Investment in Petrochemicals

Ali Forouzandeh

Director General of Public Relations

The 13th administration has made massive efforts to develop the petroleum industry, particularly the lucrative and appealing petrochemical sector, making great achievements in the process. However, investment in this value-generating industry is so attractive that there is still room for maneuvering.

Investing in financing projects is the first and foremost issue in launching petrochemical projects. Therefore, given the importance of this issue, packages have been forecast for investment in the petrochemical industry. Capital market actors and financiers are largely expected to benefit from new financing methods.

Iran’s current petrochemical production capacity stands at 92 mt, which is expected to jump to 200 mt over a 10-year period through which more than 100 new projects would come online. It would earn the country $180 billion in value annually, which means this industry could finance its development projects while helping the national economy and creating jobs. The main petrochemical projects are concentrated in six special industrial and economic development zones – Mahshahr, Assaluyeh, Kangan, Siraf and Dayer, Parsian, Chabahar, and Qeshm.

Realization of a projected 8% economic growth and accomplishment of petrochemical development objectives by the end of the 8th National Development Plan would require $7 billion in annual investment, which indicates the great potential that this sector enjoys in attracting investment.

Reconsidering some procedures, the 13th administration has made arrangements to revive mothballed projects. The petrochemical industry has currently dozens of projects close to operation. It has long-term plans for diversity, independence, completion of the value chain and finally reducing crude oil sales. After all, Iran’s petrochemical industry remains open to domestic and foreign investment.

Makran to Become Iran’s 3rd Petchem Hub

Negar Sadeqi

With eighteen petrochemical plants set to be built in Makran, it would become Iran’s third petrochemical hub. The general policy of the National Petrochemical Company (NPC) in issuing licenses for petrochemical plants in Makran is based on the completion of the value chain. Therefore, selling raw materials would be banned in the Makran Petrochemical Park (MPP).

The MPP would be developed in two phases. In Phase 1, six projects would become operational. Ali Reza Moniri-Abyaneh, the CEO of Negin Makran Petrochemical Company (NMPOC) which is developing the Makran hub, reckoned that €20 billion would be invested in the MPP. He said incentives were envisaged for prospective investors there, adding that access to the Gulf of Oman as well as the consumer market were among the advantages of investment in southeastern Iran.  

One major policy pursued by the 13th administration has been to set aside crude sales in producing petrochemicals. Therefore, over the past years, efforts have been made to issue licenses to projects aimed at completing the value chain. Iran’s current petrochemical production capacity stands at 92 million tonnes a year, which will reach 130 million tonnes by the end of the 7th Five-Year Economic Development Plan in March 2029. Since competition in the global petrochemical market will become tighter in the coming years, NPC will naturally start policymaking in this sector from now on. There are already 75 petrochemical plants in the two hubs of Assaluyeh and Mahshahr. However, petrochemical development is not limited to these two hubs. Due to Iran’s economic privileges and strategic position, NPC has chosen some areas for petrochemical industry development. Southeast Iran is one of them. The hub under construction there is Makran. An advantage of this hub is access to the Gulf of Oman which is linked with the high seas, directly neighbors Pakistan and Afghanistan, and indirectly Central Asian nations (via Turkmenistan). In the late 2000s, the then administration adopted the plan for the economic development of Makran, involving the provinces of Sistan &Baluchestan, and Hormzugan. It was then agreed in 2011 that Makran would host the third petrochemical hub.  Later that year, the Ministers of Petroleum and Defense signed an agreement according to which the Ministry of Defense would develop this area through “Shastan Investment Company”. Negin Makran Petrochemical Development Company (NMPDC) is tasked with developing infrastructure in the Makran area on behalf of NPC.

Private Investors

The MPP covers 1,200 ha. Until 2017, about 60 km of roads and 63 km of canals for gathering surface water had been built there. Furthermore, 50,000 trees were planted in the park. Water and power supply infrastructure had been built before 2017. However, the bulk of the MPP development was done in 2020. There are currently 4 investors operating in the MPP. Once their projects are completed, €8 billion in investment would be absorbed. By December 2023, €1.5 billion had been attracted.

Private investors are currently operating projects in the MPP. Shastan, Bakhtar Petrochemical Company (BPC), and Pasargad Energy Development Company (PEDC) are involved. The utilities are being handled by NMPDC and are 60% completed now. After that, two methanol units from BPC would become operational by 2025. Moniri-Abyaneh said for the first time methanol-to-olefin (MTO) is being operated by BPC.

Selling raw materials would not be authorized in the Makran hub and Moniri-Abyaneh said: “This policy is being implemented under the stewardship of NPC. All licenses issued for building plants in this area are based on this policy.”

A mini-LNG plant is also planned to be built in this park. BPC has been allotted the necessary land for its projects which it is yet to begin. But, under NPC planning, these plants would not get involved in methanol production and would rather be active in value chain completion.

6 Projects in Phase 1

Gas has been supplied to Chabahar via Iran Gas Trunkline 7 (IGAT-7) since last March. Therefore, 30 mcm/d of gas would be supplied to the MPP as feedstock. NMPDC, in partnership with Japan’s Toyo, had conducted feasibility studies on the petrochemical projects and revised some of them. In the end, the construction of 6 petrochemical projects received the necessary license from NPC.

Moniri-Abyaneh said that five GTX units for converting methane to products of higher value, as well as a urea/ammonia unit, would be built in Phase 1 of the MPP. He said that following arrangements with NPC, 21 projects were envisaged in the practical chain of the downstream industry, using feedstock from Phase 1.

Therefore, in Phase 1 of the MPP, Shastan would be investing in a GTX unit under the name of Badr Sharq Petrochemical Company and utilities, BPC in two GTX units under the name of Kimia Sanat Mabna, PEDC in Sina Petrochemical Plant, and one GTX unit. Due to the high rate of return on investment in this industry and the advantage of access to consumer markets, good incentives are envisaged for investment, be it domestic or foreign, in this hub. The advantages include 100% ownership of land, up to 50% discount for transit commodities, and a 20-year tax break since the start of operation.

Moniri-Abyaneh said that based on an MOU signed between NMPDC and China’s CPCIF, Makran was recognized as the best area for an Iranian-Chinese petrochemical park.

Methanol Storage Tanks

The MPP also owns an exclusive jetty for petrochemical exports in Shahid Beheshti Port of Chabahar. Ports and Maritime Organization (PMO) is tasked with building this jetty for the park. However, since construction operations for this jetty are behind schedule, the idle oil storage capacity of the area would be at the disposal of the park. As of next summer, methanol will be exported from this jetty in limited volumes. Alongside the export jetty, a project for building methanol storage tanks is also underway.

These tanks are built on 8 ha of land with €50 million investment in three phases. Once the tanks have been built, methanol would be transferred to this port to be stored. In Phase 1, two 68,000-cubic-meter storage tanks would be built.

Moniri-Abyaneh said the four methanol storage tanks would be exporting methanol for a limited period because NPC’s policy is to convert methanol to olefin to serve downstream plants. But as long as these units are not operational, methanol could be exported.

Chabahar Economic Prosperity

The three economic, environmental, and social functions were the most important tasks assigned to NMPDC in the MPP development. Economically speaking, the workforce would be supplied locally; environmentally, all projects would be environment and ecology-friendly; and socially, the park would lead to urban development and enhanced welfare. As far as social performance is concerned, NMPDC officials have studied the social impacts of this petrochemical park as a social responsibility vis-à-vis residents of Chabahar. Moniri-Abyaneh said eight technical attachments had been provided, one of which was about content development.

As far as skill enhancement is concerned, the park would meet up to 70% of its workforce needs from among residents. Studies conducted in this sector indicated that more than 52% of job seekers in Chabahar were only elementary school graduates, which caused restrictions. But for the first time, a petrochemical vocational school was established in Chabahar to train 680 persons in 25 disciplines necessary in the MPP.

Moniri-Abyaneh said that 50% of the workforce is local, adding that some low-literate youth with welding skills have been hired. He noted that 4,200 job opportunities have been created, leading to a better livelihood for households.

Petchem, Driver of Development

One of the obligations assigned to the petroleum industry about oil and gas plant construction is to develop regional infrastructure to prepare the ground for investment. Due to the high volume of investment, governments are often involved. Therefore, before investors step in, the infrastructure including road construction, water and power supply, and airport should be prepared. But it has to be noted that investors would not be the only ones to benefit from these facilities in Makran where citizens would be beneficiaries. For instance, residents of the MPP have no access to drinking water. NMPDC would supply drinking water alongside industrial water. 

Moniri-Abyaneh said a seawater intake facility built there would allow for withdrawing 560,000 cubic meters a day of water, adding that 140,000 cubic meters would be supplied in the form of drinking water to residents. He said underprivileged villages would be prioritized, noting that in the first phase, up to 1,000 cubic meters of drinking water would be free of charge for residents.

The seawater intake facility is the first in Iran off the Gulf of Oman. All seawater intake facilities in Iran have been built in the Persian Gulf up to the depth of 80 meters. But in the new one, it starts from a depth of 800 meters. The Gulf of Oman’s waves are stronger than the Persian Gulf’s. Therefore, it was decided to apply the micro tunneling technology for the first time. This method has already been used for subway construction, but it was used for the first time in sea drilling.

In most microtunneling operations the machine is launched through an entry eye and pipes are pushed behind the machine. This pipe-jacking process is repeated until the MTBM reaches the reception shaft at the far end. The speed of the advancing machine is limited to the speed at which the pipe is inserted into the entry eye via the hydraulic arms in the jacking frame. Moniri-Abyaneh said it was a successful experience that would be useful in water desalination plants.

