at European markets; rather we have various scenarios under review.”

Salari said overseas refineries would enhance Iran’s crude oil exports and help sell refined Iranian oil at target markets.

“Talks have been held for cooperation with overseas refineries in Asian nations. Expert teams are active and proposals are being reviewed,” he said.

Salari said the first domestically-made compressor would be soon unveiled for use at overseas refineries, adding: “Specialized technical teams are assessing the conditions in target countries so that we can work in international markets.”

Maritime LPG Exports

Salari said that liquefied petroleum gas (LPG) exports had increased, adding that LPG exports had quitted in the past due to special conditions.

“At Bandar Abbas, 400-500 tb/d LPG export capacity was revived. In Abadan, the first LPG carrying vessel docked while offshore gas export installations were renovated there. Before that, onshore delivery was done from Abadan to Afghanistan and Pakistan,” he said.

Upgrading the quality of refined products is among important issues at 10 refineries. Salari said one case in point was fuel oil, adding that pilot projects were envisaged as agreements had been signed with knowledge-based companies.

In case of good yield from these projects, commercialization would take place and Iran would have technical knowhow to upgrade fuel oil and light crude quality.

All NISOC Wells Ready for Production

Iran’s oil production levelstood at roughly 2.2 mb/d in 2021, before the 13th administration took office. It recently rose to 3.1 mb/d. National Iranian South Oil Company (NISOC) is the main oil supplier in Iran, accounting for 75% of the country’s oil production. Ali Reza Daneshi, CEO of NISOC, puts the company’s oil production at 2.94 mb/d, which is planned to reach 2.97 mb/d by the end of the current calendar year in March 2024. Owing to measures taken over the past two years, NISOC is now able to bring its production to 2.8 m/d in 45 days.

Oil Output up 1 mb/d

Tough sanctions against Iran’s petroleum industry and subsequently the decline in supply over recent years had forced NISOC to cut its production. However, although sanctions were still in effectfrom the very beginning, the 13th administration was determined to maximize oil production and sales. Two years on, Iran’s oil production had jumped as data show.

NISOC runs 45 hydrocarbon fields and 65 hydrocarbon reservoirs sprawling on 70,000 square kilometers extending from Bushehr to Khuzestan provinces. It supplies 75% of crude oil and 16% of gas output in the country. Ahvaz, Gachsaran, Maroun, Aghajari, Karanj, Parsi and Bibi Hakimieh are among major fields administered by NISOC.

Daneshi said arrangements had been made for NIOC’s oil output to grow, including overhaul of processing equipment, gas compressor stations, gas injection facilities, gas and LPG plants, slug catchers and manifolds. For the first time in the history of NISOC, 110 turbines and rotary machinery were domestically repaired through outsourcing.

That help increase NISOC’s oil output back to pre-sanctions levels. Now all NIOC wells are ready for production.

“Capacity building is under way to reach 3 mb/d. However, what we can easily achieve now is 2.8 mb/d output, which is possible in 45 days,” said Daneshi.

Not Easy Job

Restoring oil production capacity is not as easy as thought. Oil production could not increase as soon as one wishes it. Following tough sanctions imposed on Iran, National Iranian Oil Company (NIOC) directors decided to cut output. But when in parallel with this policy, no arrangement is thought for bringing oil output back to pre-sanctions levels, oil wells would be harmed, much less production companies would not be able to reach production targets due to the lack of capacity-building.

Daneshi said: “One of the battlefields against sanctions is Iran’s petroleum industry. Had we not redoubled our efforts during this time we would not have witnessed oil output hike as it has happened now.”

“I would also like to note that Iran’s petroleum industry is interlinked with all economic arteries of Iran and naturally we would never stop working,” he said.

Daneshi said plans had been envisaged for workover wells in order to preserve oil production, adding: “We were legally barred from drilling development wells, but we could work over our wells. However, due to sanctions, foreign companies denied us required equipment. Workover was not easy, but we exhausted our contracting capacity and NIOC’s potential.”

3.27 mb/d Eyed

According to a five-year plan submitted to the Ministry of Petroleum, NISOC intends to bring its production from the current 2.943 mb/d to 3.279 mb/d by 2027.

“Reaching that level would require constant access to rigs and commodities, renovation of installations and pipelines and streamlining bureaucracy,” said Daneshi.

Minister of Petroleum Javad Owji has welcomed foreign investment in the upstream and downstream oil sector, saying: “We plan to attract $250 billion in investment into the petroleum industry over eight years.” He said that the 13th administration had struck $40 billion worth of agreements with local and foreign companies over the past 20 months.

When asked if foreign companies would be involved in NISOC’s output hike plans, Daneshi said: “Our current production capacity is a level which is achievable independently, but we will definitely welcome foreign engagement and investment where needed. We have already held talks with some foreign companies.”

He said that NISOC was in talks with Russian and Chinese companies to develop two oil reservoirs, adding that good talks were under way with other foreign investors, too.

Regarding the subject of talks with foreign companies, he said: “As Petroleum Ministry officials have said we need investment as we have extremely high potential in the petroleum industry. We believe that we need to have ties with foreign companies. Knowledge is always fluid. We are looking for bilateral relations. We are still lagging behind in exporting technical services. We should be more serious with regard to developing oil reservoirs, installations, training exports and selling petroleum commodities.”

Gas Gathering

A significant initiative by the Ministry of Petroleum over the past two years has been the conclusion of associated petroleum gas gathering. NISOC has long had extensive plans to gather flare gas. Today, nearly 80% of flare gas is being gathered. Daneshi said: “Under the aegis of collaboration between NISOC and Persian Gulf Petrochemical Industries Company (PGPIC), more than 600 mcf/d of gas is gathered. We received the project while it had 10% physical progress, but we brought it to 45% by last March.”

Part of this project came online under the 13th administration, including NGL 1000 precompression, NGL 900 precompression, and Issar 400KV power supply station. Furthermore, a significant number of projects associated with the Persian Gulf Bidboland facility would come online by the end of the current calendar year ending on 20 March 2024.

Another gas gathering project pertains to the Maroun petrochemical plant, which is currently under way. Apart from that, 61 mcf of gas was auctioned off in northern Khuzestan, which was the first of kind in 43 years.

Iran holdsover 33 tcm of natural gas, as well as 154 billion barrels of recoverable crude oil reserves, which puts it in first place in terms of combinedoil and gas reserves in the world.

Iran recently managed to reach 3.8 mb/d of crude oil and gas condensate output and more than 1 bcm/d of rich gas, using 10 oil and 21 gas refineries. Given the country’s big oil and gas production capacity and global demand for energy security, the Ministry of Petroleum has formulated plans for output hike. Given the high rate of return on investment in the petroleum industry, Iran has sweetened the terms& conditions of contracts with a view to attracting foreign investment.

MOGPCOwns Sophisticated-cum-Attractive Oil Reservoir

Negar Sadeqi

Maroun Oil and Gas Production Company (MOGPC) is among the leading Iranian companies with the capacity to produce more than 620 tb/d of oil. Qobad Nasseri, CEO of MOGPC, tells “Iran Petroleum” the company would add 30 kb/d to its output capacity by next March. He also said that the Maroun reservoir was one of the most sophisticated and attractive reservoirs in the world, requiring cutting-edge technology and investment. Nasseri said foreign companies would be welcome to cooperate in developing the Khami, Amsari, and Bangestan layers of the Maroun field, promising a good rate of return on investment. The followingis the text of Iran Petroleum’s interview with Nasseri.

How much is the current oil and gas production capacity of MOGPC?

The company is currently managing and steering more than 520 wells, over 3,200 km of pipelines as well as 28 industrial plants. Its production capacity stands at 620 tb/d of oil and 600 mcf/d of gas. It is also the sole supplier of feedstock to the Isfahan refinery in addition to providing feedstock for export.

To what extent did MOGPC meet its target last and this calendar year?

Last calendar year and during the first quarter of the current calendar year, production were targets entirely met. In the current calendar year, 82 tb/d of oil is planned to be added to the company’s output, 75% of which has been achieved in the first quarter.

How much production hike would MOGPC see in the current calendar year?

We plan to drill 4 new development wells and 10 workover wells for the current calendar year. We have also installed an electric desalter at Marooun-4 and a new separator in the Shadegan field and we have also developed a manifold with a view to adding 30 tb/d to MOGPC’s output by the end of the calendar year.

When will MOGPC reach its maximum output?

The company is fully ready to reach maximum production in the shortest possible time. Due to sanctions and a lack of spare parts, the overhaul was delayed. However, good measures have been taken over the past two years to supply spare parts, as a result of which we can reach maximum output.

Have you had any talks with foreign companies to develop MOGPC oil fields?

Development of the Shadegan (Asmari and Bangestan) and Kupal (Asmari) fields has been awarded to Russian companies. They have made a preliminary inspection of the fields, but we have yet to assign them the fields. MOGPC is one of the largest crude oil producers in the country and there is great potential for attracting foreign investment due to the high rate of return in the short term. The Bangestan reservoir of Kupal is among the attractive reservoirs for foreign investors. In developing the Khami as well as Asmari and Bangestan reservoirs we may cooperate with foreign companies because the Maroun reservoir is one of the most complicated and most attractive reservoirs in the world, requiring modern technology and investment. The Khami reservoir containing valuable gas compounds can serve oil or petrochemical investment companies.

Given the 13th administration’s policy of maximum output, what have you done for maximum efficient recovery?

In order to realize maximum efficient recovery and boost production capacity, we need to undertake some activities. We have been doing significant measures since last calendar year, which have resulted in an output hike.  Some of these measures are as follows: In November 2022, we began construction of a 36-km-long 10-inch pipeline stretching from the Shadegan separation facility to the Maroun-3 and Maroun-4 plants, which we ended last May. That brought the Shadegan oil field production capacity to about 15 tb/d. We also started building a 26-km-long gas pipeline last March, which would prevent the flaring of 30 mcf. Furthermore, with a view to stabilizing production, we started the overhaul of processing equipment. We’ve now finished the overhaul of the coalescer tank of Maroun-1 and Maroun. The coalescer tank of Maroun-4 is now operational and Maroun 1’s tank would come online soon.

How much is MOGPC’s oil recovery rate?

The rate of recovery differs in various fields. For instance, the rate of recovery in the Maroun field is about 25% due to complexities while it stands at more than 50% in Shadegan. If necessary investment is made we will definitely see production hike in these fields.

What measures have you undertaken in line with protecting the environment and preventing pollution caused by gas flaring?

With a view to reducing gas flaring, we have signed agreements with Tamkar Gas and Hirbod Niroo to cut gas flaring down to below 10%. We’ll have no flaring over two years in case some projects are implemented.

Did your company face mandatory production cuts in recent years?

Being the sole feedstock supplier to the Isfahan refinery, MOGPC has been operating at full capacity despite all sanctions.

What about gas injection into MOGPC’s gas fields?

We’re currently injecting gas into the Kupal oil field to stabilize pressure and increase the recovery rate.Of course, for overhaul and safety, we have shut down the gas injection facility over the past two years. But the overhaul of gas injection is underway, which we hope would be over by the end of the current calendar year.

What measures have you undertaken to use new technologies and control the oil quality with a view to protecting the environment and securing defense?

As far as renovation of installations is concerned, we have installed two new-generation membrane desalters with 20 kb/d capacity at Maroun-5 to guarantee crude oil quality control. It is currently under test to become operational later. For waste injection pumps, we envisaged 6 devices. One has been installed and the rest would have been installed by the end of the current calendar year. New waste pools are also under construction. In addition to that, we are building a wide concrete bridge in the main corridor of oil pipelines of MOGPC towards Aghajari and Omidieh for defense purposes and safeguarding the pipelines. In order to supply the necessary industrial water for operational units, a new pumping system has been installed. Desulfurizing towers with 40 kb capacity have been installed at Maroun3 and Maroun-5, which would come online by the end of the year. Also, relying on domestic capacity, we have built a 5 kb MOS device, whose components have been fully provided by local manufacturers.

Profile: Maroun Oil and Gas Production Company (MOGPC)

Reza Rezaei

Acting Technical Director, MOGPC

Hydrocarbon reservoirs administered by Maroun Oil and Gas Production Company (MOGPC) include the Asmari and Bangestan reservoirs of Maroun, the Asmari and Bangestan reservoirs of Kupal, the Bangestan reservoir of Shadegan and a Khami reservoir shared by Maroun, Kupal, and Shadegan fields. So far, 528 wells have been drilled in the six reservoirs while according to a production plan, MOGPC is proceeding with output hike measures up to the end of the current calendar year by carrying out development and workover activities. In light of the annulment of the mandatory output decline, MOGPC would be delivering about 75% of its oil production to domestic refineries with the rest destined for export. However, the decline in production levels is not ruled out due to overhaul programs.

Output Hike

Some of the activities envisaged by next March include plugging, perforation, and acidizing of oil and gas wells, which have already added about 83 tb/d to the company’s output. Furthermore, the drilling of 12 development wells would add 13.6 tb/d, and the workover of 47 wells would add another 65 tb/d to MOGPC’s production. The company has already seen its output capacity grow by 69 tb/d. Therefore, in a bid to meet production-level targets in the current calendar year, 27 drilling rigs have been installed, 10 of which would be drilling development wells, and the rest would be handling workover activities. Of course, thanks to proper repair work last calendar year, MOGPC met its production target at 129%. 

Due to its standing in Iran’s oil and gas production, MOGPC has the potential for attracting investment and development to boost output capacity. Here we review MOGPC reservoirs and associated activities.

Shadegan Oil Delivery

The Asmari reservoir of the Shadegan field contains high-quality light crude oil. It is among relatively young areas administered by MOGPC. Investment in the field would have a good yield. So far, 37 wells have been drilled in the field, 6 of which in the Bangestan reservoir are not producing.

Last calendar year, with the construction and completion of a new 10-inch pipeline stretching from Shadegan to Maroun 3 and from Maroun 3 to Maroun 4, the oil delivery capacity from this field has increased. In fact, with the completion of the pipeline, 6 Asmari wells with about 30 tb/d capacity have been reopened as there is now sufficient transmission capacity. Prior to carrying out these operations, there were three 8-inch and one 10-inch pipelines. But the new 10-inch pipeline has joined other pipelines to transmit oil from the Asmari reservoir to Maroun 3 and Maroun 4. There is a capacity to deliver up to 130 tb/d of oil.

The Shadegan field is currently producing 104 tb/d of oil, which would increase to 108.5 tb/d when the workover is finished on Well No. 21 of Shadegan. Furthermore, in order to maximize production from this reservoir, repair work is underway on another well, which would bring the production capacity of the Asmari reservoir to 112.5 tb/d.

The drilling of 3 new development wells is planned to be over in Shadegan by next March, which would enhance the field’s production capacity to 125 tb/d. Moreover, other activities like perforation, acidizing, and changing layers in viable wells would bring the Asmari reservoir’s production capacity in Shadegan to 130 tb/d.

Maroun Asmari Reservoir, Acceptable Yield

The Asmari reservoir of the Maroun field is among the most sophisticated reservoirs in Iran. Production from the reservoir is faced with numerous challenges including water production, extra gas production, fluid contamination, casing collapse due to the Gachsaran high-pressureFormation, and a sharp decline in downhole and formation pressure in some parts of the reservoir. By gas injection and using existing facilities and innovation in selective and widespread acidizing methods, production goes on from this reservoir; however, in order to develop this reservoir for more production, state-of-the-art technology is needed to complete wells. We hope that the gas injection station of this reservoir, which was recently closed for the replacement of pipes, would resume work by next March so that gas injection into this reservoir would help stabilize the reservoir pressure and facilitate persistent production and enhanced output.

Plugging, perforation, and acidizing, as well as the completion of some workover wells have brought the oil production capacity in Maroun’s Asmari reservoir to 321 tb/d.

Acidizing of Maroun Bangestan

The first problem coming to the fore with regard to the Bangestan reservoir of Maroun is asphaltene production which would create a big obstacle to the well, pipelines, processing installations, and finally production. Therefore, at least twice yearly, coiled tubing should be used with aromatic solutions to clean up asphaltene inside wells.

The next issue is the sharp decline in the formation pressure in Maroun’s Bangestan wells. In a bid to slow the decline in the formation pressure, we have acidized some wells and we plan to acidize more wells by the end of the current calendar year. These stimulating activities have slowed down the formation pressure decline and resulted in maximum production from most wells. Of course, based on what has already been done and in light of the great potential of this reservoir, we hope that production from this reservoir would improve.

Maroun Khami, Highest Pressure in Mideast

The Khami gas reservoir of Maroun is among the deepest and most pressured reservoirs in the Middle East. The reservoir pressure in the downhole formation is about 12,500 pam. The wellhead flow pressure and fluid temperature stand at 6,500 pam and 120 degrees Celsius. Two wells in the reservoir are producing about 40 mcf/d of gas and 6.2 tb/d of condensate. In light of the high pressure and temperature and big depth of these wells, the development of the reservoir for higher production would require major investment and special technology, which is on the agenda. 

Kupal Asmari Awarded

So far, 48 wells have been drilled in the Asmari reservoir of the Kupal field, yielding 62.5 tb/d of light crude oil. The most critical challenges in this reservoir include the collapse of casings, pressure decline, and water production. Due to the lack of desalination installations and insufficient desalting capacity in the adjoining unit, pre-salt oil is delivered to the Maroun-1 production unit. In a bid to compensate for the reservoir pressure decline, 150 mcf/d of gas is injected into the gas cap of the reservoir which is planned to be awarded to a foreign investor for development.

Kupal Bangestan Up for Grabs

The Bangestan reservoir of the Kupal field is another tight reservoir for production and development. 

Working on 14 wells of this reservoir is tough, costly, and boring because of asphaltene production. However, the difficulty of work has not stopped production, hoping that awarding this reservoir, along with the Asmari reservoir, to foreign investors, would guarantee persistent production.

Sweetened Oil Contract Terms for Foreign Investors

 A committee assigned by Iran’s Ministry of Petroleum has developed a new generation of oil contracts intending to provide local and foreign investors in Iran’s petroleum industry with attractive terms and conditions. To that end, while upgrading the country’s standing within the Organization of the Petroleum Exporting Countries (OPEC) and global oil and gas markets in the long term, the Ministry of Petroleum is striving to prepare the ground for the development, exploration, and exploitation of oil and gas fields. Minister of Petroleum JavadOwji has said Iran would be open to any foreign investment in the petroleum industry.

Some contractual frameworks similar to Iran Petroleum Contract (IPC) are used by governments and companies in developing nations to attract foreign investment and proceed with development and industrial projects. The new contractual framework serves as a legal instrument to support foreign investment and make incentives for investors in host nations. Similar contractual frameworks are being used in oil-producing countries to encourage investors to invest in them. However, countries have of course customized terms and conditions in their oil and gas contracts.

As far as the efficiency and attractiveness of IPC contracts are concerned, a variety of factors are involved. Some of these factors include compliance with intellectual property rights, regulations protecting foreign investment, political and economic stability, a powerful and independent judiciary system, dispute settlement mechanisms, and infrastructure. If a country can guarantee these factors and adopt regulations in favor of foreign investment and enforces IPC deals, it would most likely attract investment. 

Furthermore, transparency and predictability within the judiciary process and dispute settlement can also positively affect foreign investors’ openness to IPC contracts. 

IPC Advantages over Service Contract

Due to sanctions imposed on Iran’s petroleum industry, using IPC would help attract more investment. By updating the IPC, the 13th administration intends to further sweeten the terms of contracts in the petroleum industry to pave the way for local and foreign investors. IPC is more flexible than service contracts as far as terms of contracts and financial issues are concerned, which would enable foreign companies to negotiate their desired terms.

Another advantage of IPC is that foreign companies can win shares in Iranian oil and gas projects, thereby enabling foreign parties to get more profits from activity in Iran. IPC deals would require foreign companies to bring their advanced technology and technical know-how to Iran’s petroleum industry, which would definitely help improve the performance of Iran’s petroleum industry. 

Iran holds 209 billion barrels of oil in place, coming third in the world, just behind Venezuela and Saudi Arabia with 304 and 262 billion barrels, respectively. Meantime, Iran comes second in terms of global gas reserves with 1,230 tcf of natural gas, just behind Russia with 1,688 tcf. They are followed by Qatar (843 tcf), the United States (433 tcf), Turkmenistan (400 tcf), Saudi Arabia (298 tcf), the UAE (273 tcf), China (247 tcf), Nigeria (203 tcf) and Venezuela (197 tcf).

Standing 3rd in oil reserves and 2nd in natural gas reserves, Iran enjoys a strategic standing that would require attracting investment to stabilize production and boost its international status. Iran’s petroleum industry needs $20-25 billion in investment per annum, which would not augur well.

Easier Formalities 

Despite financial restrictions caused by sanctions, the Ministry of Petroleum has not neglected investment in the petroleum industry, which drives the national economy, presenting investors with various ways to strike win-win deals. 

Saving time in signing contracts has been a major concern. Deputy Minister of Petroleum for Supervision on Hydrocarbon Reserves SajjadKhalili has said: “Under the 13th administration, the Ministry of Petroleum is trying to issue upstream and downstream licenses for qualified legal persons.” 

“It means that a license would be issued for both National Iranian Oil Company (NIOC) and E&P companies for oil projects. That would have the advantage of being issued in less than one year,” he added.

Khalili said Iran had followed the example of Norway and Britain in this regard, adding that oil and gas fields are considered public wealth in both countries.

“In these countries, the process of issuance of a license is steered by sovereign bodies. We can use their experience in Iran’s petroleum industry due to the similar public ownership of oil reserves,” he said.

$28.8bn Investment 

Minister Owji recently told the OPEC seminar that Iran had, over recent years, signed new oil agreements to develop oil and gas fields and build refinery-integrated petrochemical complexes. He said the terms of new contracts are attractive to investors. 

Owji said: “Foreign investors may recoup their investment and costs by selling petroleum products once such projects are launched. To that end, we have signed agreements with many companies including from Russia.”

Planning for a $250 billion investment in the petroleum industry over eight years is among other objectives set out for the Ministry of Petroleum under JavadOwji. Over the past 20 months, $40 billion worth of agreements have been signed with local and foreign companies. Meantime, the projects that are coming on stream or are initiated, are valued at $28.8 billion. 

To finance petroleum industry projects, a wide range of options including the National Development Fund of Iran (NDFI), foreign finance, banking resources and money market, bonds, and Islamic financial instruments are available, which oil companies are well familiar with.

$4bn Investment in Gas in 3 Years

Natural gas consumption growth and gas balance are among key issues in developing independent gas fields to supply national demand. Therefore, the Iranian Oil Central Oil Fields Company (ICOFC) is planning a $4 billion investment in gas production from independent fields up to 2026. The minimum gas production envisaged in this crash plan is the equivalent of five phases of the South Pars gas field, involving 14 fields: Shanol, Sarkhoun, Sefid Zakhour, Halegan, Sefid Baghoun, Khartang, Gordan, Madar, Tous, Baba Qir, Dey, Aghar, Pazanan, and Eram. Moreover, feedstock would be supplied to the Fajr Jam, Parsian, Farashband, Shahid Hasheminejad, and Ilam refineries in southern, eastern, and western Iran.

Gas Development and Storage

With the completion of the South Pars development, ICOFC is in the spotlight for gas production. This company is operating fields in 17 provinces for oil and gas production. Meantime, in addition to developing oil fields, this company is responsible for gas field development and gas storage.

Mehdi Heydari, CEO of ICOFC, told a forum on gas storage for winter demand that three production subsidiaries of ICOFC were running 85 oil and gas fields, for whose development necessary measures are underway. That is why ICOFC’s mission has shifted from “production orientation”to “production and development orientation”, he said.   

Noting that in parallel with gas field development, gas compressor stations would be erected, he said: “Compressor stations would be installed in the fields which are in the last one-third of their lifecycle, which includes Kangan, Naar, Homa, Varavi and Tange Bijar.” He said ICOFC would focus on its oil field development projects in western Iran and Fars Province.

Gas Imbalance Setoff

ICOFC has a short-term (early production) and a long-term five-year (crash plan) underway to increase gas production. Therefore, specific projects are envisaged to compensate for the gas imbalance in the country. Development of fields with gas production has begun, including in northeastern Iran by East Oil and Gas Production Company (EOGPC) and South Zagros Oil and Gas Production Company (SZOGPC). At EOGPC, gas is produced from Khangiran, Gonbadli, Mozdouran, and Shourijeh. The Tous gas field is to be added to this group in the current calendar year.

The main field in this group is Khangiran with an output of 44 mcm/d in winter peak. Thanks to storage during eight warm months of the year, nearly 66 mcm/d of gas is supplied by EOGPC during winter. But next winter, the figure is expected to reach 70 mcm/d as the Tous field is joining the club.ICOFC’s main subsidiary South Zagros Oil and Gas Production Company (SZOGPC) runs four strategic gas production zones: Parsian, Naar & Kangan, Aghar and Dalan, Sarkhoun, and South Gashou. The largest among them is Parsian producing 66 mcm/d of gas. According to official data, SZOGPC’s output exceeded 162 mcm/d last calendar year.

Early Production

NIOC has assigned ICOFC the task to begin early production from the Aghar, Dey, and Tous fields with a view to setting off gas imbalance. The trio is forecast to add 10 mcm/d of gas to national output next winter. Next calendar year, early production from the Khartang field is expected to add another 10 mcm/d as seven new wells would have been drilled. Up to March 2025, ICOFC would see its output grow 20 mcm/d. National Iranian Drilling Company (NIDC) is the contractor company for drilling wells in the Khartang, Aghar, Dey, and Tous fields.

Early production is also planned in the Madar field, which would add 20 mcm/d to national output. Madar can also produce more than 45 tb/d of condensate. An MOU has been signed for this field.

3 Gas Storage Hubs

One key issue with sustainable gas supply in the country is storage which is done for technical, economic, and strategic reasons to counter shocks caused by gas supply and demand. Experts believe that guaranteeing sustainable gas supply and preventing sudden price fluctuations are among the advantages of gas storage. In Iran, underground gas storage is underway at Sarajeh and Shourijeh fields for eight months to be used during the final four months of the year. They store nearly 26 mcm of gas, which is instrumental in setting off gas imbalance in the country. The second phase of storage at Shourijeh is underway by the National Iranian Gas Company (NIGC). Three new storage sites – Bankol in Ilam Province, Mokhtar in Kohguiluyeh and Boyer Ahmad Province, and Qezel Tappeh in Golestan Province – are to be added to the list.

According to the head of ICOFC, the proximity of Sarajeh to Tehran and northern cities and the proximity of Shourijeh to northeastern Iran were key issues in gas supply specifically in winter.

IFCO Eyes Having Energy Intensity

CEO of Iran Fuel Conservation Organization (IFCO) Hossein Abniki has said that plans are underway to cut energy intensity in the country by half.

He said that it was possible to realize energy efficiency equivalent to 3.5 mb/d of crude oil.

“The energy intensity in Iran is three to four times as much as advanced nations. For instance, in car fuel consumption, our energy consumption is twice as much as global consumption while energy efficiency is low at buildings,” said Abniki.

Energy intensity is a measure of the energy inefficiency of an economy. It is calculated as units of energy per unit of GDP (Gross Domestic Product) or some other measure of economic output. High energy intensities indicate a high price or cost of converting energy into GDP. On the other hand, low energy intensity indicates a lower price or cost of converting energy into GDP. The energy intensity of a country or region differs from its energy efficiency.

Abniki said while the Ministry of Petroleum and the Ministry of Energy were energy suppliers, other organs like the Ministry of Industry, Mine and Trade, Ministry of Agriculture, and Ministry of Interior along with municipalities were major consumers of energy in the country.

Plans are underway to renovate 16,000 cabs, he said, adding: “Electrification of public transport and phasing out clapped-out buses and motorcycles are on the agenda.”

He said that $30 million had been approved to be spent on energy efficiency in the urban and suburban transport sectors.

Referring to the proposed Energy Efficiency Fund, Abniki said: “The capital envisaged for the Fund is an initial $10 billion, which can finance all efficiency projects in the country.

$21bn Projects Underway in South Pars

 CEO of Pars Special Economic Energy Zone (PSEEZ) SakhavatAssadi has said that more than $21 billion worth of projects are underway in the giant offshore South Pars gas field.

“Despite sanctions, a total of $150 billion has been invested in the upstream and downstream sectors of SPEEZ,” he said.

He added that four petrorefineries were also under construction, which would end the need to export gas condensate from South Pars.

Assadi said that SPEEZ accounted for 48% of Iran’s petrochemical production, adding that new projects would double the output.

He said that the South Pars field supplied gas as feedstock to PSEEZ petrochemical plants. “The Persian Gulf Star refinery, supplying 40% of domestic gasoline needs, fully receives its feedstock from South Pars condensate,” he added.

Assadi said PSEEZ exports level had grown 40% year-on-year to $12.3 billion, noting: “More than 90,000 persons are working at PSEEZ and activity is going on without any halt despite hot weather.”

Gas Transmission Capacity at 1bcm/d

CEO of Iranian Gas Transmission Company (IGTC) Gholam Abbas Hosseini has said that Iran’s gas distribution capacity has reached 1 bcm/d.

He said that on average 274 bcm/y of gas is sent to consumer points, adding that IGTC is responsible for maintaining 70% of the National Iranian Gas Company's (NIGC) physical assets.

He also said that IGTC stood after the upstream sector, oil and gas wells, and gas refineries.