The NMPDC has also been involved in building schools and developing cultural and welfare facilities. But oil would add to prosperity. Road construction, railway, electricity supply posts, airport development, and industrial plants have become active in southeastern Iran.

$97bn Worth of Petchem Projects

The1stConference on Iranian Petrochemical Industry Investment and Financing was held recently in Tehran. During the event, a special package of investment in this industry was unveiled to complete the value chain. This incentive-based investment package involves investment in products and completing the value chain of the petrochemical industry.

The products that are not manufactured domestically and are required by downstream industries, high-risk products or products requiring new technology, products with tough market conditions, and products that would generate high value-added are included in this package.

Investment and financing is key for petrochemical projects. The CEO of National Petrochemical Company (NPC), Morteza Shah-Mirzaei, has said that attractive investment packages have been prepared for the petrochemical industry under the 7th National Economic Development Plan. He said that capital market actors and financiers, who are the main elements of petrochemical units, were expected to apply these new financing tools.

20-Year Petchem Development Plan

Shah-Mirzaei said particular work had to be done in absorbing financial resources in a bid to overcome obstacles. Disruption in investment is a cause of delay in projects and associatedlucrum cessans.

The plan for petrochemical industry development has been finalized in the 7th plan and the chapters on the petrochemical industry in the 8th plan have been specified, he said, adding: “A 20-year vision plan for petrochemical industry development is being drawn up, which would set out horizons for the petrochemical industry development over 50 years.”

Noting that the petrochemical industry is the top absorber of investment in Iran, he said certain creative units in this industry were highly lucrative.

“Under the 7th Development Plan, an investment package has been adopted for the petrochemical industry, which would bring this industry’s capacity to 140 million tonnes by the end of the 7th plan or in the middle of the 8th plan,” said Shah-Mirzaei.

Catalyst Self-Sufficiency

Value chain completion and quitting crude sales are among the most important topics of the petrochemical industry development plans. Some petrochemical units have modified their grades to supply new products which would be of significance in the value chain completion.

Currently, more than 85% of petrochemical equipment could be sourced locally, which would reach 100% in three to four years.In the meantime, Iran’s petrochemical industry is at a turning point due to efforts made for the local development of necessary technologies. As Shah-Mirzaei has said, catalyst technologies and technical know-how would be entirely developed in the country.

Most petrochemical plants are located in southern Iran and some in western Iran. The NPC chief has said that Iran would be envisaging petrochemical and chemical plants that would be compatible with eastern climate conditions.

Shah-Mirzaei called on the foreign-based Iranian elite to share technical know-how with Iranian industrialists.

Mercantile Exchange Sales

Credit sales of petrochemicals is another issue of significance in providing the necessary capital for petrochemical projects. This scheme has been implemented in Iran for the first time, which is expected to bring about major developments in this sector.

According to Shah-Mirzaei, credit sales of petrochemicals started in Iran Plast 2022, which resulted in credit sales of more than IRR 400,000 billion during the first half of the current calendar year on the Iran Mercantile Exchange. The credit sales of petrochemicals have revived many stagnant industries, thereby providing necessary liquidity and capital.

Thanks to the facilitation of conditions in the current calendar year, 1.3 million tonnes more of petrochemicals would be demanded on domestic markets. Downstream units may now purchase more, which would be a great achievement for 15,000 industrial units whose feedstock is supplied by petrochemical plants.

Petchem Attractive to Investors

Reza Nekouei, NPC director of investment, highlighted the significance of absorbing investment and financing petrochemical projects, saying: “All investment projects in this industry that had been formulated last calendar year have been revised; some of them were eliminated and some were replaced based on national needs.”

Noting that attracting investment would be the most important strategy of the petrochemical industry, he said: “Realizing 8% economic growth and reaching petrochemical industry development objectives by the end of the 8th National Development Plan would require $7 billion in annual investment, which indicates great potential for attracting internal and external resources.”

Petchem Output Set to Grow

Iran’s petrochemical industry currently operates 75 plants with a production capacity of 92 million tonnes, which is expected to reach 141 mt by 2027 and 199 mt by 2032, when there will be 179 plants.

Nekouei said that 125 petrochemical projects were underway with about $97 billion in investment. “The variety of petrochemicals is clear in petrochemical projects and we have tried to move towards value chain completion,” he added.

There are six special industrial and economic zones in Iran’s petrochemical industry: Mahshahr, Assaluyeh, Kangan, Siraf &Dayer, Parsian, Bushehr, Chabahr and Qeshm.

“In the Mahshahr Special Economic Zone in Khuzestan Province, 20 projects with a capacity of 9.46 mt/y are underway, requiring $7.4 billion investment. They would be receiving 5.06 mcm/d of gas as feedstock,” said Nekouei.

In Assaluyeh, 22 projects with a capacity of 28.05 mt/y are underway, requiring a $22.2 billion investment. They would be receiving 27.08 mcm/d of gas as feedstock.

In Kangan, Siraf & Dayer in Bushehr Province, which includes the Pars II Special Economic Energy Zone, 14 projects with a capacity of 13.57 mt/y are underway, requiring $11.56 billion investment. They would be receiving 5.98 mcm/d of gas as feedstock.

In the Parsian zone in Hormuzgan Province, 11 projects with a capacity of 14.47 mt/y are underway, requiring $11.1 billion investment. They would be receiving 13.76 mcm/d of gas as feedstock.

In the Chabahar Free Zone in Sistan and Baluchestan Province, 3 projects with a capacity of 9.13 mt/y are underway, requiring a $4.93 billion investment. They would be receiving 12.72 mcm/d of gas as feedstock.

In Qeshm Island, 4 projects with a capacity of 10.25 mt/y are underway, requiring a $5.07 billion investment. They would be receiving 20.78 mcm/d of gas as feedstock.

Nekouei went on to introduce 4 special economic zones in Bushehr and Hormuzgan provinces, saying: “They are new special industrial and economic development zones, for which new projects would be envisaged. They are an industrial park in Bushehr Province, Bandar Abbas Industrial Park, Jask Free Zone, and Lavan Free Zone.”

PGPIC $20bn Projects

Abdolali Ali-Asgari, CEO of Persian Gulf Petrochemical Industries Company (PGPIC), said the company had 30 projects worth $20 billion underway, adding: “The petrochemical industry represents the most important national privilege, and investment in this sector would be important and crucial.”

Highlighting investment as the top priority in the country, he said: “Today, those nations that have had significant activity in financing and business environment improvement have been successful.”

He said that PGPIC finances its projects either directly by using the company’s domestic resources or indirectly through the capital market.

“At PGPIC, for the first time, $200 million worth of “Murabaha” bonds were issued by Bank Mellat following Central Bank of Iran (CBI) authorization. Of that figure, $100 million was allocated to ending gas flaring at the Persian Gulf Bidboland refinery. It was recently decided that IRR 60,000 bonds would be issued shortly for implementing projects,” said the official.

Also known as “Murabaha”, an Islamic finance technique used to provide working capital, trade financing, and acquisition financing on terms compliant with “Sharia”. In a “Murabaha” transaction, a financing party buys an asset that has been identified by its client (borrower) from a third party and then sells that asset to the borrower for the original purchase price plus a profit element (generally calculated based on a benchmark figure such as LIBOR). The borrower pays the new higher purchase price in installments.

Project Fund Financing

One of the future policies of PGPIC has been to develop downstream petrochemical industries by establishing petrochemical parks. To that end, locating 9 chemical parks has been done, which would involve various technologies of production.

Ali-Asgari said: “In the downstream sector of the petrochemical industry, in addition to various tools which we have on hand, we are trying to establish a fund to finance these projects.”

He touched on the recently launched methanol park, saying: “NPC would transfer 2 mt of methanol to that park, while various plans are underway for methanol profitability.”

He said that the stocks of Arvand Petrochemical Plant and Bandar Imam Petrochemical Plant would be offered on the capital market to finance petrochemical projects.

PGPIC has also set up its own financing company operating as an investment bank. The company, in interaction with investors, can provide financing for projects.

IRR 174,000bn Facilities

Reza Dowlatabadi, CEO of Bank Mellat, also said the main challenge to projects was financing. “Today, petrochemical projects carry the minimum risk of investment. Bank Mellat has devised various financing tools for investing in this industry," he said.

Last calendar year, Bank Mellat allocated IRR 174,000 billion in facilities to the energy sector, up from IRR 95,000 billion a year before.

Majid Shokrollahi, director of assessment and domestic investment atthe National Development Fund of Iran (NDFI), touched on the necessity of non-interventional investment in financing projects, saying: “NDFI has shifted approach from allocating only loans to non-interventional investment models.”

Referring to NDFI’s new strategy of chain investment, he said: “Chain investment is aimed at stabilizing the entire chain and its completion while attracting maximum economic value-added for projects.”

PetroTech, Event for Ecotechnology Development

Iran’s Ministry of Petroleum organized the second PetroTech conference and exhibition on 19-21 December 2023 as part of its efforts to overcome sanctions, supply petroleum industry equipment needs, and increase cooperation with knowledge-based companies to develop biotechnology. The first edition of PetroTech, which focused on universities, represented a successful experience in collaboration with knowledge-based companies. This year, the Ministry of Petroleum organized the event on a larger scale with more companies in attendance. The event was co-sponsored by the Office of Deputy Minister of Petroleum for Engineering, Research and Technology, PetroPark, and the four main subsidiaries of the Ministry of Petroleum: NIOC, NIGC, NPC, and NIORDC.

By risk management and proper planning, the Ministry of Petroleum in the 13th administration has managed to make use of the potential of local knowledge-based companies and instead remove the need for importing commodities whose domestic manufacturing is possible, which has saved the country’s hard currency.