“IGTC receives gas from 20 gas refineries including 13 South Pars refineries, as well as Fajr Jam, Parsian 1, Parsian 2, Bidboland, Ilam, ShahidHasheminejad, and Sarkhoun& Qeshm refineries. Furthermore, two gas terminals from Turkmenistan and 16 NISOC districts, and 8 NGL plants supply gas to IGTC,” he said.

“Currently, 38,000 km of gas pipeline, 333 turbocompressors, 91 compressor stations, and 61 production centers are active under IGTC,” he added.

Hosseini said that NIGC’s telecom network, with more than 8,000 km of fiber optics and 964 telecom stations, is managed by IGTC.

He said 98 bcm of gas had been delivered to consumers during the first four months of the current calendar year, up 4 bcm year-on-year.

Value Chain to Secure Petchem Margins

CEO of National Petrochemical Company (NPC) Morteza Shah-Mirzaei has said that companies and investors may expand the value chain of products with a view to creating a safe margin for themselves.

He said the expansion of the value chain would result in cut-price feedstock, which would, in turn, secure safe margins.

He reaffirmed NPC’s wholehearted support for investors and companies working in harmony with the value chain macro-strategy, saying: “One item enshrined in the 7th Five-Year National Economic Development Plan is incremental cut-price feedstock with a view to petrochemical industry development.” 

He said methanol production units would benefit from up to 30% cut-price feedstock in case of value chain completion, adding: “Petrochemical projects’ investors may also benefit from 20-30% cut-price feedstock advantage.”

“Development of the downstream industry, increasing value-added and job creation, diversity of export products, and upgrading the level of social and economic welfare are among the main advantages of the petrochemical industry value chain completion,” he said.

Sepehr&Jufair to Start Oil Production in September

AbuzarSharifi, the CEO of Petroleum Engineering and Development Company (PEDEC), has said the Sepehr and Jufair oil fields would start oil production in September.

He said the two fields were being developed in three phases, adding that the first phase was nearly ready for the production of about 20 tb/d.

“The agreement for the development of the Sepehr and Jufair oil fields was signed between National Iranian Oil Company (NIOC) and a subsidiary of Bank Pasargad on an IPC basis,” he added, noting that development work started nearly two years ago.

“The comprehensive development of these fields includes three phases, first of which aims at the output of 36 tb/d of crude oil,” said Sharifi. “But as soon as the 13th administration took office, development of this field accelerated significantly to the extent that phase 1 is nearly ready for production.”

“The contractor predicts to invest directly about $400 million in Phase 1 and $2.7 billion in total,” he said.

$36bn Energy Efficiency Projects Approved

Minister of Petroleum Javad Owji has said that the Economic Council has given the nod for $36 billion in energy efficiency projects.

“Oil supplies 95% of national energy needs. Therefore, if we fare well on energy efficiency the bulk of energy imbalance will be set off,” he said.

Owji put Iran’s oil production capacity at 3.85 mb/d, adding: “Of course, we are still producing 3.19 mb/d of oil while Iran’s gas production capacity has reached 1 bcm/d.”

Last calendar year, he said, $12 billion worth of oil projects were completed. He said: “They included operation of the refinery of Phase 14 of South Pars, which added 50 mcm/d to national gas processing capacity.”

Minister Owji referred to Phase 2 of the Abadan refinery development, saying: “With the commissioning of this project, 210 tb/d was added to the Abadan refinery’s treatment capacity. In terms of flare gas gathering, the NGL 3200 project came on-stream.”

Noting that production at SP11 had begun with 10-12 mcm/d capacity, which would reach 50 mcm/d as new wells are being drilled.

In the current calendar year, $15 billion worth of projects were completed, which would help increase oil, gas, and petroleum products production.

“Iran is producing 700 to 800 tb/d of gas condensate from its underground reservoirs. Therefore, a simple disruption in the gas condensate exports can give rise to many disruptions,” said the minister, adding that under the former administration, condensate exports had fallen to 7 kb/d.

“Through new marketing, we used part of oil and gas condensate parked on the water, in our local refineries and petrochemical plants and exported the rest,” he said.

Alay MahestanPetchem Plant 30% Completed

The head of the Oil Industry Pension Fund (OIPF), Abdol-Hossein Bayat, has said that the project has had 33% progress.

He said that the PDH, PP, and utility units of this plant have had 28%, 27.7%, and 35.4% progress, respectively.

Bayat said the project is expected to be completed 64% by the end of the current calendar year. By March 2022, it was 5% completed, and by March 2023, 30%.

“The Alay Mahestan project is being financed by equities and facilities,” he said. He added that so far equities had financed it. “Banks do not invest in projects which are less than 30% complete. Therefore, we would soon see banking facilities released for this project. We’re currently in talks with Bank Saderat, Bank Tejarat, and Bank Mellat for this purpose,” he added.

Bayat said Alay Mahestan would be supplying an intermediate and a final product. “The propane produced in the upstream sector is being sold directly. But selling raw materials faces sales restrictions. Therefore, if we can convert propane to propylene we would see a higher value-added,” he said.

The technical know-how for converting propane to propylene in the PDH unit of the plant was owned by two foreign companies.

Iran Oil Sector Enters Overseas Activities

JalilSalari, CEO of the National Iranian Oil Refining and Distribution Company (NIORDC), has said that the Ministry of Petroleum has entered overseas operations in the refining industry.

“Proposals have been made by Iran to Latin American nations for cooperation in the development of infrastructure for the product distribution chain from transfer to storage,” he said.

Salari said that numerous expert meetings had been held to learn about the potential of Latin American nations in the product distribution chain and gather precise information on their storage capacity, transportation fleet, fuel stations, trend of consumption, and consumer prices. “NIORC and private companies operating in these domains will be involved,” he said.

Salari said: “As far as fleet renovation is concerned we tried to introduce the representatives of carmanufacturing companies to these countries and establish product transport companies.”

He touched on the signing of new oil contracts for the renovation of fields and entry into the petrochemical value chain overseas, saying: “As far as the refining industry’s overseas activities are concerned, we used to focus on processing, and NIORDC was the first to step into this field, but subsequently the objective to examine the market of these countries and be able to enter their transfer and distortion chain based on price conditions.

$8bn Investment Needed in Refining Projects

Nasser Ashouri, the secretarygeneral of the Union of Oil Refining Industry Employers, has said $8 billion was needed to be invested in refineries.

“The refined products have recently increased in terms of diversity from 30 to 46 items and this diversity is increasing on a daily basis, which is instrumental in value-added creation and increased profitability of refining units,” said Ashouri.

He said 13 quality improvement projects had been defined for refineries, adding: “Earlier, all refineries were loss-producing, but today they are all profitable. However, given the age of refineries in the country, we agree with implementing development projects, which are estimated to need $8 billion in investment. Preparatory work has begun for these projects and some of them like the Shiraz refinery development project is 90% complete and would become operational in two months. However, implementation and completion of all these projects need government support.”

“The MehrKhalij Fars refinery is a 130 tb/d condensate refinery that could produce 10-15 ml/d of gasoline to help set off gasoline imbalance in the country. It is 43% complete now, but needs investment,” he said.

Ashouri said that every month one product is added to the mix of products. “Earlier we had 30 products, but today we have 46,” he said.

SP Refineries Treat 75% of Iran Gas

CEO of South Pars Gas Complex (SPGC) Ahmad Bahoush said 75% ofIran’s gas production is supplied by 13 refineries of the South Pars gas field.

“Part of South Pars products is used as petrochemical feedstock and light gas is fed into national trunklines,” he said.

Bahoush said during the first four months of the current calendar year (started on 21 March 2023), over 64 bcm of gas had been fed into the national trunkline.

“More than 85 mcm of gas condensate, more than 211 tonnes of granulated sulfur, over 740,000 tonnes of ethane, 2 million tonnes of propane and butane were produced at South Pars refineries over the same period,” he said.

“Following overhaul, we have managed to deliver more than 2.129 bcm of gas to the Bushehr, Pars, and Kangan petrochemical plants,” he added.

Bahoush said that the overhaul of the 3rd, 8th, 10th, and 12th refineries was over, using entirely domestically-manufactured equipment and local know-how. He added that the overhaul was underway at the 4th, 6th, and 11th refineries, noting that the overhaul had been carried out to maximize gas processing next winter.

He said that SPGC came first last calendar year in terms of using domestically manufactured commodities.

$50bn Invested to Set off Gas Imbalance

CEO of National Iranian Oil Company (NIOC) Mohsen Khojasteh-Mehr has said $50 billion would be invested to set off gas imbalance in the country.

“The urgency of this issue stems from the fact that 99.5% of national energy demand is supplied by oil and gas,” he said.

Khojasteh-Mehr said that NIOC owned 400 oil and gas reservoirs, adding: “We have about 230 offshore platforms, 73 production units, and 18 NGL units.”

“There is 13,000 km of subsea pipeline in the country. All of this urges us to reduce vulnerability and increase deterrence,” he added.

“The NIOC Board of Directors has approved $18 billion of renovation and reconstruction projects, of which $15 billion belongs to National Iranian South Oil Company (NISOC) and $3 billion to Iranian Offshore Oil Company (IOOC). This investment has to be made over a 5-8-year period,” said Khojasteh-Mehr.

“To set off gas imbalance, $50 billion is planned to be invested, $20 billion of which is for gas compression at the South Pars gas field which accounts for 70% of national gas production and consumption, requiring sustainability in production,” he added.

The NIOC chief said that in addition to gas compression, the development of the North Pars and Kish gas fields, 13 projects at Iranian Central Oil Fields Company (IOOC), and the development of Farzad B and Belal were on the agenda.

“At the beginning of the 13th administration’s term in office, SP16 delivered 14 mcm/d of gas rather than the planned 28 mcm/d due to pipeline damage. We lost even that 14 mcm/d and we had to build a new pipeline which would come online ahead of winter,” he said.

Iran’s hydrocarbon reserves amount to 240 billion barrels of oil equivalent, he said, adding that consumption of 7 mboe in the country was in contradiction with wealth generation.

Resalat Poised for 50% Output Hike

Negar Sadeqi

The Resalat oil field was damaged twice under Iraqi oil strikes during the 1980-1988 war. It is now set for two-phase development that would see its production increase from 5 tb/d to 38 tb/d. Pouria Moarefi, Resalat developer at Iranian Offshore Oil Company (IOOC), tells “Iran Petroleum” the oil field would see its output increase 50% by next March. Phase 1 is expected to treble the Resalat output while Phase 2 eyes a seven-fold increase in its output. Moarefi also said water injection and gas lift would help preserve Resalat’s output levels.

The following is the text ofthe interview “Iran Petroleum” had with Moarefi:

Where is the Resalat oil field located and when did it start oil production?

The Resalat oil field is one of the Persian Gulf oil fields in Hormuzgan Province. Located 85 km from Lavan Island, it started production in 1970 under the name Rakhsh. Its installations are known as R1, which includes a drilling platform, a processing platform, and a supporting platform. Oil production from this field continued nonstop until the imposed war broke out, during which the field was damaged severely. Its offshore installations were targeted twice in July and August 1987. In the course of the first strike, a number of R1 platform wells caught fire and during the second strike, the production platform was set afire, leading to full destruction of the drilling platform and the drilling rig installed there. Furthermore, due to a rupture in the subsea oil pipeline of Well No. 6 and lack of access to wellhead control systems, installed 240 feet under water, oil and gas leaked into the sea. The well was finally secured in October that year by IOOC technicians who plugged the leak.

How many days was oil supply halted?

Due to relatively high damage inflicted on the Resalat field installations, oil supply from the field was halted for nearly two years. During the same time, the damaged structure of the residential section of the platform was reconstructed and reinstalled to allow for renewed production. Later on we managed to increment oil production from the field, but we needed new design and plan as the field had been severely damaged.

When did the field development begin?

Given the fact that the Resalat oil field is an independent reservoir in Iran and the priority of recovery from joint oil fields, it was not among priority projects. Although feasibility studies had been carried out for developing the field long before, it formally started in 2020. Through development of the Resalat oil field in two phases, we will see the number of wells and installations increase. That requires installing a power plant of higher capacity. That is why construction of a gas desalination unit has started to fuel new power plants. It has also to be added that construction of the jacket of the wellhead platform of the Resalat field started last March at Khorramshahr Yard. In fact, through this project, for the first time since the existing installations were damaged during the imposed war, renovation and strengthening of structures as well as drilling and building wellhead platforms have been underway in line with the field development.

What is supposed to be done in Phase 1?

At this phase, all defective pumps are replaced while new wells would be drilled as need be. I would like to note that in Phase 1, we have a wide spectrum of operations. We will be repairing and strengthening oil platforms in two different sections. Basic reparation of Platform R1 is highly complicated as it lies underwater because in addition to technically precise inspections, vessels, frogmen and necessary equipment need to be deployed underwater. The second part involves strengthening top drives and platform installations. The installations of the platform at the Resalat field had been damaged too much due to long fire and missile strikes. Structurally speaking, when you start strengthening a defective structure, you need first to plan for its replacement while sealing has to be taken into consideration so that the structures would not be detached during reparation. That would require specific calculations while its inspection has a sophisticated process, especially in offshore structures where waves and wind increasingly impact these structures. Studies on strengthening structures and top drives were time-consuming as we intended to implement the project in the most effective manner.

Did you have any foreign consultants in the preliminary

studies?

Yes, we have hired a foreign consultant. I should note that the technical expertise of our manpower, both in IOOC and in Iranian contractor companies, is no secret, but due to the high volume of damage, we wanted to utilize the latest design and analysis. In 2021,the Iranian Offshore Engineering and Construction Company (IOEC) partnered with a foreign consultant to carry out the necessary analysis and inspection. Currently, the Strengthening, Modification, and Repair (SMR) model has been drawn up for offshore installations and we are buying the necessary parts. The drilling platform was 60% damaged during the war. This is one of the most challenging platforms we have now, which requires heavy offshore operations. This is an eight-jacket platform supporting 1,600 tonnes of weight. It also houses a residential section.

What does Phase 1 involve?

Phase 1 involves the development of the Resalat field with a view to increasing the output to 11 tb/d through drilling, repairing, and strengthening existing installations, building a wellhead platform, reforming processes, and drilling 4 new wells and re-drilling two wells in this field.

Where does the project stand now?

The project was physically completed 14% recently. Arrangements were then made for a roll-up platform and installing the first and second trains of the jacket of the 1,200-tonne WHP-1 at Khorramshahr Yard.This platform would be installed in October to allow for the drilling of two wells, each with a production capacity of 2.5 tb/d. At this stage, we will also move to build a top drive for WHP-1, which would involve building and installing the top drive, and installing and operating the pipeline and power cable linking the old platform R1 and WHP-1.

When can we witness an oil production hike from this field?

According to planning, we hope to see a 50% hike by next March subject to receiving the necessary safety certifications. With the full implementation of Phase 1, oil production from this field would triple.

What activities does Phase 2 involve?

In Phase 2, two wellhead platforms – WHP-2 and WHP-3 – would be built for the satellite platforms of Platform R1. Replacing the top drive of the drilling platform and building new processing, compression and residential platforms are all on the agenda. In this phase, we will implement both pipeline and gas lift sections. Currently, oil production lift is carried out by pump. In Phase 2, gas injection would help boost pressure. Furthermore, drilling about 21 wells would go ahead as planned. With the implementation of Phase 2, Resalat’s production will grow 7-fold.

When will Phase 2 start?

Due to the size of activities envisaged for this phase and the prioritization of safety of wells and installations, we may be able to start structural activities based on previous inspections. Given the conditions of the drilling platform, we have defined an inter-phase project under which we would make older wells safer while trying to win over National Iranian Oil Company (NIOC) for credit allocation to the drilling platform and construction of a residential platform, apart from Phase 2.

In which parts of the project can we benefit from foreign companies’ assistance?

Imaydefinitely say that our own specialists enjoy high expertise for developing the Resalat field both in terms of installations and drilling. However, due to financial restrictions and the necessity of using cutting-edge technology, we may use foreign companies’ capital and technical knowhow for field development. Nonetheless, if for any reason whatsoever, foreign companies are not engaged, we can proceed with developing this independent Iranian oil field. It has also to be added that more than 80% of equipment for this phase has been supplied by local manufacturers.

What are your plans to prevent oil production fall?

Currently, we’re using downhole pumps to boost pressure at the wells of the Resalat oil field; however, we intend to conduct water injection and gas lift simultaneously in the second phase in a bid to prevent output fall.

South Pars Gas Compression; Top Priority

Iran plans to invest $2.6 billion in building, installing, and operating a gas compression platform in Phase 11 of the supergiant offshore gas field. Installing this platform is important for the National Iranian Oil Company (NIOC) in that it is the main pilot project for building gas compression platforms at South Pars to prevent production fall-off in this massive reservoir jointly owned by Qatar. Iran is currently recovering more than 700 mcm/d of gas from South Pars, but in case of a hesitation in installing compression platforms, the field would see its output fall as much as the equivalent of a development phase.

2 bcf compression platforms can boost pressure by 90 Bar. The idea is for Iran to build such platforms in its own onshore yards, but each platform would weigh about 20,000 tonnes, much higher than the 7,000 tonnes capacity Iran can handle. Therefore, it would be urgent to upgrade existing infrastructure.  

Sophisticated design, the necessity of proper arrangement of equipment, safety, and operational issues are among the features of gas compression platforms whose installation requires the float-over method whose technology does not exist in Iran. Therefore, the basic and conceptual design of the gas pressure compression platform needs to be done by an international consultant so that an effective model would be provided to Iran to be used in other phases of South Pars. However, due to sanctions, NIOC is planning separate studies to implement compression projects in this giant field.

Why SP11 Needs Compression

SP11 was the last undeveloped phase in Iran’s section of the gas reservoir. As studies found the field to be experiencing a fall in output in coming years, the Ministry of Petroleum decided to consider installing compression platforms in this phase while working on its development to add 56 mcm/d to the field’s overall output.

After an agreement was signed for the development of SP11 with a consortium comprising France’s Total (the forerunner to TotalEnergies), China’s CNPC, and Iranian Petropars. However, the US quit the 2015 nuclear deal in 2018 and reimposed sanctions on Iran. Subsequently, foreign companies pulled out of the project. But Petropars teamed up with Pars Oil and Gas Company (POGC) to study the construction of compression platforms by relying on local know-how.

It is noteworthy that before the sanctions were reinstated, POGC had assigned the basic design for the construction of compression platforms to a French company. But following the imposition of sanctions, it was decided that a local or foreign company carry out the basic design.

Various options have been considered to boost the pressure in South Pars. Among other things, for each South Pars platform, a pressure compression platform specific to that platform should be installed, which, of course, considering that there are 38 well platforms in this field, therefore, the installation of pressure platforms will costa fortune. Another option is to install the complexes of pressure boosting platforms in the place of the field where the pipelines exit and close together, and in the process of boosting the pressure of a set of platforms, it is concentrated in one point. Based on this, three pressure-boosting complexes are expected to be built offshore, in which case, each hub corresponds to 10 to 12 platforms. This option is expected to cost more than $20 billion.

Advantages

The question is to know what role gas compression platforms would play. The wellhead pressure required for the transfer of 1 bcf of gas onshore is normally 120 Bar. Now if this

pressure falls to 100 Bar, it would be difficult to transfer 1 bcf of gas. At 90 Bar pressure, only 700 mcf could be transferred. That would also result in a production drop. That underscores the significance of gas compression platforms which would in the end help prevent a drop in production. In the absence of such platforms, pressure fall-off should be tolerated by drilling new wells and working over existing wells. Every year, the acid job is performed in 10-11 wells at South Pars and production is done by perforation of layers and acid job. 

South Pars can keep production up to as low as 30 Bar pressure. It means that even if pressure drops from the current 120 Bar for each bcf to as low as 30 Bar, gas recovery would go on. On average, each platform experiences pressure fall-off seven times a year.

Ahmad Mortezaei, head of the Energy Committee of Expediency Council, has touched on the South Pars pressure fall-off as a major challenge in the energy sector, saying: “Pressure fall-off would reduce refinery output that would finally result in gasoline production. Therefore, proportionately with the gas pressure fall-off at South Pars we face a decline in condensate production. Now if no solution is found we have to spend exorbitant sums on electricity, gas, and gasoline production.”

Basic Engineering

Mohsen Khojasteh-Mehr, CEO of NIOC, has said gas compression at South Pars is a new technology even for Qatar. “Therefore, the key issue in gas compression would be to pay attention to the fact that basic design and studies are both technology and capital-intensive.”

A pilot project is envisaged for gas compression at South Pars, based on which required compressors would be supplied by an Iranian company for onshore and offshore purposes.

“Simultaneously with using local potential, we will definitely use foreign potential if we can reach it,” said Khojasteh-Mehr.

In this way, an agreement was signed between client POGC and contractor Nargan for basic and advanced engineering studies for the gas compression project. 

The agreement contains studies on 4 compression hubs, including 17 packages. The main points are enhanced recovery, environmental studies, civil defense, and reservoir engineering among others.

NIOC Plans

In parallel, NIOC has taken some measures with a view to setting off domestic gas imbalance. Some of these measures are the drilling of 70 wells for preserving output at South Pars, holding licensing rounds for the drilling of another 15 wells in this field, introducing two 10-well packages, andperforming acidjob in 400 wells.

It has to be added that last calendar year, planning was carried out for drilling 35 wells at current gas platforms with a view to boosting the yield from South Pars. According to POGC officials,the project would take 2 to 3 years.

Gas recovery began from South Pars in 2002. It was initially supplying 10% of the total gas output in the country, which has now reached 80% as new phases have been developed. Gas production from this field reached 141 mcm/d over four years with an investment of $9 billion. Now with a total investment of $90 billion, gas recovery from this massive reservoir has crossed 700 mcm/d.

South Pars is estimated to hold 410 tcf of gas in place. Overall, 755 tcf of gas has been extracted over two decades.

The initial pressure of South Pars reservoirs in the Kangan and Dalan layers, 3,000 meters deep under Persian Gulf waters, has dropped from 5,200 psi to 3,500 psi over 20 years.

Iran Flare Gas Gathering Outlook

Iran is among leading nations with regard to gathering associated petroleum gas. It is endowed with great potential for gathering more flare gas. The 13th administration has displayed firm determination over the past two years to gather as much flare gas as possible. The deputy minister of petroleum for planning, Houshang Falahatian, has said Iran would have gathered all flare gas by March 2026.

Flare gas gathering would allow for the recovery of higher-quality oil and more oil sales. Furthermore, natural gas production as a clean source of energy is focused upon across the world and flare gas gathering would allow for optimal use of these resources and facilitate energy exports. In addition, using associated petroleum gas as a domestic source of energy would help reduce dependence on fossil fuels and increase economic stability.

Over the past century, gas flaring has left harmful impacts on the environment and jeopardized community health in oil and gas-rich areas. The necessity of paying attention to quitting gas flaring should be kept in mind from both economic standpoint and fulfilment of international obligations. Therefore, the 13th administration, despite grappling with unjust sanctions, has tried its best to secure feedstock supply to petrochemical plants while incentivizing local banks to make long-term investments in gas gathering projects. The Bidboland-2 gas refinery project is one case in point.

Taking into consideration its international obligations, Iran is required to mitigate its GHG emissions by 2030 by 4% unconditionally and 8% conditionally. Of course, over recent years Iran has undertaken serious measures to that end, one case of which is the concurrent implementation of 9 NGL projects with capacity to gather 5.1 bcf/d of flare gas. Some of these projects are the Bidboland-2 gas refinery (four NGL projects), Persian Gulf Yadavaran gas refinery (NGL 3200), Hengam gas refinery (Qeshm Island gas flare), Dehloran refinery-integrated petrochemical plant and Kharg NGL.

Falahatian has said that flare gas gathering would have been cut by 50% by March 2025.

NGL 3100 is a major flare gas gathering project, which is now 80% complete. Once fully operational, it would end 5.5 mcm/d of flare gas. The NGL 3200 project with capacity to gather 6.3 mcm/d of flare gas recently came online. The project for delivering flare gas to NGL Kharg, which gathers 7.5 mcm/d of gas, is now 70% complete.

It seems that benefiting from the financial capacity of the petrochemical sector, which is the highest-income sector, in the long-term would offer a suitable solution for financing petroleum industry projects without having to wait for the outcome of nuclear talks.

Flare Gas Feeding Petchem Plants

National Iranian South Oil Company (NISOC) recently expressed its readiness to operate development of 16 Khami reservoirs with a view to supplying feedstock to petrochemical plants for years to come. That would partly supply the petrochemical plants’ feedstock needs as an estimated 1.3 mcf/d of gas would be provided. That along with five or six other NGL projects would help produce 1,200 mcf/d of dry gas and 200,000 b/d of condensate and C2+. Currently, over 80% of flare gas in southern Iran has been gathered and the 13th administration is trying to gather the remaining gas which would have economic efficiency in addition to compliance with international environmental obligations. 

Arrangement with Banks

Iran has been seeking to finance flare gas gathering projects using a variety of methods. It has never kept the petroleum industry waiting for the outcome of nuclear talks with world powers.   

Senior managers of National Iranian Oil Company (NIOC) have regularly held meetings with capital market players to exchange views on manner of making better use of the financial capacity of these institutions. Undoubtedly, directing bank sources towards progressive industries would empower banks to play a positive role in national economy.

Last January, the Ministry of Petroleum announced formation of a consortium of domestic banks for investment in the petroleum industry. This banking consortium would initially invest $4 billion in the petroleum industry. This figure would increase as more banks would join the consortium.

Working out mechanisms for the involvement of banks in the petroleum industry would fill the vacuum left by financial shortages for implementing petroleum industry development projects, bring about efficiency and profitability in the economic and banking sectors. The petroleum industry has been unable to engage foreign banks and companies directly in the upstream and downstream sectors due to Western sanctions, but now the government has shifted to local banks and companies to develop the petroleum sector.

Petchem Revenue

The Ministry of Petroleum has changed its policy in financing with a view to using new methods like benefiting from the capacity of industrial holdings to investment in the upstream sector, including flare gas gathering to prevent associated petroleum gas flaring. This decision has been widely welcomed by petrochemical plants as it would secure stable feedstock supply to them. Last calendar year, a $500 million agreement was signed with Persian Gulf Petrochemical Industries Company (PGPIC) for gas gathering in East Karoun. Later, an agreement was signed with PGPIC for gas gathering in West Karoun in a bid to end flaring in four provinces in coming years.

Expert planning is also under way for completing the Persian Gulf Bidboland value chain, which would materialize in coming years by using the rated capacity of the plant’s feedstock and products.

Amak Project

A project for flare gas gathering from the Bangestan layers of Ahvaz, Ab Teimour, Mansouri, Kupal and Maroun oil reservoirs,

known by its Persian acronym “Amak”, is among projects prioritized by NIOC. Some parts of this massive project have already come online, but its full implementation has been put off.

Prior to implementation of Amak, 241 mcf/d of associated gas was flared in the Bangestan layer, releasing about 9,000 tonnes of pollutants into the environment.

During the operation of the first phase of this environmental project, four pressure compression stations – Ahvaz 1, 2, 3, and Mansouri – and a gas sweetening refinery came online in 2005, to be followed by the commissioning of the Kupal and Maroun stations in 2007 and finally the Ab Teimour station in 2009. With the completion of the first phase of the Amak project, the economic phase of the project became operational, which included 17 gas compressor and dehydration stations, a refinery to sweeten gas and condensate, laying 280 km of line pipes, building 95 km of power transmission lines and developing several electricity stations.

After the last compressor station was launched in 2009 and the acid gas sweetening plant in 2021, 28 tb/d of gas liquids, worth $1.68 million, has been achieved. Meantime, 182 mcf/d of sweet gas, worth $780,000, is delivered to National Iranian Gas Company (NIGC).

The second phase of the Amak project, which is its environmental phase, involves 96 km of 12-inch pipes for carrying acid gas, a gas compressor and dehydration station, as well as auxiliary processing and safety systems. This second phase would help prevent flaring of 14 mcf/d of flare gas and deliver 18 mf/d of gas directly to the Razi Petrochemical Plant.

Thanks to the Amak project, about 86% of associated petroleum gas is gathered at NISOC-run areas, to be used for local consumption or injection into oil reservoirs for maximum efficient recovery. For remaining flare gas, projects are under way in partnership with petrochemical plants to supply feedstock to them and prevent associated petroleum gas flaring.

Implementation of flare gas gathering at NISOC-run zones would gather 18-20 mcm/d of gas, which would go to the Maroun and Persian Gulf Bidboland petrochemical plants as feedstock. An agreement is also under way for gas gathering and processing at NGL 3200 and NGL 3100 from southwestern and western Iran respectively, which would gather roughly 12 mcm/d of flare gas to serve as feedstock for petrochemical plants.

Cutting Pollution in Gas Hub

Permit has been given for financing a project cut gas flaring by 20% at the refineries of Phases 1-10 of the giant South Pars gas field with a view to ending flaring of 2.3 bcm of gas per annum. That would be the start of one of the major environmental projects in the petroleum industry.

The comprehensive project for sustainable development is focused upon the integrated management of all refineries and installations of South Pars as well as implementation of inhibiting and refining all pollutants in South Pars, be it oil, gas or petrochemicals. Under the aegis of cooperation on the part of NIGC and National Petrochemical Company (NPC), this project has taken primary steps in the three sectors of refining management and polluting gas consumption, polluting liquids (particularly DSO) management, polluting solids (particularly sulfur) management and preventing its release into atmosphere.