One reason for the Ministry of Petroleum to turn to locally manufactured commodities is that due to the strategic nature of the petroleum industry and most of its equipment being foreign-sourced, sanctions were imposed on the sector. Therefore, from the viewpoint of national security and political haggling, increasing independence in the petroleum industry is significant.

The Ministry of Petroleum has upgraded its scientific and financial communications with knowledge-based companies and institutes to supply technological and strategic needs.

First-Time Manufacturing

The petroleum industry has been subject to sanctions since the 1979 Islamic Revolution. In some years, the sanctions have been eased, while in some years they have been toughened. However, since 2018 sanctions have been made tougher than ever. Therefore, Petroleum Ministry officials formulated plans to blunt the impact of sanctions on the oil and gas sector. The most important sector that should take steps towards defusing sanctions is the oil and gas industry. Over the past two years, the number of knowledge-based companies involved in the petroleum industry has exceeded 550, i.e. three-fold growth.

Iran has always insisted on promoting domestic manufacturing and supporting knowledge-based companies. The most important value chains are found in the subsidiaries of the Ministry of Petroleum. The Office of Vice President for Science, Technology and Knowledge-Based Economy recently appreciated the Ministry of Petroleum for its cooperation with knowledge-based companies. Thanks to this policy, key equipment and technologies required in Iran have been provided by relying on knowledge-based companies.

The experience of various countries shows that R&D and technology development would help economic growth. In Iran, the application of technology to the oil and gas industry is among the successful knowledge-based experiences that should be repeated in other big industries.

$23mn Contracts

The four subsidiaries of the Ministry of Petroleum see PetroTech as a good opportunity to supply their needs. For this purpose, they have signed dozens of MOUs and/or agreements with knowledge-based companies, estimated to be worth $23 million.

One of the key challenges faced by knowledge-based and technological companies has been inconvenient payments by clients and the lack of any insurance infrastructure for indemnification in case of damage caused by using knowledge-based products and commodities manufactured for the first time in the country.

For the first time, Iranian Oil Industry Ventures (IOIV) has moved to support knowledge-based companies. During PetroTech, IOIV unveiled two of its new services: LC in Iranian rial and liability insurance for commodities.

Iran’s Supreme Leader Ayatollah Seyed Ali Khamenei has called for following up on knowledge-based activity in large industries. That was why a working group was established at the Office of Vice President for Science, Technology, and Knowledge-Based Economy to pave the ground for the local development of key technologies in the oil and gas industry. Other sectors like the steel industry and car manufacturing would also have the chance to benefit from R&D credit to develop cutting-edge technologies.

Ali Aqa-Mohammadi, head of the Economic Working Group of the Supreme Leader’s Office, said at the inauguration of PetroTech that Iran was targeting 7.4 mb/d oil output. He said NIOC would in the first step target 5.4 mb/d output under the 7th National Economic Development Plan which also requires national gas production to grow 50%.

“That would materialize by Iranian potential and knowledge-based petroleum industry. To reach the top regional position in terms of technology and innovation, we need to transfer in technology and develop technical know-how,” he said. “The Petroleum University of Technology should steer technology. The Research Institute of Petroleum Industry should become the center of research institutes.”

Vahid Reza Zeidifard, deputy minister of petroleum for Engineering, Research, and Technology, said at PetroTech’s inauguration ceremony that technology and innovation should be prioritized in the petroleum industry.

“Precise identification of technological needs, using the capacity of first-time manufacturing law and identifying associated challenges are among the measures taken by the Ministry of Petroleum. Therefore, 100% self-sufficiency in catalyst manufacturing is realized under the 13th administration," he said.

Iran has long been moving towards adopting policies for local suppliers and manufacturers, as well as suppliers of technology in a bid to grow. Domestic companies have fared well in terms of engineering, as well as technology development. Even without foreign companies present in Iran, it would be possible to implement megaprojects.

Adopting strategic policies for economic resilience has largely helped overcome technological dependence on Western governments in terms of the technological needs of the petroleum industry, which has significantly thwarted international sanctions.

COP28 Obligations, Start Point to Save Planet

Ehsan Taqavinejad

Head, Energy Studies Dept., Petroleum Ministry’s Directorate of OPEC and Int’l Energy Fora

The 2023 United Nations Climate Change Conference known as the Conference of the Parties (COP) of the UNFCCC, was the 28th United Nations Climate Change Conference, held from 30 November to 12 December at Expo City, Dubai, United Arab Emirates. COP28 participants reached an agreement on 15 points out of 20 envisaged in its agenda. Two key issues of climate financing and adaptability to climate changes were postponed to next year. With about 85,000 participants, COP28 became the largest global climate event in the world.

Finance Stalemate

On the first day of the first week, during the inauguration, the participants reached an early agreement on launching a “loss and damage fund” they had initially established last year during the Sharm el-Sheikh meeting in Egypt. This agreement was the outcome of negotiations that had been held within the framework of the fund transition committee in 2023 to present recommendations about the organizational arrangement of its establishment. Germany and the United Arab Emirates (UAE) will each provide $100 million to the newly established fund to support poorer countries in dealing with the irreversible impacts of climate change.

As of Dec. 10, nations collectively pledged $792 million to help vulnerable nations recover from climate-related disasters. France, Italy, Germany, and the UAE were the largest contributors, each pledging at least $100 million, according to the National Resources Defense Council, while the US chipped in $17.5 million.

Unlike day 1, talks in the following days were tough, particularly when Global Stocktake (GST), Global Goal on Adaptation (GGA), emission reduction plan, just transition plan, climate financing, and convergence of financial flows with the development of low-emission and climate change resistant economy were being debated.

Lack of progress on climate financing was the key weakness of COP28, as was the case with previous rounds of the Conference. No progress was made in the Negotiations on the New Collective Quantified Goal (NCQG) by developing nations. Without financing, fulfillment of current obligations enshrined in the Nationally Determined Contributions (NDCs) by developing countries would face challenges. It has been noted in the COP28 decisions that meeting such needs for before 2030 would require $5.8-5.9 trillion. Furthermore, developing nations would require $215-387 billion a year for NDCs up to 2030.

Finally, on 13 December 2023, Sultan Al Jaber, president of COP28, read out the UAE Consensus.

The following is a brief review of major decisions adopted by COP28 on energy.

GST Decisions

The most important document in the UAE Consensus pertained to decisions on the most challenging agenda of COP28, i.e. the results of the first global assessment of the progress of Paris Agreement objectives, known as Global Stocktake (GST), drawn up in 196 paragraphs. Technical talks for drawing up the said report lasted more than 18 months as Article 14 of the Paris Agreement required such a report to be adopted periodically as of 2023. The report was the result of hours of negotiations based on the findings of numerous reports, particularly Intergovernmental Panel on Climate Change (IPCC) AR6, reports provided by the Secretariat of the Convention as well as written documents submitted by Paris Agreement signatories. Meantime, political agreements reached by world powers including a joint statement by the US and China in Sunnylands before COP28 were instrumental in this report. In their statement, they stated they were "committed to working with each other and with other Parties to adopt a consensus Global Stocktake decision".

"In the view of both countries, the decision: should reflect that there has been substantial positive progress toward achieving the objectives of the Paris Agreement, including that the Agreement has catalyzed action by both Parties and non-Party stakeholders and that the world is considerably better off in terms of its temperature trajectory than it would have been in the absence of the Agreement," said the statement. They said they believed that the decision "should reflect that substantially more ambition and implementation on action and support will be needed to achieve the Paris Agreement’s goals, recognizing different national circumstances ".

The GST report should

be seen as the sum-up of UN international climate talks during seven years following the 2015 Paris Agreement with a more ambitious approach towards achieving the objective of maintaining global warming at 1.5 °C. The GST report could serve as a guideline for future climate talks in several domains including emissions reduction, adaptation, means of implementation, financing, technology and capacity-building, loss and damage, compensatory measures as well as international cooperation.

Emission reduction is the most important part of GST. In addition to achievements, shortcomings, and obligations, it sketches out the future path for reducing global greenhouse gas (GHG) emissions, particularly in the energy sector.

Global Achievements

In the first paragraphs about climate progress it has been noted that before the Paris Agreement was adopted, it was predicted that global temperature would rise up to 4 °C compared with the pre-industrialization period, but now forecasts have been revised down to 2.1-2.8 °C. Furthermore, current long-term strategies (representing 75 Parties to the Paris Agreement) account for 87% of the world’s GDP, 68% of the global population in 2019, and around 77% of global GHG emissions in 2019. This is a strong signal that the world is starting to aim for net-zero emissions.

Shortcomings

Despite the progress made, collective action by nations to maintain global warming at 1.5-2 °C would not be sufficient. Specifically developed nations have not sufficiently fulfilled their obligations on cutting GHG emissions before 2020 because IPCC had already shown that developed nations were required to reduce their GHG emissions in 2020 by 25-40% compared to 1990, an objective which has not been achieved. Based on central estimates only, cumulative net CO2 emissions between 2010 and 2019 compare to about four-fifths of the size of the remaining carbon budget from 2020 onwards for a 50% probability of limiting global warming to 1.5°C, and about one-third of the remaining carbon budget for a 67% probability to limit global warming to 2°C. Even when taking uncertainties into account, historical emissions between 1850 and 2019 constitute a large share of total carbon budgets for these global warming levels.

Paris Agreement Temperature Objectives

The GST recognizes the need to reduce GHG emissions by 43, 60, and 84 percent from 2019 levels by 2030, 2035, and 2050, respectively, to limit global warming to 1.5°C. But it notes Parties are off track when it comes to meeting their Paris Agreement goals. It calls for strong actions and ambitions toward nationally determined contributions (NDCs), emphasizing equity and historical responsibility particularly concerning developed countries.