Given the high economic value of flare gas and the indirect benefits which would be achieved from gathering them, various nations across the globe have made massive investment in this sector in a bid to reduce their flare gas significantly. Persian Gulf littoral states including the United Arab Emirates (UAE), Kuwait and Saudi Arabia have made huge investment in this sector, ending flaring in their oil fields.

Iran Petchem Output to Hit 93mt

The Iranian government has effectively handled the impact of Western sanctions on the oil and gas sector, including refining and petrochemical industry. The petrochemical industry, which is naturally unsanctionable, has played a more prominent role than oil and gas in the economy. Last calendar year to March 2023, Iran’s petrochemical industry earned the country over $54 billion in revenue despite tough sanctions. Furthermore, 80% of annual revenue from petrochemical exports has returned to national economy.

CEO of National Petrochemical Company (NPC) Morteza Shah-Mirzaei has said that Iran would bring its petrochemical output capacity to 93 million tonnes by next March as eight new projects are coming online.

Petrochemical holdings are instrumental in petrochemical production and exports. The government has promised them sustainable feedstock supply in the long-term in order to encourage them to investment in upstream sectors. Iranian petrochemical holdings’ participation in investment would expedite the implementation of petrochemical projects. For instance, an olefin project in Gachsaran and NGL 3200 of Persian Gulf Hoveyzeh Gas Refinery were inaugurated earlier this year, both of which supplying feedstock to downstream facilities. 

8 Petchem Projects Due to Come Online

Shah-Mirzaei recently said that at least 10 new petrochemical projects would become operational in the current calendar year. They are: Arta Energy Ardebil (132,000 tonnes/yr of AA-grade methanol and 283,000 tonnes/yr of formaldehyde), Aryan Methanol Assaluyeh (1.65 mt/yr of methanol), Gachsaran olefin (1 mt/yr of ethylene and 84,000 tonnes/yr of C3+), NGL 3200 of Persian Gulf Hoveyzeh Gas Refinery (with capacity to process 250 mcf/d of associated petroleum gas), Phase 1 of Hengam petrochemical plant (1,150 tonnes of ammonia and urea), Phase 2 of Maroun petrochemical ethylene oxide, phase 1 of Nakhl Asmari petrochemical plant (with production capacity of 66,000 tonnes of formalin, 6,000 tonnes of acetaldehyde, 10,000 tonnes of paraformaldehyde, 15,000 tonnes of pentaerythritol, 10,000 tonnes of sodium formate, 60,000 tonnes of biodegradable plastics and 40,000 tonnes of polystyrene), Unit 4 of Air Separation at Damavand Petrochemical Plant, Air Separation Unit of Aryan Polymer Pouya and Phase 1 of Petronad Asia (160,000 tonnes/yr of MEG and glycerin). As mentioned earlier, two of these projects have come online.

Petchem Needs $70bn Investment

Based on Shah-Mirzaei’s statement, 100 petrochemical projects are planned to come online within 10 years, i.e. the end of the 8th National Economic Development Plan. He has said that these projects would potentially attract roughly $70 billion in investment.  

The petrochemical industry accounts for the main share of Iran’s non-oil exports. The current installed capacity of this industry stands at 92 million tonnes, which is planned to reach 131.5 million tonnes by the end of the 7th National Plan.Meantime, the production capacity of the ethylene and aromatic chains would respectively reach 11.9 mt and 3 mt. Polymer production capacity is set to hit 8 mt in the current calendar year and 19 mt by the end of the 7th plan. Furthermore, the planned implementation of propylene production projects and its chain would bring propylene and its chain production capacity to 11.6 million tonnes by the end of the 7th plan. The current propylene production capacity stands at 1 million tonnes a year and the entire propylene produced by the petrochemical industry is consumed by downstream units. The demand for propylene is over 1 million tonnes.

Methanol is also a petrochemical product for which major capacity building has been built in the past years. Iran is currently exporting the bulk of methanol it produces. But value chain completion would led to higher value creation as the methanol production capacity would reach 700,000 tonnes a year. Meantime, the ethylene production capacity would reach 11.9 million tonnes and the aromatic chain production would hit 3 million tonnes by the end of the 7th plan.

The current basic chemical production capacity stands at 40 mt/yr, which is set to reach 74 mt/yr by March 2028. The methanol production capacity would by then reach 30 mt/yr from currently 12 mt/yr.

550 Varieties

Iran holds 28% of the Middle East’s petrochemical capacity, which in turn owns 10% of the world total capacity.

Holding 33 tcm of natural gas and 157 billion barrels of crude oil reserves, Iran has good potential to develop its petrochemical industry and complete its oil and gas value chain. The petrochemical industry stands in 6th place among 71 sectors of Iran’s economy, thereby playing a major role in production and job creation.

Currently, 70 petrochemical plants are supplying 550 types of polymer and chemical products. NPC intends to complete the value chain of the petrochemical industry.

According to the NPC chief, Iran’s petrochemical production capacity would reach 95 mt by March 2024, up from the current 92 mt. It is noteworthy that 70% of Iran’s petrochemical products are destined for export. NPC intends to convert some of these products to higher-value ones.

Strategic Petchem Projects

The petrochemical industry is instrumental in economic development in terms of its contribution to income generation, increased share of gross domestic product and job creation. For this purpose, NPC has adopted a roadmap with view to boosting its competitiveness and fulfilling its objectives. To that end, two major plans, known as the second and third jumps, have been implemented in the petrochemical industry. That would bring the nominal capacity of this industry to 130 mt by March 2026 with an increased income of $35 billion.

However, the strategic projects of the third petrochemical jump pursue the objective of developing the value chain and supplying diverse products, which are defined under three categories: mixed feedstock projects, propylene production projects, and pioneering projects. Implementation of these projects would help complete the value chain and supply local needs in addition to increasing job creation and decreasing widely-demanded products imports.

200mt Target

Shah-Mirzaei said the petrochemical production capacity would reach 141 mt by 2027 before increasing to 200 mt by early 2033.

The petrochemical industry currently needs 52 mt/yr of feedstock, which is 1.1 mboe/d, up from last calendar year’s 1 mb/d. The figure would reach 2.2 mb/d by the end of the 7th Development Plan, which is equal Iran’s refining capacity.

Meantime, the annual demand for refined products would grow 1% by 2030 while according to estimates, global demand for petrochemical products would increase by 4.5% by 2030.

The aromatic production capacity is set to increase from the current 4 mt to 5mt by 2027 while fertilizers- urea and phosphate- would go from 9 mt to 11 mt by then.

According to NPC officials, basic production capacity would reach 100 mt, methanol production capacity would reach 40 mt, ammonia production capacity 9 mt, polymer production capacity 31 mt, aromatic production capacity 6 mt and urea production capacity 9 mt within 10 years.

Undoubtedly, Iran’s petrochemical industry is on the path of development and progress. New projects would significantly boost the production capacity of this sector.

Iran Ethylene Output Exceeds 1mt

Gachsaran Petrochemical Company (GPC) is Iran’s third largest olefin plant. It was inaugurated recently while President Ebrahim Raeesi and Minister of Petroleum Javad Owji were in attendance. Built with €1.3 billion investment, its annual production capacity stands at 1 million tonnes of ethylene and 84,000 tonnes of C3+.

Addressing the inaugural, Minister Owji said construction of the facility lasted 19 years. He said it was aimed at completing the value chain, adding: “We welcome domestic and foreign investment for implementing petrochemical projects. Return on investment in this sector is high. By inaugurating this plant, 1 million tonnes has been added to Iran’s ethylene production capacity.”

Value Chain Completion

The 13th administration firmly went ahead with the inauguration of the Gachsaran petrochemical plant despite tough US sanctions that had stonewalled efforts.

The ground was broken for the Gachsaran petrochemical plant after approval of the West Ethylene Pipeline (WEP) project in 2002 starting from Assaluyeh and running through the provinces of Fars, Khuzestan, Chahar Mahal and Bakhtiari, Lorestan, Kermanshah, Hamedan and Kurdistan. The main idea behind this project is to complete the value chain and supply feedstock to the Bakhtar, Mamesani, Dehdasht, Boroujen and Kazeroun petrochemical plants and the Gachsaran polymer plant. Except for Gachsaran, the other projects are not yet complete. The Gachsaran plant receives annually 1.25 mt of ethane from the Persian Gulf Bidboland gas refinery via a 90-km pipeline to produce 1 mt of ethylene and 84,000 tonnes of C3+.

One reason for the long drawn-out implementation of the project was restrictions imposed by US sanctions against the Iranian petroleum industry. However, due to the 13th administration’s insistence on completing the petrochemical industry value chain, distancing itself from selling crude oil and focusing instead on the Bidboland gas refining project, it picked  up pace. Bidboland gas refinery gathers and processes gas from oil fields in southern Iran and delivers ethane to the Gachsaran petrochemical plant. Therefore, nearly IRR 170,000 billon was earmarked for its completion over two years with necessary equipment domestically manufactured for the first time.

Abdol-Ali Ali-Asgari, CEO of PGPIC, has said that more than 80% of the petrochemical plant’s needs had been supplied domestically.

PGPIC holds a 46.37% stake in the project, Kazeroun Petchem Co. 10.8%, Boroujen Petchem Co. 9.05%, Mamesani Petchem Co. 10.8%, Dehdasht Petchem Co. 10.23% and Sepehr Saderat Financial Group 11.7%.

3,000 Job Opportunities Created

Located in Kohguiluyeh and Boyer Ahmad Province, Gachsaran is home to one of the largest oil reservoirs of Iran. Gachsaran Oil and Gas Production Company (GOGPC) accounts for 17% of Iran’s oil exports. One reason that prompted Petroleum Ministry officials to complete the Gachsaran petrochemical plant was GOGPC’s involvement in oil exports and also provincial development.

According to Minister Owji, more than 3,000 job opportunities have been created through this project. He added that $2.6 billion of upstream and downstream oil projects including development of Golkhari and Bibi Hakimieh fields for 30 kb/d output, polyethylene plants, development of the Mokhtar field for gas storage and construction of a 110 tb/d refinery-integrated petrochemical complex would be implemented in the province.

Owji also said that accelerating the Gachsaran petrochemical project had improved the petrochemical value chain in the country.

Largest Ethylene Line

Olefins are among key petrochemical products that give rise to a variety of products due to their reactivity. Low-density olefins make up more than 60% of basic petrochemicals in the world. Due to the diversity of products from olefin, global demand for it is rising. Of the seven basic petrochemicals (ethylene, propylene, methanol, xylene, benzene, toluene and butadiene), propylene, ethylene and butadiene are olefin products accounting for 57% of basic products in the world.

Ethylene is used in the polymer industry, artificial tissues, solvents, lubricants, antifreeze and alcohols. The 2,800-km West Ethylene Pipeline, which is the longest ethylene pipeline in the world, lies in Iran.

Investment in Value Chain

Currently 70% of Iranian petrochemical products are destined for export. Therefore, converting some of these products into higher-valued ones is one of objectives sought by National Petrochemical Company (NPC).Iran imported 870,000 tonnes of petrochemicals, worth $2 billion, last calendar year to March. Now by planning to complete the value chain and implementing propylene, methanol, ethylene, aromatic and butylene chain projects with about $4 billion in investment, a 4mt capacity is set to be created in this sector, which would mean saving the country more hard currency. That is why 20 value chain-based investment packages have been defined. It has to be noted that NPC would no longer issue license for projects for which there is no feedstock.

Hassan Abbaszadeh, director of planning and development at NPC, has said: “70% of total propylene produced in the world is converted to polypropylene. Iran’s propylene production capacity is about 1 mt, which is planned to increase.”

Meanwhile, during the 7th and 8th national five-year development plans, a total of 105 projects would come online, 68 of which would become operational under the 7th plan with 50 mt capacity. These projects would require $36 billion in investment, $13 billion of which has already been provided. Under the 8th plan, 37 petrochemical projects with a total capacity of 50 mt/ywould become operational, for which $34 billion is needed.

Minister Owji said Iran welcomed investment in the oil, gas and petrochemical sector, adding: “The petrochemical industry is not capital-intensive as there is already technical knowhow in the country.” He added that this sector would be in compliance with the principles of resilient economy, not to mention its job-creating nature.

Once all the planned 105 projects fullyimplemented over 10 years, the production capacity of basic products would go from 40 mt to 100 mt; methanol production capacity from 14 mt to 40 mt, ammonia production capacity from 7 mt to 9 mt, polymer production capacity from 8.8 mt to 31 mt, aromatics production capacity from 4.2 mt to 6 mt, and urea fertilizer production capacity from 5 mt to 9 mt.

Iran’s installed petrochemical production capacity recently reached 93 million tonnes with a growing share for methanol, ethylene and propylene projects.

Iran comes after Saudi Arabia in basic petrochemical production. Qatar, the UAE, Oman, Kuwait and Turkey follow Iran. As Iran enjoys proper capacity in ammonia, ethylene and methanol production, petrochemical projects are revised under the 8th national development plan to be entirely based on value chain completion.

Gas Capacity-Building for Wealth Generation

 A decline in global fossil fuel use and the growing shift to clean fuels underscores more than ever the significance of production of gas as a clean source of fuel. Iran, with 33 tcm of natural gas in place, holds 17% of the world’s gas reserves. That has pushed Iran to build capacity in the gas sector.

Hormoz Qalavand, NIOC’s production chief supervisor, has said that the state-run oil company is currently producing over 1.04 bcm/d of gas from 23 gas fields, about 1 bcm of which is delivered to NIGC to be fed into national gas grid. Meantime, Iran has 22 gas refineries with capacity to treat over 850 mcm/d of gas. That is while the massive offshore South Pars gas field supplies more than 70% of Iran’s gas. The value of natural gas produced in Iran is equivalent to the value of more than 55 million barrels of oil. Currently, 6% of Iran’s gas is exported to Turkey, Iraq, Armenia, Nakhichevan and Azerbaijan.

There is more than 417,000 km of urban and rural gas grid across the country, providing gas to 96% of Iran’s population. There is more than 38,000 km of gas trunkline across the country, which is expected to reach 45,000 km by 2025.

As high-pressure gas transmission lines come online, the quality of gas distribution would improve, not to mention Iran’s standing in international gas trading. Owing to Iran’s geographically strategic position, longer transmission lines would increase potential for gas transit, swap, trade and export. Iran’s gas transmission network can currently handle 800 mcm/d of gas, which would reach 1.1 bcm/d by 2025.

The compression network would increase accordingly. For each 1,000 km of 56-inch gas transmission line, 50 mcm of gas is pumped, which would double when gas compressor is added. Under the 2025 vision plan for the gas industry, the number of production centers would increase from 40 to 74 and the number of compressor stations from 79 to 130. That would increase gas transmission from 240 bcm to 400 bcm.

According to available data, Iran’s natural gas consumption totals 228 bcm annually, broken down among major industries (17%), power plants (30%), and housing and business sector (44%).

More than 97% of cities and 90% of villages are connected to gas network. Owing to its privileges in the gas industry, Iran is involved in gas swap with Azerbaijan and Turkmenistan. Majid Chegeni, CEO of NIGC, has said that Iran’s international gas trading levelshould increase 8-10% by 2025.

Increased Swap

According to Chegeni, Iran’s swapped gas in 2022 was up 358% in volumes and up 530% in revenue year-on-year.

In 2022, NIGC imported natural gas from Turkmenistan to be delivered to Azerbaijan, thereby resuming gas imports from Turkmenistan. Mohammad Reza Jolaei, director of dispatching at NIGC, said Iran swapped 1.3 bcm of gas in the calendar year to 2023. Iran’s gas swap with Turkmenistan and Republic of Azerbaijan is expected to grow 70% year-on-year.

Higher Gas Exports

According to NIGC, Iran’s gas exports last calendar year stood at 20 bcm, which is forecasted to increase to 21.7 bcm this calendar year.

Iran will continue to deliver gas to Turkey up to 2026. Jolaei said preliminary talks have been under way to renew the deal with Turkey.

Iran exported about 9.1 bcm of gas to Iraq last calendar year, which is hoped to reach 9.3 bcm this year.

Iran’s natural gas export in 2022 was up 10% in volumes and 79% in value compared with the year before. LPG export was also up 32% in terms of volume and 57% in terms of value year-on-year.

Techno-Engineering Services

Presence in the market of various countries and exporting the technical and engineering services of the gas industry to target countries are among Iran’s important export potentialities. Therefore, development of oil and gas technical and engineering services export and income generation through it not only provides the possibility forsustaining this energy with a long-term approach, but also the country would improve its potential in income generation, job creation, technical knowhow upgrade and improving political relations.

Iran has currently signed agreements with 18 neighboring nations for exporting technical and engineering services. Ehsan Saqafi, director of Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), said:“Based on the estimates made in the entire oil, gas and petrochemical equipment market in South America, Central Asia, East Asia, the Middle East, we envision a €10 billion market, which can be achieved in three years. There is capacity to export equipment to Belarus, Russia, and Tajikistan. We have already exported equipment to Russia. Export to Belarus has not been serious enough, but the capacity has been created and the required measures have been taken, and exports to this country will begin soon. We are also thinking of exporting equipment to Uzbekistan.”

Tajikistan is also among markets to receive Iranian equipment and engineering services owing to cultural commonalities. It is also being studied.

Exports to Venezuela

During President Ebrahim Raeesi’s recent visit to Venezuela, the overhaul of gas compressor stations in Venezuela by an Iranian knowledge-based company was discussed.

Saqafi touched on the potential for exporting oil equipment to Venezuela, saying: “We predict a €5 billion market for this country in coming years. We have already stepped into the Venezuelan market, some measures have been taken and some agreements have been signed. We can hope to export €8-10 billion worth of oil, gas and petrochemical equipment to Venezuela within three years.”

Operation in Iraq

Among countries to which technical and engineering services are exported, Iraq has the highest share mainly due to deep-seated social, religious and political affinities between Iran and Iraq. Jahanbakhsh Sanjabi, secretarygeneral of Iran-Iraq Joint Chamber of Commerce, has said Iran can export $5 billion of technical and engineering services to Iraq.

Last calendar year, Iran struck $4 billion of technical and engineering service export agreements with Iraq, which would help partly offset export to Iraq. Sanjabi also said that Iran may export up to an annual $50 billion worth of technical and engineering services in the energy sector and development of oil fields.

Although exporting technical and engineering services to Iraq is part of Iran’s upstream and downstream projects, Iran is also ready to implement gas projects in Iraq. Technical and engineering services export may create jobs, which has to be taken into account by Iranian businesspeople.

Clearly, benefiting from the potential of domestic manufacturers in implementing gas projects has a promising prospect.

Investment and Production Capacity Expansion in Oil Industry

FereydounBarkeshli

Energy Market Analyst

Recent developments in the oil industry suggest that investment paradigms and behavior are not necessarily changeless over time. The process of a company investment expenditure and capital formation is influenced by a range of internal and external variables. Changes and shocks in oil prices, uncertainty, finance and liquid availability, inflation rate that affects the cost of machineries, equipment and technology may carry their impacts deep into companies and governments’ decision-making systems and establishments. In this article step by stepit will be explained that both National Oil Companies and International Oil Companies follow more and less the same patterns. However, the NOCs may show more flexibility in their decisions compared to IOCs. In the meantime, it is important to keep in mind that most NOCs are moving towards privatizing attitudes in their investments and capacity expansion specifically in upstream sector.

To begin with,it is noteworthy that international data providing institutions often have divergent views on the direction of investment. I begin my intervention with a view from 2022 OPEC World Oil Outlook published by the OPEC Secretariat on May this year.

According to the report, international oil market will require an additional 13 mb/d of crude oil for the next twenty five years. This estimate is based on the real time demand forecast that has been approvedby the International Energy Agency.

Capacity Expansion

Estimated costs for total oil-related investment needs in the long term are assessed at $12.1 trillion (in 2022 US dollars). Of this, $9.5 trillion will be required in the upstream, $1.6 trillion in the downstream and $1 trillion in the midstream. This estimate is higher than the World Oil Outlook 2021, as even though the under study period is one year shorter, some cost inflation and dollar valuation mayimpact the estimated volume of investments requirements to new heights. Inflation and bank rate hikes can significantly raise the amount of money required to add another 13 mb/d in two and a half decades from now.

It is important to note that much of the investment requirements for this capacity built up is the United States of America. This is an indication that despite all the efforts made by the oil-rich Persian Gulf countries, their share of investments and capacity expansion is still behind what the global energy markets need in order to provide fair and equitable supply of oil to inhabitants of our planet. It is noteworthy that the United State mainly invests in shale oil and tight oil development, while America’s conventional oil will receive one-fifth of the total investment. Much money is spent on so little and expensive volume of oil. This is in the light of the fact that United States has barred the appropriate expansion of oil capacity in countries with huge volumes of oil by way of sanctioning them.

The situation is even bleaker when it comes to downstream. The downstream side of the market has tightened significantly over the last few years. Demand recovery following the pandemic and decline in available refining capacity exacerbated by geopolitical uncertainties have been the major problems in the downstream sector.

For the next five years that is to year 2027 around 7.3 mb/d of refining capacity is required. For the longer term that is through the fourth decade of the century, some 15.5 mb/d of refining capacity will be required. South East Asia will consume most of the refinedproducts followed by Middle East countries that are consuming more of their own oil and refined products due to increased urbanization and initial phases of industrialization. It was timely for Iraq to sign a contact with French company TotalEnergies to build a 1 mb/d capacity.

Most OPECobservers disagree that the world economy will encounter Peak Oil Demand phenomenon by the middle of 2030s. That would mean that additional capacity built up isn’t a viable option for oil companies and governments that seek revenues and intent a proportional reward for their investments. However, it is inline with factual analysis that the rate of demand growth will slow down as renewables and energy efficiency technologies move forward.

IEA recommends that the oil sector is in an up-cycle as demand rebounds strongly from the Covid-19 pandemic. The roll-out of a low-carbon energy system is going to take time. Oil will continue to drive the global economy and define energy security for years to come. The main difference between OPEC and IEA is about the rate of demand growth and peak oil timing.

It is disheartening to note that after three years of continuous recovery since January 2020, upstream asset development spending is just under $500 billion a year, up by a third from a 2020 low, but barely half the $914 billion 2014 peak in 2023 terms. The apparent shortfall has fed a widespread belief that the industry is underinvesting and that a supply crunch is inevitable, sooner or later. Oil companies both IOC’s and NOC’s earnings have gone up tremendously after OPEC plus countries agreed to production cuts in late 2021. But most of the additional earnings were invested outside oil industry. Most oil companies invested their profits on non-conventional energies. As for National Oil Companies, most of the additional revenues went for infrastructure and development projects. However, Middle Eastern countries such as Saudi Arabia, Iran, Kuwait and UAE were the ones that invested most heavily and pointedly on their oil industry.

Lessons from Past and Way Forward

The year 2019 was a costly one for OPEC in that oil lost over 15 mb/d of its demand. Perhaps no other industry in the world could afford such a huge declinein its demand. Oil investments and oil share values went into a slump, too. Market manipulators seized no opportunity to hit at oil. They undermined the resilience of oil and OPEC countries. A time has now come for OPEC to show resistance and invest.

Below I intend to go through some of the major oil producers’ investments planning and projects.

Undoubtedly, the international oil market has undergone major shifts and still more to come. United States of America keeps pumping more oil despite its promises and pledges that the country is abiding by Conference of Parties (COP) agendas. It is for the Middle East and OPEC to be thoughtful and vigilant of the futures oil markets and oil and energy justice. Most International Oil Companies (IOCs) and industrial countries are in the business of finger-pointing Peak oil demand. There’s no mention of peak oil supply.

Peak oil supply is real. On February this year, Saudi Arabia officially announced that the country could not produce above 13 mb/d. This is inspire of the fact that Saudi Arabia is among countries that spend hefty on its oil industry, from upstream to midstream and downstream levels.

I am going to briefly touch upon a few of Saudi Arabia and other important oil producers in the Persian Gulf region.

Development Projects in Saudi Arabia

As in most other oil producing countries, oil is the main and key driver of the economy. However, during the period 2012-2022 the government has pursued a number of initiatives to modernize and expand its oil industry, including investing in new technologies and infrastructure and partnering with a number of international companies to develop new fields, boost productivity and prevent the process of aging in the oil fields.

Some of the major investments in the Saudi Arabia oil sector during the ten year period include the development of the Khurais oil field, which was launched in 2009 and is one of the largest oil fields in the world,as well as the expansion of the Shaybah oil field. In addition, Saudi Aramco, the state-owned oil company, has invested heavily in new technologies such as carbon capture and storage and has also pursued partnerships with international companies to develop new fields and explore new markets.

Overall, the investment patterns in the Saudi Arabia oil sector during 2012 to 2022 period have been focused on expanding production capacity, improving efficiency and sustainability and exploring new opportunities for growth. However, it is important to note that these investment paradigms may have been impacted by economic and geopolitical factors over the years and may continue to evolve in response to changing market conditions.

It is also important to note that most oil wells in Saudi Arabia are in the second half of their life cycle and face declining production and require greater deals of investments and professional care. In this respect, Saudi oil fields are more similar to those of Iran.

UAE Oil Sector

Abu Dhabi National Oil Company (ADNOC) plans to invest $45 billion in expanding its oil sector including expansion of refining and petrochemicals capacity by 2025. In addition, Dubai World Central(DWC) is undergoing a major expansion project worth $33 billion, which includes the construction of a new airport, residential facilities and infrastructure to serve and support the oil industry projects.

Upper Zakum Oil Fields expansion project by ADNOC is investing $3.1 billion to expand its refining capacity to 840 tb/d by 2025. Fujairah Oil Terminal expansion is investing $1.2 billion to expand its oil storage capacity and export terminals in Fujairah, which will increase its capacity by 1.3 mb/d by 2026.

Abu Dhabi Gas Industries, GASCO is investing $10 billion in the Habshan-Bab gas pipelines project which will transport natural gas from Abu Dhabi to Dubai and northern Emirates.

Abu Dhabi Marine Operating Company(ADMA-OPCO), is investing $10 billion in the Satah Al Razboot offshore oil fields development, which will produce 100tb/d.

ADNOC is investing $1.4 billion in the Umm Shaif Gas Injection project which involves injecting gas into the Umm Shaif oil field to enhance its production capacity.

Among Persian Gulf oil producing countries, UAE has the most ambitious oil production capacity expansion plan. United Arab Emirates plans to add some 1.3 mb/d by 2025. That is one reason for the UAE’s intentions to distance from OPEC so that will be free from quota system.

United Arab Emirates is to host COP28 climate conference later this year. The country intends to portray a clean energy characteristic of the energy sector. The event will boost the country’s international image and a positive signal from oil producing countries to the world.

Kuwait Production Capacity

Kuwait is a quiet member of OPEC and the international oil market. However, Kuwait is considered a powerful and impactful player for the global oil markets.

Some of the projects in Kuwait include:

Lower Fars Heavy Oil Development- KOC is investing $7 billion in the development of the Lower Fars heavy oil fields which is expected to produce 60 tb/d.

Clean Fuels Project- Kuwait National Petroleum Company(KNPC) is investing $16 billion in the clean fuels project which involves upgrading and expanding its refineries to produce cleaner fuels.

Al-Zour Refinery Project-KNPC is investing $14 billion in the development of the refinery project which will have a capacity of 615tb/d.

Burgan Field Development- KOC is investing $4 billion in the development of the Burgan oil field which is one of the largest in the world and expected to increase production by 100tb/d.

Other major projects in Kuwait are gas- related such as Sabriyah Gas Storage Project by KOC, is investing $3 billionandis aimed at constructing underground gas storage facilities to ensure reliable gas supply.

When we add up oil sector capacity expansion and production maintenance of five important oil producers:Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Oman, the total dollar volume of oil and oil-related projects is around $ 985 billion through 2025. While both OPEC and the IEA suggest that oil industry needs an additional investment in the order of $9.5 trillion(upstream and downstream), in order to catch up to 1.9 to 2.2 mb/dincremental output through 2035 when peak oil demand is estimated to arrive.

This is a clear indication that the global energy think tanks are going wrong somewhere. That is to mean, we have either overestimated the advance of renewable sources of energy and energy efficiency or possibly gotten wrong with the figures for investment requirements. It is true that production costs of the Middle East is much below the world average cost of production but it is also essential to note  that NOCs act based on prospects for oil consumption. When major oil consuming countries keep telling them that they don’t want their oil but you must keep building capacity in order to support our energy security, investors don’t volunteer.

Energy Integration

A major problem that energy industry in general and oil industry in particular face today is the politicization of climate change and environmental aspects related to energy consumption. Oil and non-conventional energy sources aren’t rivals or competitors. They are integrated and jointly help the world to be a better place for future generations.

According to estimates, the world has to spend $42 billion by end of 2024, just to decommission the existing infrastructure and facilities in the North Sea and UK together with the Netherlands and Denmark. This is a huge cost. In case North Sea producers do not want to produce, they may stop production. Facilities that don’t produce are not polluting.

The general wisdom suggests that conventional energy and green hydrogen or renewable sources of energy can coexist. They don’t need to be at war with each other. To explain more precisely, the global economy and energy system are at a crucial juncture, characterized by uncertainties that weren’t seen during the last century. As such the input of all energy players is required in full.