Energy Policy Package

Paragraph 28 reads: "Limiting global warming to 1.5 °C [above pre-industrial levels] with no or limited overshoot requires deep, rapid, and sustained reductions in global greenhouse gas emissions of 43% by 2030 and 60% by 2035 relative to the 2019 level and reaching net zero carbon dioxide emissions by 2050. [Countries] further recognize the need for deep, rapid, and sustained reductions in GHG emissions in line with 1.5°C pathways."

It then calls on Parties to contribute to the global efforts set out in the Paragraph. In doing so, it sets 1.5°C as the benchmark for action. As Paragraph 28 includes a range of measures, this requirement is fundamental to evaluating the significance and role of each measure.

The new global goals to triple renewable capacity and double energy efficiency in paragraph 28a could make a significant dent in emissions and fossil fuel use by 2030. When the Climate Action Tracker looked at COP28’s announced initiatives, it found these pledges held the most promise, but highlighted the urgent need for monitoring countries’ actions to ensure these global pledges are turned into concrete, national action.

Contribution to GHG Mitigation

The Conference of the Parties serves as the meeting of the Parties to the Paris

The agreement, “further recognizes the need for deep, rapid and sustained reductions in greenhouse gas emissions in line with 1.5 °C pathways and calls on Parties to contribute to the following global efforts, in a nationally determined manner, taking into account the Paris Agreement and their different national circumstances, pathways, and approaches:

(a) Tripling renewable energy capacity globally and doubling the global average

annual rate of energy efficiency improvements by 2030;

(b) Accelerating efforts towards the phase-down of unabated coal power;

(c) Accelerating efforts globally towards net zero emission energy systems,

utilizing zero- and low-carbon fuels well before or by around mid-century;

(d) Phasing out fossil fuels in energy systems, in a just, orderly and

equitable manner, accelerating action in this critical decade, to achieve net zero by 2050

in keeping with the science;

(e) Accelerating zero- and low-emission technologies, including, inter alia;

renewables, nuclear, abatement, and removal technologies such as carbon capture and

utilization and storage, particularly in hard-to-abate sectors, and low-carbon hydrogen

production;

(f) Accelerating and substantially reducing non-carbon-dioxide emissions globally; including in particular methane emissions by 2030;

(g) Accelerating the reduction of emissions from road transport on a range of pathways, including through the development of infrastructure and rapid deployment of zero and low-emission vehicles;

(h) Phasing out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible.

Economic and Social Implications

Although the implementation of these measures, which have been adjusted in terms of the writing and content of the obligations compared to the initial proposals, it still means structural changes in the world energy system, which will have economic consequences not only for oil and gas reserves holding countries but also will bring about social and economic consequences for most developing countries. In addition, their rapid implementation, especially phasing out fossil fuels from the energy system, can fuel energy security risks.

Given such concerns raised by the representatives of some countries in the negotiation process of the 28th Cup, in paragraph 29 of the global assessment report as another part of the energy policy package, the role of transitional fuels, which is interpreted as natural gas, in “facilitating the energy transition and at the same time ensuring energy security” has been recognized:

"It is acknowledged that while ensuring energy security, transition fuels may play a role in facilitating the energy transition."

OPEC, GEFC

The Gas Exporting Countries Forum (GECF) and the Organization of the Petroleum Exporting Countries (OPEC) held the Fourth High-Level Meeting of the GECF-OPEC Energy Dialogue, on 13 December 2023, at the GECF headquarters in Doha. In a joint statement, they reiterated that the oil and gas industry will play a constructive and critical role in sustainable development and poverty eradication, while contributing to just, orderly, and inclusive energy transitions, in particular through enhancing efficiencies and developing and deploying advanced technologies, such as carbon capture utilization and storage (CCUS)". They stressed that continued investment in oil and natural gas is essential to meet future demand and ensure global market stability".

|Both of our organizations must work together along with other key industry stakeholders to help promote investment-friendly policies. The fact is, without adequate levels of investment, the future of our industry is in jeopardy. Part of this effort entails ensuring a balanced narrative on energy transitions and, when necessary, correcting misguided messages related to both hydrocarbon fuels and our industry,” they said.

Remarks on COP28 Decisions

Global efforts enshrined in Paragraph 28 of the GST report need to be implemented within an appropriate conceptual framework and should by no means be taken into consideration separately. The beginning of Paragraph 28 shows members’ contribution should follow “global efforts, in a nationally determined manner, taking into account the Paris Agreement and their different national circumstances, pathways and approaches”. Reference to the Paris Agreement indicates that such global efforts should in turn follow Common but Differentiated Responsibilities

and Respective Capabilities (CBDR–RC), which is a principle within UNFCCC that acknowledges the different capabilities and differing responsibilities of individual countries in addressing climate change.
At COP26, held two years ago, in Glasgow, a “gradual decline” in coal use was agreed upon, which set the basis for a global move towards changing the energy regime to counter global warming. The sixth assessment report of the Working Group III of IPCC (released in 2022) indicated that 64% of global CO2 emissions in 2019 came from fossil fuels and industrial activities. The report reiterated that limiting warming to 1.5 or 2 °C required a major transformation in the energy regime including scaling back on fossil fuel consumption, establishing low-carbon energy sources, shifting fuel to low-carbon energy carriers, increasing energy efficiency, and saving more on energy consumption. However, in the COP27 meeting in Egypt, due to efforts made by major oil and gas producers, as well as

top consumers affected by the Russian war on Ukraine, no agreement was reached.

OPEC's Insistence on Expanding CCS Technologies

Given the reduction of the shock impacts of the energy crisis, the discourse of elimination, reduction, and gradual shift from fossil fuels or fossil fuels without reducing emissions became one of the main axes of climate negotiations. Before COP28, due to the different positions of the countries in this regard, a bipolar atmosphere had been formed in the world. OPEC member countries insisted on the position that rather than referring to the fuel source, climate, and COP; discussions should focus on the manner of reducing GHG emissions and developing carbon absorption technologies. Disclosure of a letter by the OPEC secretary general calling on member countries to reject any formula that would target fossil fuels created a negative atmosphere against OPEC. However, some OPEC members like Saudi Arabia, Iraq, and Kuwait took a tough position against any elimination of fossil fuels to be included in the COP28 report. But this idea had strong proponents. The European Council set out the EU position ahead of the meeting, stressing that the transition to a climate-neutral economy will require a global phase-out of unabated fossil fuels and a peak in their consumption in this decade. It highlights the importance of having the energy sector predominantly free of fossil fuels well before 2050, as well as of striving for a fully or predominantly decarbonized global power system in the 2030s, leaving no room for new coal power, since cost-effective emissions reduction measures are readily available. It also calls for a phase-out as soon as possible of fossil fuel subsidies which do not address energy poverty or just transition. In parallel, more than 100 European and African nations released a joint statement calling for the phase-out of fossil fuels. The UN Secretary-General released a statement at the closing of COP28, saying: "To those who opposed a clear reference to a phase-out of fossil fuels in the COP28 text, I want to say that a fossil fuel phase-out is inevitable whether they like it or not.  Let’s hope it doesn’t come too late.

 “Some countries have chosen a middle way. In the Sunnylands statement, the US and China said they ”intend to sufficiently accelerate renewable energy deployment in their respective economies through 2030 from 2020 levels to accelerate the substitution for coal, oil and gas generation, and thereby anticipate post-peaking meaningful absolute power sector emission reduction, in this critical decade of the 2020s”.

 Under such circumstances, the inclusion of “gradual phase out fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, to achieve net zero by 2050 in keeping with the science” in the GST report would mark the success of multilateralism in the world. In a bipolar atmosphere, nobody felt to have achieved its objectives, but nobody showed dissatisfaction either.

Tripling Renewables Capacity?

3) The contribution of countries to tripling the global renewable capacity to 11,000 GW by 2030 would face numerous challenges. The GST report highlights that the “adaptation finance needs of developing countries are estimated at $215–387 billion annually up until 2030 and that about $4.3 trillion per year needs to be invested in clean energy up until 2030, increasing thereafter to $5 trillion per year up until 2050, to be able to reach net zero emissions by 2050”. Another barrier is that not counting China, too little development is happening in the global south, even though the electricity demand there is surging. Investors want a premium when putting money to work in emerging markets. One fix is to blend in government funding that takes on some of the risk. That is the idea behind the Just Energy Transition Partnerships, which Western governments have set up over the past two years, and the $30bn climate fund announced by the United Arab Emirates on December 1st. Yet the sums involved remain too small, and earlier deals have been beset by backsliding and delays. Structural injustice in the world’s financial system and the high cost of financing is another hurdle to the proportional development of renewable energy in developing countries. The rate of return for financing renewable energy projects in rich countries has historically been around 3-4%, while typically in emerging and developing economies, this rate is over 10%. Colombia’s minister of environment asked on the sidelines of COP28 who could go ahead with renewable projects with a 5% rate of return. Another challenge in moving towards green energy is reliable access to minerals such as lithium, nickel, cobalt, and rare earth elements that are used in the production of electric car batteries, solar panels, and wind turbines. Now the supply chain of these materials is concentrated in several countries, especially China. To contribute to tripling the capacity of renewables, countries need to ensure a more diverse supply of vital minerals and metal recycling.