Oil and renewables are not at war with each other. They are complementary. Therefore, stakeholders are called on to collectively work towards energy transition through a system of energy integration. According to International Energy Agency, there were a total number of 1.7 billion cars and vehicles on the roads in the year 2022, out of which a total number of 7 million were electric ones. Gasoline is considered the main engine of oil consumption growth. In the meantime, according to IEA estimates, the total number of electric vehicles will increase five folds by 2030, which is still a small fraction of the number of cars on the world.

Of course, there are numerous factors and variables at play here: the way world economy behaves, estimated rate of the world economygrowth,inflation and interest rates in the United States, rates of growth of Chinese economy and Chinese energy demand. European Union and its future energy policy harmony, as well as those of India may play amajor role in energy consumption centers.

Solstad Gains Extensions to Vessel Contracts Offshore Brazil

Solstad Offshore has secured offshore vessel contracts from two oil companies in Brazil with a combined value of $100 million.

PRIO has awarded an 18-month extension to the charter of the Normand Pioneer construction support vessel to August 2025, which will assist the company’s E&P activities in Brazilian waters.

Solstad and Equinor Brazil have entered an agreement to convert the platform supply vessel Normand Carioca to a well stimulation vessel and extend its present contract through December 2027, with Equinor covering the cost of the conversion

Saipem to Overhaul Bouri Platforms Offshore Libya

Mellitah Oil & Gas B.V. Libyan Branch, a consortium between Eni and NOC, has awarded Saipem a $1 billion EPCIC contract for the Bouri Gas Utilization Project offshore Libya.

Saipem will perform a revamp of the platforms and facilities serving the Bouri gas field, located in water depths of 145 m to 183 m in the Mediterranean Sea. One of the aims is to reduce CO2 emissions.

The company will engineer, procure, construct, install, and commission a new 5,000-ton gas recovery module on the DP4 platform and lay 28 km of new subsea pipelines connecting the DP3, DP4, and Sabratha platforms.

German Regulator Wins 1.8-GW Wind Auction

Utilities RWE, Vattenfall and development firm Waterkant Energy have been awarded four offshore wind sites in the North Sea in a tender worth 784 million euros ($864.75 million), the German energy regulator said Aug. 10.

The companies secured rights to the areas suited to housing 1.8 GW of power turbine capacity, the authority, which awarded the rights, said in a statement, adding commissioning was expected in 2028.

The allocation complements a 12.6 billion euros offshore wind tender for 7 GW that two oil majors won last month.

Valeura Expanding Production Facilities in Thailand

Valeura Energy expects to mobilize a new mobile offshore production unit later this year to the Nong Yao oil field in the Gulf of Thailand, with development drilling starting soon afterward.

The installation has started of a new 3-km subsea pipeline that will connect the Nong Yao C system to the field’s existing production facilities.

Output from the field in license G11/48 rose recently following the drilling of two horizontal infill wells, and the company plans further infill drilling to boost production and minimize the effect of natural declines.

LNG Japan Farming Into Australia Project

Woodside Energy and LJ Scarborough Pty Ltd (LNG Japan) have formed a strategic partnership that covers the latter taking equity in the Scarborough joint venture (JV) offshore/onshore Western Australia, potential LNG offtake and collaboration on opportunities in new types of energy.

Under the agreement, LNG Japan will acquire a 10% non-operating stake in the Scarborough JV for $500 million, subject to adjustments. In addition, LNG Japan will reimburse Woodside for its share of expenditure for the Scarborough project from Jan. 1, 2022.

US SPR Release; Opportunity or Challenge?

Shuaib Bahman

Ever since the outbreak of the war in Ukraine, global markets have been largely affected in various economic sectors as Russia, a top producer of fossil energy in the world, was slapped with Western sanctions, forcing the Kremlin to reconsider its oil and gas sales to certain states. While many expected the continued war to drive global energy prices up, a variety of measures including tapping strategic reserves by some countries like the United States did avoid any sharp price hike. However, it seems that the long-term use of this policy would not affect global markets and would instead affect the US domestic atmosphere in the run-up to the next presidential election.

When Russia – Ukraine started in February 2022, the US undertook to release 30 million barrels from its Strategic Petroleum Reserve (SPR) in a bid to prop up world oil markets. That was in response to European and Asian nations’ commitment to free up their energy reserves in a bid to strike a balance in global markets. Back then, the US and 30 other members of the International Energy Agency (IEA) committed to releasing 60 million barrels of oil from their strategic reserves with a view to helping stabilize global energy markets. Half of that total – 30 million barrels –come from the US SPR, and the other half will come from allies in Europe and Asia. The US Department of Energy then announced it would release more than 200 million barrels of oil from the SPR in winter to keep oil prices in check. It confirmed it had sold part of its SPR at $95 a barrel in 2022, which triggered domestic political opposition.

SPR

The US SPR has already been tapped by US officials to allay market concerns. In fact, the US administration has already dipped into its strategic petroleum reserves in the midst of political tensions and military crises to control the oil supply on global markets. The US first released oil from its strategic reserves in 1991 when then President George Bush (senior) ordered so during the Iraqi invasion of Kuwait. That was done in coordination with fellow IEA member states. Fourteen years later, when Hurricane Katrina severely damaged US oil facilities, President Bush (junior) ordered that 30 million barrels be sold from the SPR. Six years after, IEA member states once again decided to tap their strategic reserves to respond to oil supply disruptions following Libya’s civil war. When Saudi Aramco oil installations were struck in 2019, cutting the country’s oil exports by half, the Americans once more tapped their SPR.

The idea of the US SPR dates from World War II (WWII), but it took shape effectively just after OPEC imposed an oil embargo on the West in 1973 and 1974. The Organization of the Petroleum Exporting Countries decided to raise oil prices and stop selling oil to Western governments in protest of their support for the Zionist regime during the Yom Kippur War. That caused an economic crisis in the US, pushing the country to put into practice the idea of SPR. In the following years, the IEA called on consumers to establish strategic reserves for their three-month consumption.

In the US, the president is the sole authority who can order tapping the strategic reserves. President Gerald Ford signed a bill into law in 1975, authorizing the president of the US to release oil from the SPR only when a serious halt comes up in the global oil supply. That is why President Joe Biden’s release of oil from the SPR, at a time the country is faced with no serious threats and the oil supply, is not halted, has caused debate in the country. Republicans believe that the US should only release oil from its strategic reserves to counter the Russian invasion of Ukraine and protect its European and Asian partners without having any impact on local energy prices.

Restrictions

Although oil release from strategic reserves has always been a solution for the US administration, restrictions do apply.

First and foremost, it is not possible to release more than 4.5 mb/d from the SPR. Therefore, if the market is in serious need, tapping the SPR would be faced with serious restrictions.

Second, according to the US Department of Energy, it would take 13 days for the released oil to be supplied on the market after receiving presidential greenlight. Such interval will no doubt let shocks leave impact. Therefore, the SPR cannot offer a quick solution.

Third, the crude oil held in the SPR needs to be processed at refineries prior to being supplied on the market. Therefore, under emergency conditions when the market needs fuel, the SPR can be of no help.

Fourth, although the SPR can ward off price shocks in the short-term, it would give bullish signal to the market in the long-term as it would mean emptied reserves, which would definitely have significant psychological impacts on the market.

Fifth, simply releasing oil from the SPR would not be instrumental in market balance; rather it would be effective when other countries join the initiative. In fact, should the US fail to coordinate  with its allies, including Europe, it could not by itself have any serious impact on the market or at least any impact would be short-lived.

Sixth, replacing the oil released from the SPR can be accompanied by issues and challenges. As the US Department of Energy has announced, oil prices at $68-73 a barrel would be good for starting to replenish the SPR. Although oil purchase for that purpose is done when oil prices are low in the market, the effort to make additional purchase would increase demand and affect prices. Therefore, although the Biden administration has moved to purchase oil at $67-72 a barrel to refill the SPR, the market would experience shortage of supply as demand for high sulfur content oil, which the US Department of Energy looks for, increases due to the production cut by OPEC+ countries.

Seventh, release of oil from US strategic reserves would not be just in favor of the US and its allies in terms of price control; rather, US rivals would benefit as well. For instance, China is a beneficiary to the US SPR oil release without having to dip into its own strategic reserves.

Eighth, refilling the US SPR has faced evident political opposition that may have an impact on the forthcoming presidential election. For instance, former US President Donald Trump has taken to task his successor for oil release from the SPR, saying it would be for wartime and other emergency conditions. Trump asserts that Biden has released oil from the SPR merely to artificially reduce high oil prices without contributing to any decline in energy prices inside the US. That comes against the backdrop of falling popularity of President Biden due to high fuel prices, which would threaten him and his Democratic allies.

Energy in Kenya; Iran Opportunities

Kenya is at the crossroads of East Africa, which has in recent years developed its economic service sector and made significant progress in the use of modern technologies. Although more than one-third of the country’s 46 million people still live below the poverty line, the middle class that has emerged in recent years accounts for three-fourths of GDP growth. The middle class also representsthe country’s major energy consumer. The remarkable point about Kenya’s energy sector is its investment in renewables. Currently, more than 75% of the energy consumed in Kenya is supplied by renewables, which mainly include geothermal energy and hydroelectricity. The Kenyan government plans to switch to 100% clean energy by 2030. Kenya’s goal in its Vision 2030 plan for the energy sector is to increase investment in renewables.

The country’s desire to use clean energy has been influenced by several factors, including the need to mitigate greenhouse gas emissions and the urgent need to provide reliable and affordable energy for its growing population. For this purpose, Kenya’s geothermal energy production is forecast to increase 9-fold, which could, along with solar and wind energy, supply most of the country’s energy needs.

Investment in Geothermal

In general, Kenya has made significant investments in geothermal power plants in recent years. Like much of East Africa, this country is located on the Great Rift Valley fault and has strong geothermal currents, estimated at 7,000 MW.For this reason, the United Nations and global development banks are encouraging investments in geothermal energy throughout East Africa and have planned projects in Ethiopia, Tanzania and Djibouti. Kenya began using this energy in the 1980s with the construction of the first unit of the Olkaria Power Plant in Naivasha, 120 km northwest of Nairobi. Currently, Olkaria, with a total production capacity of nearly 550 MW of electricity, constitutes more than 45% of the country's electricity production and has become one of the largest geothermal power plants in the world.

Geothermal energy is a renewable and environmentally friendly energy that does not emit carbon dioxide and other greenhouse gases. For this reason, it has many advantages for energy production, one of the most immediate applications of which is heating greenhouses for the production of agricultural products. Also, this source is cheaper than other sources of energy. For example, one-kilowatt hour of geothermal energy in Kenya costs $0.07. Meanwhile, for the same amount of electricity production by fuel oil, $0.18 should be spent. In addition, geothermal energy does not emit pollutants, and at the same time, it is more regular than solar or wind energy.

Moreover, Kenya is among the countries that benefit from the best levels of sunlight in the worldas it is located on the Equator. Scientists estimate that the country’s solar potential is 4.5 kWh, which is among the best rates in the world. So with such natural data, Kenya has the possibility to create solar parks. It is currently the frontrunner in the number of solar energy systems installed in the world. In rural areas across the country, the use of solar energy to generate electricity is on the agenda.

Meantime, significant investments have been made in Kenya in the use of wind energy. According to the Kenya National Bureau of Statistics, the country has the largest wind farm in Africa. The Lake Turkana Wind Power Project, which is Africa's largest wind farm, consists of 365 wind turbines capable of powering more than one million homes.

Iran-Kenya Cooperation

Cooperation between Iran and Kenya in the energy sector is not a new issueas it has been considered by both parties in the past years. Kenya used to be one of the buyers of Iranian oil and imported about 30 mb/y from Iran. Although this process was disrupted due to US sanctions, the desire of both sides to continue cooperation in the energy sector has not changed. During President Ebrahim Raeesi’s recent visit to Kenya, both sides emphasized the development of energy cooperation.  

Despite all the investments madeby Kenya in renewables, oil and petroleum products are still needed in this country and have a significant share in the industrial sector. The important point is that Kenya has to import oil products, thereby giving a country like Iran a considerable opportunity to export petrochemicals there.

Reviewing details of Iran’s exports to Kenya in the past years also indicates that the African country has mainly been a buyer of petroleum products. In such a way that bitumen is ranked first among Iran’s exported goods to Kenya with a 75.99% share in this list. Considering this historical background, Iran’s capabilities, and Kenya’s needs, Tehran has a significant opportunity to cooperate with Nairobi in the petrochemical field.In addition, the presence of major international oil companies in Kenya's oil and gas exploration sector has created opportunities for service companies. There are services related to geophysical data collection, oil well registration and testing, drilling rig services, and a wide range of other related services in this field, which is an opportunity for Iranian technical-engineering companies to be present in the country.

On the other hand, Kenya’s energy market desperately needsLPG whose consumption has been increasing in recent years. In various ways, the Kenyan government is trying to replace biomass fuel and kerosene with LPG for domestic and industrial use because these fuels have led to major deforestation and environmental pollution. Therefore, according to the policy of the Kenyan government in expanding the use of LPG, as well as the considerable expertise, knowledge, and resources that Iran has in this regard, there is scope for bilateral cooperation.

Kuwait Energy Outlook; Impossible Ambitions

Shuaib Bahman

Kuwait’s ambitious development plan “Vision 2035” is aimed at transforming the country into a globally important financial and trade center to attract domestic and foreign investment. At the frontline of Vision 2035, lies the Silk City project to which 250 square kilometers of land has been allotted in northeastern Kuwait with an estimated investment of $86 billion over a 25-year period.

As part of its efforts for economic development and upgrading its regional and international standing, the Kuwaiti government is seeing energy as a driving force. Given Kuwait’s rich resources and income, energy would be instrumental in financing its ambitious plans. Kuwait has also been using oil bonanza to invest in renewable energies.

A leading oil producer and exporter, Kuwait is a founding member of the Organization of the Petroleum Exporting Countries (OPEC). Holding the world’s 5th largest oil reserves, Kuwait is the fourth richest Arab League nation in terms of per capita income. The petroleum industry is the largest industrial sector in Kuwait, covering nearly half of the country’s Gross Domestic Product (GDP) and the bulk of its exports. Therefore, oil revenue is key to Kuwait’s budget spending.

Oil Output Hike

Given the importance of oil in Kuwait’s economy, the country has paid due attention to investment in the energy sector. One of the key projects in this country is the Al-Zour oil refinery, which is part of Vision 2035. The refinery is expected to produce environmentally-friendly varieties of fuel.

Kuwait’s oil production capacity currently stands at 2.8 mb/d, which is aimed to raise to 3 mb/d by 2025. Kuwait Oil Company (KOC) plans to spend about $42.2 billion on its oil projects up to 2027-2028. The Kuwaiti government had already announced its intention to invest over $100 billion in the oil and gas industry between 2018 and 2023 with a view to enhancing crude oil and natural gas production capacity. Natural gas is currently the fastest growing market in Kuwait’s energy sector and the government is planning to supplant natural gas to oil for power generation. That would be of significant help to Kuwait’s savings and investment. The country is expected to bring its natural gas production from the current 17.4 bcm/y to 27.3 bcm/y in 2035.