4) The contribution of nations to global efforts for quick methane reduction up to 2030 could be implemented. It had been referred to less clearly in COP26 and COP27 reports. A global initiative is the Global Methane Pledge (GMP), which is a voluntary framework supporting nations to take action to collectively reduce methane emissions by 30% from 2020 levels. Up to 50 leading global oil and gas producers including Abu Dhabi National Oil Company (Adnoc), Saudi Aramco, ExxonMobil, TotalEnergies, and Shell signed a deal to reduce their carbon emissions to net zero by 2050 and curb methane emissions to near zero by 2030. The 50 oil and gas companies “have joined the oil and gas decarbonization charter (OGDC), a global industry charter dedicated to high-scale impact, and to speed up climate action within the industry”. Tackling methane emissions is recognized as a key way to control climate change in the short term, as its warming potential over 20 years is 84 times that of carbon dioxide. It also disappears from the earth’s atmosphere within a few years, while carbon dioxide remains in the earth’s atmosphere for up to 1,000 years. According to the IPCC report, methane has been responsible for 30% of global warming since the Industrial Revolution, and the oil, gas, and coal sectors account for 40% of anthropogenic methane emissions. About 50 to 80% of methane emissions from fossil fuels can be reduced by using existing technologies at lower cost to decrease from 50 dollars per ton of carbon dioxide equivalent.

Conclusion

The final adoption of the 196-paragraph GST report is neither prescriptive nor binding for nations. In addition, since the text of such decisions has repeatedly emphasized national conditions, it allows countries to choose the best decarbonization method according to their country’s conditions, to reduce emissions and achieve the goals of the Paris Agreement.

On the other hand, the UAE Consensus is indicative of a turning point in realizing climatic ambitions in the energy sector. The contentious and tense discussions and negotiations in the UAE, an oil-rich country and OPEC member revealed more than before that the main issue in the global “climate change” negotiations is the discussion of “energy change” in its broad dimensions, or in other words, energy transition. Such changes in the world’s energy system will create fundamental changes in terms of energy geopolitics and economic order at the global level. The expected result of such a transformation is to eliminate or weaken the owners of traditional fuel resources and strengthen the owners of the technology and mineral resources needed for green energy in the prospective carbon-free world.  In a general assessment, although the oil producers of the Persian Gulf with low-cost production and less carbon emissions put them in a good position for the transition period, in the time after the peak of oil demand, they face the major challenge of maintaining their oil revenue in the face of price strains.

COP28 decisions have not determined any specific mechanisms for global efforts aimed at reducing emissions, but pressure will grow on governments to consider changes. “Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end,” said UN Climate Change Executive Secretary Simon Stiell in his closing speech. “Now all governments and businesses need to turn these pledges into real-economy outcomes, without delay.”

Expectations: COP28 made no tangible progress in terms of climate financing. Therefore, COP29, scheduled for November 11-22, 2024, in Baku, is expected to focus on the New Collective Quantified Goal on Climate Finance (NCQG) in a bid to replace the current annual objective of $100 billion in aid. COP29 will be affected by the result of the US presidential election.

Low-Yielding Wells to Be Rehabilitated 

The head of Petroleum Industry Innotech Park, Mohammad Esmaeil Kefayati, has announced the planned rehabilitation of low-yielding wells in four oil fields administered by the National Iranian South Oil Company (NISOC).

“Four groups comprising representatives of technology companies in contract with the Innotech Park, NISOC, and operators have made an on-site assessment of four NISOC wells,” he said.

“The planned rehabilitation of closed and low-yielding oil wells is among national technological projects aimed at increasing oil production, protecting hydrocarbon resources, and supporting knowledge-based companies. It is being steered by the Innotech Park under the 13th administration,” he added.

Kefayati said that Diaco Energy Pajouh, Zima Tose’eh Parsian Kish, Engineering Support & Technology Development (ESTD), and Mehr Energy Exploration & Production Company had visited the Bibi Hakimieh, Maroun, Palangan and Rag Sefid fields respectively.

“This visit was conducted in the presence of representatives of the Innotech Park, NISOC, operators, and technological companies to make an on-site assessment of the latest conditions of wells to be assigned to technology companies for the implementation of necessary technology,” he said.

Iran Boosts Oil Export Capacity

The CEO of Iranian Oil Terminals Company (IOTC), Abbas Gharibi, has said that the company’s technicians were charged with overhauling jetties and storage tanks.

He added that with the completion of the overhaul in the Kharg oil terminal, Iran would see its oil export capacity increase by the end of the current calendar year (ending on 20 March 2024).

“Owing to its strategic and vital infrastructure like jetties, berths, loading arms, pipelines, storage tanks, measurement systems, single-point mooring, and tugboat, IOTC attaches special significance to safety issues,” said Gharibi.

He emphasized maintaining production stability and upgrading equipment, saying: “Using the capacity of knowledge-based companies and preparing operational conditions for increasing crude oil production and export is on the agenda.”

“Development and modernization of the company in terms of industrial installations and oil storage tanks, as well as crude oil measurement systems is on the agenda,” he added.

Gharibi said that in recent years 20 million barrels of gas condensate had been exported from Kharg to help gas production in the country

Special Operation on Azadegan Processing Line

Special operations have begun on a 28-inch pipeline of the central processing unit of the South Azadegan field, said the head of the Azadegan and Jofair area.

Reza Jafari said the advantages of this project included separating heavy crude oil in South Azadegan from superlight crude oil of Sepehr and Jofair.

He said the operations involved installing split tee fittings on the 16-inch pipeline of the skid-mounted processing system, after which hot tap operation would begin.

“This pipeline would remain unused until the central processing plant becomes operational. This operation would carry big volumes of oil to the Karoun pumping station,” said Jafari.

“Operations for connecting the 16-inch line of processed oil to the skid-mounted processing system is underway without any interruption in production. Petroleum Engineering and Development Company (PEDEC) is in charge while pipeline, operation, HSE, and technical inspection units of this company are involved,” he said.

Jafari said: “Currently, about 70 tb/d of oil is being directed by this pipeline to the West Karoun pumping station.

Third Onshore Well in Kish Operational

The third onshore well in the Kish gas field has become operational, a deputy CEO of the National Iranian Drilling Company (NIDC) said.

Abdol-Karim Ali-Mohammadi, the deputy CEO for drilling projects, said the well had been spudded by the Fath-61 drilling rig.

He said the project for drilling 13 wells in the Kish gas field was very significant, adding that due to the special conditions of the reservoirs of this gas field, the completion and operation of wells there had experienced several years of halt.

He added that necessary planning was made for accelerating drilling operations to set off the existing gas imbalance in compliance with the instructions of the minister of petroleum.

“Given the complexity of reservoirs in the Kish gas field, NIDC technicians adopted an initiative project using fluids and overcome obstacles in the way of supplying downhole equipment to complete well A2 in October,” said Ali-Mohammadi, adding that the final operations for the completion of the third well, B1, had just concluded.

He said the third well was more than 4,144 meters deep with reservoir pressure at 5,800 pam.

South Pars Output Preservation Projects Underway

CEO of National Iranian Oil Company (NIOC) Mohsen Khojasteh-Mehr has emphasized the implementation of projects designed to help preserve output at the giant offshore South Pars gas field.

He added that the gas compression project at South Pars would be a megaproject in this regard, which has propelled up the Pars Oil and Gas Company (POGC) agenda.

Noting that POGC was a leading gas supplier in the country, he said: “For this purpose and in line with output stability, POGC should make specific and widespread plans for preserving the production capacity of South Pars.”

Khojasteh-Mehr said that preserving South Pars output capacity was an obligation assigned to POGC, adding that the gas field, which Iran shares with Qatar, would see a renaissance in the future.

He said drilling new wells, acidizing, workover, and completion of wells at South Pars were part of activities for preserving the field’s production capacity, adding: “We need to make serious plans for all these projects and therefore petroleum engineering should prepare and equip itself.”

He said that accelerating the completion of Phase 11 of South Pars was another priority, adding: “Operations for drilling wells and building the second platform’s jacket of SP11 was underway and there should be no delay in the work.”

Noting that the allocation of budget to the development of gas fields for increased gas supply faced no restrictions, the NIOC chief said: “The plan for the development of the Kish and North Pars gas fields should be severely followed up on. In this regard, there is no difference between joint and independent fields.”

Mohammad Hossein Motejalli, CEO of POGC, said South Pars overhaul work was 98% done, adding: “Based on our planning last summer, we have proceeded with our overhaul as planned.”

He said that in addition to gas production, construction of former and new projects had got underway.

Resaalat Platform Jacket to Be Ready by March

The head of the Iranian Offshore Engineering and Construction Company (IOEC) has said that the jacket of the Resaalat oil project would become ready by next March.

Hossein Shiva said developing marketing activities was necessary for this company, in parallel with accelerating the projects. “By relying on the capacity of specialized forces in Khorramshahr Yard and other special capacities of IOEC, we are in talks to obtain a significant share of the nationally significant megaproject of the South Pars compressor platform.”

“This project is significant for the oil and gas industry, which would be instrumental in national gas supply,” he added.

“Khorramshahr Industrial Yard is ready to meet the oil and gas industry needs in such sectors as jacket, top drive, SPM, pressure tanks, storage of condensate and petrochemical equipment in both offshore and onshore sectors to help the rated capacity materialize,” said Shiva, adding that it is of great help to development-oriented companies in the petroleum industry.

He said the offshore yards in Khorramshahr could handle 60,000 tonnes a year, adding that such capacity can help national development in the oil and gas sector in addition to yielding profits for shareholders.

“Thanks to local specialists, the Resaalat project’s jacket and its piles weighing almost 1,900 tonnes are under construction, which would be completed by the end of the [current calendar] year to be moved to the location,” he added.

LPG Exports Up 14%

The spokesman for the Iranian Oil, Gas and Petrochemical Products Exporters Union (OPEX) has noted a 14% growth in liquefied petroleum gas (LPG) exports and a 36% growth in bitumen exports during the first seven months of the current calendar year from the year before. He said that methanol exports had also experienced an upward trend year-on-year.

Hamid Hosseini said during the seven months, 6.757 million tonnes of LPG, worth $1.205 billion, was exported, up 14% year-on-year.

“Iran’s LPG production capacity is good. Currently, oil and gas refineries are producing on average 12 mt/d of LPG, only 2 mt of which is used domestically as 97% of Iran is connected to the gas grid,” he said.

Referring to bitumen exports, he said: “3.339 mt of bitumen, worth $1.284 billion, was exported during the seven months. It was 2.552 mt, valued at $1.014 billion, the year before, which shows 36% growth.”

Hosseini said during the same period, 2.155 mt of oil-based products, worth $1.089, was exported, which was 3.53 mt, for $1.805 billion, last year.

Regarding paraffin exports, he said it reached 160,000 tonnes for $122 million during the same period, up from 141,000 tonnes for $145 million the preceding year.

He also said that 5.642 mt of methanol, worth $1.248 billion, was exported during the seven months, up from the previous year’s 5.471 mt.

Hosseini put the methanol production capacity in the country at 14 mt, which would soon reach 24 mt. “The entire methanol export market in the world is about 80 mt and in the current calendar year our methanol exports were good,” he said.

He added: “This year, 1.77 mt of polymer was exported for $1.713 billion while last year, we exported 2.245 mt for $2.674 billion.”

Arya Sasol Polymer Production Hits New Record

CEO of Arya Sasol Polymer Company (ASPC) Mohammad Reza Heydarzadeh has announced a new record in production and sales by this company in the current calendar year.

He said ASPC managed to record the highest 9-month production and sale from previous periods, adding that it produced 1.476 mt of polymer, 872,000 tonnes of which was marketed and sold.

Referring to the significance of the petrochemical industry in the economic cycle, he said: “The path towards development and progress has ups and downs and we are obtaining experience towards success.”

He said that ASPC had seen major changes, particularly in supplying new grades, realizing productivity, and setting up a knowledge-based and innovation center. He added that ASPC was chosen by the Office of Vice President for Science and Technology as a product-based knowledge-based company.

Heydarzadeh emphasized the expansion of international markets to increase hard currency generation and realize economic resilience, saying ASPC had recently been exporting about 20% of its products directly to target markets.

He touched on the production of the LEC 1969 new grade destined for coating extrusion, adding: “By supplying this new product, Iran is now joining two other producers of this specific grade, which would save the country $20 million in hard currency annually.”

Expounding on the development projects of ASPC, he said that a high-density and medium-density polyethylene project, currently underway, would earn the country $100 million in annual revenue.

Petchem Industry Output Up 8% Year-on-Year

The secretary-general of the Association of Petrochemical Industry Co. (APIC) has said that petrochemical production was up 8% during the eight months of the current calendar year compared with the same period a year before.

Ahmad Mahdavi Abhari said 660,000 tonnes more products were sold on the mercantile exchange in the current calendar year.

Touching on the petrochemical industry's 30% share of non-oil exports, he said that 27-30% of the capital market belongs to the petrochemical industry, feeding $6 billion into downstream industries a year. It also supplies more than $500 million worth of urea fertilizer to the Agriculture Services Organization at very low prices.

Mahdavi Abhari highlighted the role of the petrochemical industry in the national economy, saying it would wean Iran’s economy off oil. He said the petrochemical industry earned the country $16 billion in exports last calendar year, 80% of which was deposited with the Central Bank while the rest was spent on purchasing necessary equipment and commodities for petrochemical projects.

He said that petrochemical exports was worth $8.36 billion for 19.85 mt of products during the first eight months, which showed a decline in value due to lower prices.

He said that Iran’s petrochemical production capacity would reach 96 mt by next March.

Mahdavi Abhari said the petrochemical industry would invest in the development of fields to provide gas feedstock for plants, adding that it had been enshrined in Article 15 of the 7th National Economic Development Plan.

Iran Ready to Develop Iraq Upstream/Downstream Oil Sector

Iranian Minister of Petroleum Javad Owji has expressed the Islamic Republic’s readiness to develop Iraq's upstream and downstream oil sector.

Receiving an Iraqi delegation led by his counterpart Hayyan Abdulghani in Tehran, Minister Owji said the Islamic Republic’s 13th administration laid great emphasis on improving ties with neighboring nations, particularly brotherly and friendly Iraq. He said there were historically and religiously deep-seated ties between Tehran and Baghdad.

Touching on the massive hydrocarbon reserves of the two nations, he said: “Iran and Iraq can operate many joint projects together to serve both nations’ interests.”

He said Iran and Iraq shared positions within OPEC and OPEC+, extending his gratitude to his Iraqi counterpart for his recent position on his nation’s decision to cut oil production in favor of stable prices.  

The Iraqi minister said OPEC+’s recent decision helped stabilize oil prices, adding that this decision was of help to producers, consumers, and even investors.

Abdulghani said that the new Iraqi government was in favor of better energy ties between the two countries. He said Iranian companies could be involved in different projects, including the development of joint fields.

“Onshore and offshore exploration blocks constitute another area of potential cooperation by Iranian knowledge-based companies in Iraq. Furthermore, investment in gas production and building oil refineries are among other instances of Iran-Iraq cooperation,” he said.

Minister Owji also told reporters that agreements had been reached for Iranian engineers and technicians to help renovate and rebuild refineries in Iraq.

“Given Iran’s acceptable potential in the oil and gas industry and the capability of contractors and manufacturers, our country is self-sufficient. We have expressed our readiness to develop Iraq’s oil, gas, and petrochemical industry and we have embarked on constructive measures in this regard,” he said.

Can OPEC+ Output Cut Prove Effective?

Exactly eight years ago, Organization of the Petroleum Exporting Countries (OPEC) together with 10 top oil producers formed the OPEC+ alliance. OPEC member states and their allies have been through ups and downs over these years. Despite differences of opinion, the OPEC+ countries managed to hold 36 gatherings up to 30 November 2023, some of which were long and breath-taking, and some others brief. Undoubtedly, the most significant, toughest, and most challenging meeting of OPEC+ was the 6 March 2020 gathering when Russia opposed OPEC’s proposal for a 1.5 mb/d output cut, just to be followed by a 10-hour meeting in April the same year and finally consensus by 23 OPEC+ members to cut  their output9.7 mb/d.

Failure

3 March 2020 should be seen as OPEC+’s failure, as Russia turned down a request for a 1.5 mb/d output cut, stating the 1.7 mb/d output cut would remain valid only up to the end of March 2020. Saudi Arabia, the UAE, and Russia expressed their readiness to enhance output, varying from 500 tb/d to 2.5 mb/d, after March that year. Saudi Arabia decreased its crude prices, a decision followed by Iraq and Kuwait. That fueled the tension between Saudi Arabia and Russia. The oil market was experiencing a big imbroglio in March 2020 due to a supply glut. Due to the unexpected move by Russia and Saudi Arabia, oil prices dropped more than $20 a barrel. Media speculation was rife about the probable collapse of OPEC+.

Success

While the oil market and the world were disappointed with OPEC+ after the March meeting, and oil prices were on a downward path, this nascent alliance returned to the main decision-making center of the oil market in a historic return in April 2020. Against the backdrop of obstinacy by Russia and Saudi Arabia and the ensuing market supply glut, the 23 OPEC+ member states came together on 9 April 2020 and exchanged views for 10 hours onmannerof adjusting the oil market conditions. Due to the COVID-19 pandemic, the meeting was held virtually. The talks were tough and intensive. Due to Mexico’s refusal to contribute to the supply cut, the talks ended inconclusively. However, OPEC+ was not supposed to back down in the face of a saturated oil market. On 12 April 2020, OPEC released the following statement: "The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC allies led by Russia - the so-called OPEC+ - have agreed to cut their overall crude oil production by 9.7 mb/d over the 1 May 2020 - 30 June 2020 period, in an attempt to reduce the global oversupply and to firm up depressed oil prices. The production cuts would be calculated based on the October 2018 production level, except for Saudi Arabia and Russia which have a baseline level of 11 mb/d. Production cuts would then be eased to 7.7 mb/d from 1 July 2020 to 31 December 2020, and 5.8 mb/d from 1 January 2021 to 30 April 2022. The potential extension of the agreement beyond April 2022 will be reviewed in December 2021."

This historic agreement took effect on 1 May 2020. Oil had turned into a valueless commodity to the extent that producers were even selling at negative prices to get rid of their cargoes.

Russia, Kazakhstan Cold Period

At the very beginning of 2021, OPEC+ member states held their 13th meeting again virtually as COVID-19 had just triggered its second wave.The 4 January 2021 meeting ended inconclusively, thereby extending into the following day. The meeting was dealing with two approximately conflicting proposals. One group favored a continued production cut by 7.2 mb/d, while another group favoredthe facilitation of an output cut by 500 tb/d for a final supply of 6.7 mb/d. Russia and Kazakhstan were in the second group. Due to some reasons including a cold winter and a subsequent growth in local consumption, they did not favor output cuts and they finally won an agreement to increase output. It was decided that Russia and Kazakhstan add 75 tb/d of oil to their output in February and March 2021.In other words, these two nations were given the go-ahead to increase their output totalof 150 tb/d during the two months while other nations stopped adding to their supply. Russia would increase its output by 65 tb/d and Kazakhstan by 10 tb/d. OPEC+ decided to cut output by 7.125 mb/d in February and 7.05 mb/d in March. The 13th meeting also decided that Saudi Arabia would voluntarily cut 1 mb/d of its output in February and March.