Towards Clean Energy

Kuwait has not spent abundant oil revenue merely on financing development projects or the fossil energy sector. Rather it has made major infrastructure investment which would reduce its dependence on petrodollars. Increasing electrical energy production and building new stations to use renewable and clean energies, particularly solar, is among plans enshrined in Vision 2035.

In 2016, the Kuwaiti government announced it hoped to produce about 15% of its requiredelectricity from renewables by 2030. This ambitious objective is being pursued through implementing a number of major projects. One of these projects is the Abdali solar park. Another one is the 2,000MW Shagaya Renewable Energy Park which started out in 2013. The Shagaya project has partly met electricity demand in Kuwait. Once fully operational, it would power about 100,000 households.

Investment in renewables would largely reduce Kuwait’s dependence on fossil fuels for energy production. Therefore, Kuwait’s plans in the renewables sector is expected to save the country up to $2.5 billion per annum for electricity production up to 2030.

Ambitions Possible

As the world shifts to clean and sustainable energies, Kuwait is trying to diversify its energy mix and benefit from its big potential in renewables. The government has set out ambitious goals to raise the share of renewables in electricity generation. That has boosted investment in new renewable energy projects.

One reason for Kuwait to move towards renewables is growing domestic demand for electricity. In light of fast demographic growth and growing industrialization, electricity consumption has increased at a worrying speed in Kuwait. In order to meet this growing demand, the government has made huge investment in developing its power generation capacity with the focus being on renewables like solar and wind. Meantime, given Kuwait’s climate, investment in solar energy has been welcomed more than other renewables. Coincidentally, power consumption peaks when the sun is at the peak of radiation. Therefore, most renewable energy projects in Kuwait are focused on solar, which would be low-cost and highly technological.

According to the Kuwaiti government, the focus on renewables is not merely due to inclination for meeting growing electricity demand; rather, Kuwait is honoring its pledge to cap GHG emissions and fight global warning. As a signatory to the Paris climate agreement, Kuwait has pledged to cut its carbon emissions by 30% up to 2030. It is also important to know that the renewable energy growth in Kuwait has had positive impacts on the economy, resulting in the development of new projects, job creation and attraction of foreign investment and experts.

Kuwait is a resilient economy warding off any economic and financial crisis. According to international data, it has the fourth largest sovereign wealth fund with a balance estimated at $592 billion. Kuwait is also home to big gold reserves that strengthen itsnational economy. Therefore, fulfilment of objectives enshrined in development plans for further use of renewables and reducing the share of fossil energies is realistic.

Isfahan Refinery Set to be Integrated with Largest Mideast Petchem Plant

The Isfahan oil refinery has the highest diversity among Iranian refineries in supplying petroleum products. It supplies 32 products, meeting 25% of national needs. Gasoline and kerosene are the main products of this refinery, both being fully consumed domestically.

Mohsen Qadiri, CEO of Isfahan Refinery-Integrated Petrochemical Complex, has said that sustainable and balanced development and reaching the maximum Nelson Complexity Index (NCI) in the region are enshrined in the Isfahan Refinery’s Vision 2026. The NCI takes account of what types of petroleum products an oil refinery can produce. Measured on a scale from 1 to 20, the higher the value of the NCI, the more sophisticated and complex products the refinery can produce. The petrochemical units of this refinery are set to be launched in 2027, which would be a big revolution in this sector, in which case, the Isfahan Refinery would become mainly export-oriented.

The current NCI of the Isfahan oil refinery stands at 6.8%, which is expected to rise to 9.9% by 2025 and to 12.6% by 2028. The average NCI at Iranian refineries is 5.8%. The facility is striving to reach 16% within five years.

€1.5bn Revenue

Currently, 450 projects are underwayby the Isfahan Refinery, being 43% completed.Seventy percent of these projects are underway at the refinery itself and the rest at the 6 subsidiaries of the refiner. The objective sought throughout the sustainable development of the refinery is to claim the top position in the Middle East by 2026, which would make the plant competitive in all areas.

Qadiri said the planned refinery-integrated petrochemical plant would eye €1.5 billion in revenue by 2028 as higher-value products would be manufactured.

Six quality upgrade projects are underway at this refinery, pertaining to improving the refining process.

Noting that the six projects were 97% completed, Qadiri said: “These projects include Diesel Hydrotreating Unit (DHT), utilities and completion of storage facilities, Residue Hydrotreating Unit (RHU), Residue Fluid Catalytic Cracking (RFCC), Kerosene Hydrotreater (KHT), and LPG recovery from gas emissions of the isomerization unit.”

He said that the DHT unit became operational 16 months ahead of schedule, adding: “That has helped supply 26 ml/d of Euro-5 gasoil, earning IRR 195 trillion in profits.” 

He also said that the RHU unit would become operational by March 2025, which would facilitate the production of fuel oil with below one percent sulfur content.

Qadiri said the Isfahan Refinery produced 14 ml/d of gasoline, adding: “The construction of the RFCC unit was resumed in February 2023, which would come online by March 2026. There is also a plan to increase gasoline production by considering an initiative to receive gas condensate “

He said that the future operation of the RFCC unit would help increase the Euro-5 gasoline production at this refinery by 7.9 ml/d, which would finally bring the refinery’s total gasoline output to 21.5 ml/d.

Regarding the KHT unit, he said it was 21% completed, but would come on-stream by next March. The KHT unit would upgrade the quality of the entire gasoil produced at this refinery to the Euro-5 grade. 

Petchem Units

Major developments are expected at the refinery once its integrated petrochemical complex would become operational up to 2027. The petrochemical units would be fed with propane, butane, C4 raffinate, propylene, and aromatic 3-rich fuel oil to supply 523,000 tonnes of polyether polyurethane, 760,000 tonnes of methyl tertiary-butyl ether (MTBE) and 396,000 tonnes of ship fuel a year.

The petrochemical units of the refinery are estimated to earn €2 billion per annum. The production of MTBE would bring about a major change at the facility.

For the first time, fatty alcohols would be produced at this refinery at the rate of 100,000 tonnes a year.Fatty alcohols are mainly used in the production of detergents and surfactants. They are components also of cosmetics, foods, and as industrial solvents. Due to their amphipathic nature, fatty alcohols behave as nonionic surfactants. They find use as co-emulsifiers, emollients, and thickeners in the cosmetics and food industry. About 50% of fatty alcohols used commercially are of natural origin, the remainder being synthetic.

$200mn Annual Exports

The Isfahan Refinery plans in its Vision 2027 to supply products based on Europe’s 2030 energy mix.

Qadiri said the refinery would gradually stop producing products that are likely to be no longer used to instead opt for products in the value chain.

“When we enter the value chain, we would be faced with threats which we can dispel,” he said.

In the future, the Isfahan Refinery would be the sole refiner to supply products based on a global vision. Production of polyether polyurethane and MTBE is commercially viable now.

Two products are destined for Europe, which would be earning the country $200 million in annual revenue by 2026.

Iranian Control System

The Isfahan Refinery is undergoing development and quality upgrade based on the domestic manufacturing approach. The refinery is expected to meet 95% of domestic manufacturing.

The Distributed ControlSystem (DCS) made by a subsidiary of the Isfahan Refinery would be installed at the KHT unit within months. Eighty percent of this project is based on the reverse engineering of an American company’s product whose technical know-how has been purchased.

The Isfahan Refinery’s refining capacity currently stands at 375 tb/d, which is planned to reach 400 tb/d.

The refinery was initially co-designed by an American and a German company from 1976 to 1978, but it was launched in February 1980, in the aftermath of the Islamic Revolution without any foreign staff on hand

Ali Nahavandi, Oil Industry Pioneering Ophthalmologist

Oil exploration and production in Iran has seen myriad developments in the political, economic, and social sectors. The petroleum industry also affected medical and health domains, introducing valuable figures to Iranian society.

Experts have always seen the petroleum industry as a double-whammy. The discovery of oil in Iran 115 years ago has had profound impacts on the circumstances and fate of this land. Among all these political, social, and economic impacts, some famous persons are having entirely fulfilled their social responsibilities vis-à-vis Iran and Iranian society to prove that one can remain faithful to Iran and humanity in the most challenging sectors of history. Ali Nahavandi (1914-2009), the pioneering ophthalmologist in the petroleum industry, is one case in point. Faithful to his profession, he could be remembered as a famous Iranian specialist.

Nahavandi was born in Tehran where he finished his primary and secondary studies before entering the School of Medicine in 1939. He was among the second group of students of a French professor. He finished his general medicine studies in 1946. Nahavandi’s handwritten memories are on display at the Petroleum Museums and Documents Center.

From Farabi to MIS

Farabi passed his apprenticeship at the Farabi Hospital of Tehran. His presence there coincided with Professor Mohammad Qoli Shams, the leading ophthalmologist. That motivated Nahavandi to opt for ophthalmology.

Nahavandi was employed in 1948 by the Anglo-Iranian Oil Company (AIOC) and started serving at the company’s center of activities, i.e. Masjed Soleyman (MIS). He had given a poor assessment of AIOC healthcare services. His report is indicative of the dominant imbroglio in the lead-up to the 1953 nationalization of the petroleum industry. The Jahan-e- No magazine, in an issue which appeared one year before Nahavandi’s appointment to MIS, that Iranian petroleum had become the “largest asset overseas in the hands of the British Empire”. In its report on the AIOC healthcare services, the magazine said oil service workers were still living in tents and had nothing to eat but bread and herbs.

Once, Nahavandi had the chance to accompany Professor Shams in his campaign to uproot trachoma in Khuzestan. Trachoma, pox, and measles were rife in Khuzestan. They finally managed to contain the spread of trachoma in the province.

Nationalization

The nationalization of Iran’s petroleum industry was long dreamt of by Dr. Nahavandi. He had already seen the restrictions faced by Iranians in the face of decision-making by non-Iranian managers of AIOC and had been punished time and again for having visited non-corporate patients in his office. However, he loved serving people. All through his years of service in the petroleum industry, Nahavandi did not quit MIS unless on missions and he lived with them for good.

Nahavandi was supposed to retire at the age of 60, but the importance of his work and services pushed the head of the MIS health department to demand that Nahavandi remain in office. He was hired again under contract, which was renewed four times until the 1979 Islamic Revolution. He witnessed the overthrow of the Pahlavi regime and was always indulged in rendering services to people. Barely had Iran’s new political establishment taken shape than the Saddam regime invaded Khuzestan. Under such conditions, Nahavandi fulfilled his obligations and remained ready for sacrifice. When the province came under missile strike, many physicians left the area, but Nahavandi remained there to treat the people injured inthe war. He never thought of abandoning people there despite all pain and suffering.

A Request

He is survived by only one handwritten request in which he had asked the head of the MIS health division to take action for the construction of air shelters amid the bombings by Saddam warplanes. In his request, he had suggested that a swimming pool in his social residence could be modified to serve as shelter.

The war ended and Nahavandi had another brilliant page added to his memoirs. He was finally quit his office at the MIS hospital in October 1998. He was 84 as he was retiring for a second time in the petroleum industry. He always took pride in his contribution during the imposed war. But retirement had no sense for him. After retirement, he moved to Vila Shahr in Isfahan along with his adopted daughter. He lived there until he passed away. Nahavandi symbolized devotion to people.

Famous Footballer Heading IOOC Sports

Newsha Rouzban

Ali Kazemi is a well-known Iranian footballer and futsal player with a brilliant track record. He is heading the Sports and Physical Exercises Department of the Iranian Offshore Oil Company (IOOC). The following is the full text of the interview “Iran Petroleum” has conducted with him:

You are said to have started your sports activities in childhood. Would you please tell us how you started football?

Like every other footballer, I started playing football on dirt pitches for years. It continued until I found my way into “EsteghlalJonoub Tehran Football Club” where I was trained by ArdeshirLaroudi and Nader FaryadShiran among others. Interestingly, all of those who were being trained at the club grew into famous footballers. I can single out Mohammad Khakpoour, Hamid Esteeli, MasoudEsteeli or Majid Zare’. After going through all stages of the club, I joined the Daraeifootball club. When my military service started, I joined Fath to continue football. Later on, I was invited to join the national futsal team, which spelled an end to my professional football.

Could you tell us more about your presence in the Fath team and your achievements there?

I played there for several years in the first league. For one season, I was with the “SanayevaMaaden” team. Fath was a very good team. KhodadadAzizi and JavadManafi were also doing their military service by playing there. Fath was a very good team. I remember quite well we overpowered Persepolis 6-0 in the Hazfi Cup matches in September 1994. I scored 19 goals in that season. I was playing as captain and half-back. Eight of my goals were scored during the penalty shoot-out. Also in the Ramadan Cup futsal matches, we managed to defeat Tehran’s Esteghlal 7-3 in the final match. I trained even at night. I was with Fath until 1998. We wonthe championship several times. In 1998, I was invited to the national futsal squad. I was then told that I could no longer return to football. That’s why I had to stay in the futsal team for good.

What motivated you to choose futsal for the rest of your sports career?

I can say that my presence in futsal was not my own choice as I preferred football. Those who were invited to the national futsal team had no idea they would no longer be able to return to football. I remember quite well that many famous footballers were chosen to join the futsal team, but they were advised against shifting to futsal. However, were told that we could no longer play football.

How do you compare the futsal status today with that time? Has there been any progress?

Back then, since footballers played futsal too, everything was different. Futsal players dribbled better and had more effective technical mobility, but today their mobility is not sufficient.

Now can you tell us about your presence in the national futsal team and also as a legionnaire?

When I was professionally active, I achieved a variety of awards. As I said I started with Fath and won the Ramadan Cup championship titles three times. We became the pro league champion three times with Esteghlal and twice with Pas. I have also one championship title on my record when I was with the Islamic Azad University team. I also played as a legionnaire in Kuwait for 10 years. There, I gained the championship title once. At the national team, I recorded one Asian championship, two Brazil Cup runner-up titles, and one Moscow Cup runner-up title. I was also invited to the national adolescent and youth football team once. My trainers there were ArdeshirLaroudi, Nader FaryadShiran, Hossein Rahmani, Hossein Shams, Homayoun Shahrokhi, and Nasser Saleh.

Could you tell us about your activity in the petroleum industry and more specifically with IOOC?

IOOC is investing in almost all sports disciplines. For instance, we have a specific sports festival that is largely welcomed by IOOC staff. In the islands administered by IOOC, numerous sports events are underway in swimming, badminton, tennis, beach volleyball, and football. These athletes participate in maritime organ matches that have not been held for three years now. They compete with teams from shipping companies. IOOC has achieved good titles. Beach football and volleyball teams are active on the islands. Football and futsal are also popular and we have good teams.