UAE Challenge

After the 13th ministerial meeting, OPEC+ held almost calm meetings up to the 18th meeting. However, the August 2, 2021 meeting became controversial. The UAE and Kazakhstan demanded modifications to their production baseline. Due to the UAE’s insistence on its demand, the 18th ministerial meeting ended without any result. Opposition to the UAE’s proposal came while Nigeria had already expressed its dissatisfaction and was trying to increase its production baseline. There were renewed fears of the failure of the OPEC+ alliance, which drove prices up. Negotiations continued until, during the 19th meeting on 18 July 2021, the UAE had its request accepted by OPEC+ that agreed on a new production baseline for Russia (500 kb/d), Saudi Arabia (500 tb/d), the UAE (332 tb/d), Iraq (150 tb/d) and Kuwait (150 tb/d) as of May 2022. Increased oil prices stimulated OPEC+ member states to increase their output and make maximum benefit from the recovery of the global economy.

From the 19th to the 27th meeting, OPEC+ agreed on 400 tb/d output growth (August-December 2021 and January-May 2022). They also agreed on 432 tb/d output growth (June 2022) in the 28th meeting and on 648 tb/d (July and August 2022) during the 29th and 30th meetings.

Disregard of US Request

The 23 OPEC+ member states held their 31st meeting on 3 August 2022. US President Joe Biden visited Riyadh and called on Saudi Arabia to increase its production. Shortly after, Russian Deputy Prime Minister Alexander Novak met with Saudi Minister of Energy Prince Abdulaziz bin Salman to exchange views on cooperation within the framework of OPEC+. What was the outcome of the 31st meeting which was held against the backdrop of Russia’s war on Ukraine, the US and European embargo on Russian oil, and Western governments’efforts madeto replace Russian oil? OPEC+ only agreed on a 100 tb/d increase in output for September 2022.

Voluntary Cuts

OPEC+ ministers held their first in-person meeting on October 5, 2022, after a three-year hiatus due to COVID-19. Following a seven-hour meeting, they agreed on cutting 2 mb/d of their output from November to December 2023. This decision was made while crude oil varieties had seen their prices fall dramatically from the 2022 record of $130 a barrel. In its following meetings, OPEC+ approved this decision and it even decided to voluntarily cut more than 1 mb/d of its supply. OPEC+ has set its total output at 40.46 mb/d for 2024. In their last 2023 meeting, which was the 36th, OPEC+ ministers announced that they would voluntarily cut 2.2 mb/d of their supply in a bid to support stability and balance in global oil markets. This voluntary output cut would be implemented by Saudi Arabia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman from 1 January 2024 to 31 March 2024. But can OPEC+ cuts serve as a remedy to the oil market and prices, while the US output has already surpassed 13 mb/d? The New Year would not be an easy one for the OPEC+ alliance.

Shahid Hasheminejad Gas Refinery, Unique in the Mideast

The Shahid Hasheminejad gas refinery supplies gas to northeastern Iran. Located in the city of Sarakhs, along the border with Turkmenistan, it receives gas from the Mozdouran gas field which produces sour gas. Unique in the Middle East, the facility supplies 12% of Iran’s gas, covering 6 provinces. Yahya Feyzi, the CEO of the refinery, told “Iran Petroleum” that the main value-generating projects at this refinery are due to breakthroughs in the petroleum industry. The following is the text of his interview on the refinery.

What products are supplied by this refinery?

Sour gas is processed and refined to achieve sweet gas, which would be then fed into the national trunkline to serve northeastern Iran. The hydrogen sulfide content of the sour gas is captured to be converted into sulfur.The refinery supplies up to 2,050 tonnes a day of sulfur. Another product of this refinery is gas condensate which is produced at the rate of 700 tb/y. This refinery mainly receives dry gas, which is not associated with too much condensate. The refinery has a distillation unit wherein gas condensate is transformed into solvents, naphtha, kerosene, and gasoil. A small oil treatment facility is integrated into this gas refinery.

How much gas has been processed at this refinery over the past six months? How much sulfur has been produced?

The refinery has processed 5.615 bcm of gas over the past six months with sulfur production at 206,930 tonnes.

The refinery also feeds gas into the Shourijeh D Storage Site. How much does it stand at?

The Shourijeh D storage site was launched in 2014. During the first eight months of the calendar year, 10 mcm/d of gas is stored at this facility while during the remaining four months, 20 mcm/d is withdrawn to be fed into northeastern gas trunklines during winter.

How much gas has thus far been stored at Shourijeh D?

Storage was better in the current calendar year than last calendar year. Last calendar year, 1.825 bcm of gas had been stored at this facility, which has increased to 2.125 bcm now. It would soon reach 2.175 bcm.

How much gas is withdrawn when consumption peaks?

Up to 20 mcm/d of gas would be extracted from the Shourijeh D facility. In the second phase of gas storage at this facility, which is underway by Iran Gas Engineering and Development Company (IGEDC), storage would double to 20 mcm/d and withdrawal would double to 40 mcm/d.

How has storage differed year-on-year?

In the current calendar year so far, storage has been nearly 350 mcm/d higher year-on-year. If we consider this gas for 70 days of winter, 5 mcm/d more gas has been saved, which would help gas production stability in northeastern Iran.

What measures have been taken for gas supply stability at this refinery?

For sustainable gas production during winter, we have focused on qualitative overhaul. That was done in the summer at high quality and right moment. The qualitative overhaul would stave off any problem in production while guaranteeing sustainable production with preventive measures.When it got cold in January 2023, no technical problem occurred at the refinery because of the previous overhaul, letting production go on. Furthermore, 3 mcm/d was added to the refinery’s output to bring the total production to 57 mcm/d.

Would you please tell us about the Shahid Soleimani Sulfur Park at this refinery?

This park has been launched in the downstream section of the refinery. Sulfur being a major refined product, the completion of the value chain in sulfur is highly significant to us. In the initial designs, the refinery produced sulfur lumps, which had to be delivered to Bandar Abbas before being exported to China, India, and Pakistan.With approaches for higher value-added generation, preventing crude hydrocarbons, and hiring knowledge-based companies, four molten sulfur plants have been built by the private sector to transform the sulfur produced by the refinery into granulated, bentonite, and micronized sulfur. According to a joint plan with the Ferdowsi University of Mashhad and Bojnourd University, we would add other sulfur-based products to this chain.In collaboration with the Ferdowsi University of Mashhad, 10 more economically viable projects would be introduced to the refinery, and then we would supply 10 new sulfur-based products with the help of knowledge-based and private companies. The sulfur park of the Shahid Hasheminejad gas refinery is unique in Iran. In light of the success in diversifying sulfur products at this refinery and the value generation in the sulfur production cycle, similar parks are to be built at the South Pars Gas Complex and the Ilam gas refinery. Currently, this refinery accounts for more than 27% of the national sulfur output, which is a sizeable share of the national sulfur industry. Thanks to special measures like the establishment of the Shahid Soleimani sulfur park and building similar ones, it can be the standard-bearer of sulfur market development in the country and win a significant share in the region.

What environmental measures have been taken?

Given the high sulfur production capacity of this refinery, we have taken key steps in the environmental sector by implementing numerous projects like reducing flared gas and diluting acid gas.Cutting 22,000 tonnes a year from annual SO2 production, reducing annual fuel consumption by 12 mcm, and slashing up to 100 tonnes a year from catalyst waste production are among achievements of optimization of the Shahid Hasheminejad gas refinery and associated environmental achievements.

What measures have been taken to reduce gas flaring?

The 6th National Development Plan required refineries to reduce flaring at refineries by 90%. As this issue was enshrined in the law, it was decided at the refinery to cap flare gas emissions to use the gas. According to the initial design of this refinery, 24,000 cubic meters per hour of gas was flared, which is equivalent to total gas consumption in the three cities of Sarakhs, Kashmar, and Khaf. Given the significance of this issue, an American company told us of its packages which would prevent gas flaring, but they were costly and we decided to use our potential for overcoming this challenge. Therefore, a knowledge-based working group was established and good results were achieved. Based on investigations, flare gas may be divided into sweet gas, sour gas, and leaked gas. After this division, the first phase of work included gathering sweet gas to be used at the refinery. That cut gas flaring volume by a third. In the second phase, we examined the sour gas that was sent to flares and we had two options. We designed a package for sweetening this gas to fuel boilers of the water and steam unit. The volume of this gas was close to two-thirds of flare gas. On the other hand, a small quantity of gas leaked from valves was flared. Thanks to overhaul work, the leaks were stopped and gas flaring ended. We have saved 23,000 cubic meters of a total of 24,000 cubic meters of gas that would be flared. In other words, the 6th National Development Plan’s chapter on gas flaring was implemented at this refinery. We have developed the technical know-how required for reducing gas flaring at this refinery and we are promoting this know-how and cooperating with other refineries to share no-flaring technology with them.

How are you going to deal with the remaining 1,000 cubic meters?

We have plans to use the 1,000 cubic meters, for which we would use specific equipment and systems. We intend to cut it down to 300 cubic meters. It is a tough job, but we hope to reach this figure by next March.

Another unique measure at this refinery has been the dilution of acid gas. Would you tell us about it?

This project came on stream last calendar year and is a highly significant measure of carbon cycle recovery. It was an innovation. Although big European companies like Shell and BP have a different form of this system, engineers at our refinery have designed this dilution tower differently. In designing this dilution tower, we have used the most sophisticated chemical engineering simulation software. The mechanisms for capturing hydrogen sulfide and releasing carbon dioxide have all been optional.We have chosen everything for a tower 43 meters high and weighing 100 tonnes. Such a tower has been designed and built for the first time by Iranian engineers at the Shahid Hasheminejad refinery, assisted by advisors from knowledge-based companies. In addition to the tower, all thermal transducer pumps, air fans, and separators have been designed withlocally developed knowledge. This project has had environmental and economic achievements, not to mention energy efficiency. Catalysts are no longer needed to be replaced annually. Each sulfur recovery unit would see its output grow by 11,000 tonnes a year. The construction of this acid gas tower is a local initiative. Shell’s representative said: definitely this project would not pay off, but we did conclude. We designed the dilution tower and built it with the help of knowledge-based companies. This tower is highly sophisticated, requiring a specific design technology. Now we can say that our engineers can entirely design a refinery at home and abroad, and operate it. Thanks to the know-how we gained throughout this project.

What are the advantages of this project?

One advantage of this project is the possibility of selling the recaptured carbon dioxide of up to 200,000 tonnes a year to be converted to products of higher value like liquified CO2, dry ice, sodium bicarbonate, and urea fertilizer. The output of the dilution tower is CO2 with 95% purity at the rate of 500 tonnes a day. National Iranian Gas Company (NIGC) has given a permit for its outsourcing to the private sector, for which a tender bid is scheduled. We are the first gas refinery selling CO2 to the private sector.

Pressure fall-off is natural for a reservoir. What would you do when the gas supply from the Mozdouran field falls?

According to projections,the gas supply from Mozdouran has been falling for over 15 years. We are thinking of solutions now for feeding the refinery. First, we have seen if there is any new reservoir in the area to be useful. The Tous reservoir is a good option, which can give us 3-5 mcm/d, which would be then piped to the refinery. This issue has been taken into account in the current calendar year’s production plan and this field would be supplying gas by January. There are other reservoirs like Kashaf Roud, Cheshmeh Shour, and Afshar Harb, whose recovery potential is yet to be announced. Another plan which we are seeking to implement is to receive sour gas from our neighboring Turkmenistan where sour gas is left useless.

How much gas do you project to receive from Turkmenistan?

We are still in talks and no amount has been specified. As the gas supply from Mozdouran falls we would be offsetting it with Turkmenistan’s sour gas.

What are the modalities of this refinery’s cooperation with knowledge-based companies?

Giventhe capabilities of knowledge-based companies in the country, a self-sufficiency committee has been formed in this refinery. The self-sufficiency committee is to prepare a technical certificate for the parts and equipment that are foreign-made, and we provide this certificate to the identified knowledge-based companies and industries, and they built pilot equipment for this refinery. We test this piece on the laboratory scale, and after a risk assessment and obtaining the required standards, it will be used in a limited manner, after the final approval, the knowledge-based company will be placed in the vendor list of the company. Currently, 99% of mechanical parts, 90% of instruments, and 92% of electrical parts are domestically manufactured, and with the help of knowledge-based companies, we were able to achieve this great success.

What is being done at the Khangiran gas refinery’s incubator?

It was launched in 2020, which is the first of its kind at the Ministry of Petroleum. To launch this center, we were pursuing job creation and local manufacturing of equipment in cooperation with knowledge-based companies. We identified educated youth in the city of Sarakhs to develop startup ideas and launch them.We have currently 17 active startups at this incubator, three of which are mature and separate from the park. One of these startups has developed a chemical for the refineries, breaking Germany’s monopoly. This material has been approved by the Research Institute of Petroleum Industry and received the necessary standards.

Gas Storage Hits Record in Iran

 Over recent years Iran’s gas imbalance has hit 250 mcm/d, prompting the Ministry of Petroleum to focus on finding a solution for a guaranteed winter gas supply. To that end, the ministry is adopting preventive strategies including increasing gas storage and operating energy efficiency projects. Iran has registered a good record in terms of natural gas storage in the current calendar year. About 3.1 bcm of gas was stored during the first eight months of the year, which is a 10-year high.

One may wonder how come a gas-rich country with massive reserves, thousands of kilometers of intertwined pipelines and hundreds of gas compressor and decompressor stations has had to store gas regularly. The main reason for the fluctuations in both quality and quantity of energy consumption pertains to climate change. For instance, in Iran, gas consumption in cold seasons may be up to seven times higher than in hot months. Therefore, nothing is certain about a stable gas supply in winter. Furthermore, as energy-intensive industry chains have not been completed near gas production centers, expanding gas storage sites would not be economically viable. Therefore, construction of gas storage underground near major consumption centers would be a good solution, regardless of the volume of gas reserves. Some nations are known as gas giants, but they have had to store their surplus gas.

254 bcm by 2030

International association Cedigaz, in the fifth edition of its reference report on underground gas storage, expects global gas storage capacity to increase from 377 bcm at the beginning of 2013 to 557-631 bcm by 2030. The incremental growth, 180 billion-254 bcm by 2030, requires sustained investment throughout the period, amounting to a total of €120 billion by 2030. In 2030, storage will represent 11.6-13.1% of global gas demand, compared with 11.3% in 2013. New storage markets (Asia and the Middle East) account for ∼ 60% of incremental capacity through 2030. Strong growth is expected in rapidly emerging gas markets, particularly China. Storage capacity has increased > 35 bcm since 2010, mainly due to Europe which added almost 14 bcm. There are 95 projects under construction globally, adding 68 bcm of working capacity. Most of this capacity will be completed by 2020-2025.

New storage markets (Asia, Middle East) account for around 60% of the incremental capacity through 2030. The growth in working capacity is limited in mature markets (the USA, most of Europe, and the CIS). The focus is on increasing peak deliverability rather than storage volumes.

The world gas market is inclined to be fueled with enhanced investments to ensure a constant energy supply.

At the worldwide level, there are 688 underground gas storage facilities in operation in the world at the beginning of 2013, representing a working gas capacity of 377 bcm, or 10.3% of 2012 world gas consumption.

Due to long lead times, a large share of these storage facilities was decided in the mid-2000s, before the economic crisis and fall in European gas consumption. Underground gas storage has been developed in four regions: North America, Europe, the Commonwealth of Independent States (CIS), and Asia-Oceania.

North America is home to more than two-thirds of the sites, with 414 storages in the US, and 59 in Canada, and a combined working capacity of 152 bcm (40% of the global total). There are 144 facilities in Europe (99 bcm), and 51 sites in the CIS with 51 facilities (115.5 bcm). Asia-Oceania has 18 sites (9.3 bcm of working capacity). There is only one site in Argentina, as well as in Iran.

The US and Russia remain the leading countries with withdrawal capacities of respectively 3,327 and 728 mcm/d. Germany ranks  the third with 537 mcm/d.

14% Annual Storage

According to common formulae, every country has to store the equivalent of 14% of its annual gas consumption. If we consider Iran’s annual gas consumption to be about 230 bcm, the country should store at least 28 bcm a year. Therefore, Iran is at the beginning of the road. Iran currently stands fifth in terms of underground gas storage and it can store up to 5 bcm of gas a year.

In Iran, the Sarajeh storage site near Qom is the first gas storage site in the Middle East. It came online in 2012.

In the second phase of Sarajeh, an agreement was signed last March for the construction of facilities to increase gas supply capacity from 10 mcm/d to 15 mcm/d. In case 15 mcm/d of gas is stored in these tanks during the eight warm months, 30 mcm/d would be withdrawn during the four cold months.

Shourijeh 2nd Phase

After the Sarajeh storage facility, the Shourijeh facility is the second largest storage site in Iran. It came online a couple of years ago with a storage capacity of 4.6 bcm. Phase 1 of Shourijeh can store 2.4 bcm of gas. According to plans, during warm months, 10 mcm/d of natural gas would be injected into the Shourijeh facility. Gas storage volume in the current calendar year has been 15% higher than the preceding year. Phase 2 of Shourijeh was the first project whose construction started under the 13th administration. National Iranian Gas Company (NIGC) would build 7 storage tanks for gas.

200 Storage Sites

Exploration activities in recent years have located 200 storage sites, 2 of which were seen as suitable. They are Baba Qir and Bankol in Ilam Province with a storage capacity of 32 bcm. Identification of the Mokhtar gas storage site in Kohguiluyeh and Boyer Ahmad Province is another result of exploration activities, showing that this storage site is suitable with a 6 bcm capacity, from which 40-50 mcm/d of gas would be withdrawn. The three storage sites are under study and no investment has been made in them.

Increased gas consumption inactivity of aging wells, and the occurrence of natural disasters like flooding and earthquakes at gas refining facilities have been the most important reasons explaining the urgency of building natural gas storage sites. It is noteworthy that $8-10 billion a year is being spent on building and expanding gas transmission networks, while gas storage sites can save on this spending.

Surface Gas Storage

Iran’s current gas storage capacity stands at 3.4 bcm. There is potential for more than 200 mcm/d of gas storage. In a bid to offset the current gas imbalance, the Ministry of Petroleum should make arrangements for a 10% contribution by gas storage facilities to the national gas supply under the 7th National Economic Development Plan. One modern method in this regard would be to build surface storage facilities near big industries.

NIGC has recently called for investment in gas storage facilities. Since the bulk of Iran’s gas consumption comes from the domestic sector – 650-700 mcm/d out of 850 mcm/d – it is necessary to make plans to meet major industries’ energy needs.

In a bid to supply gas to all manufacturing and industrial units as well as power plants, NIGC is offering very good incentives for using the Synthetic Natural Gas (SNG), Compressed Natural Gas (CNG), and mini-LNG processes. They would be win-win projects. All investors and industrialists may benefit from energy by building the necessary infrastructure. In Isfahan Province, three SNG units have so far become operational. Furthermore, all industries that have operated projects in this province may receive LPG during cold months.

Brazil Awards Offshore Blocks

Petrobras has acquired 29 blocks in the Pelotas Basin offshore southeast Brazil under the ANP’s 4th Permanent Concession Offer Cycle.

The company will operate blocks P-M-1739, P-M-1737 and P-M-1797 with a 50% interest, in partnership with Shell (30%) and CNOOC.

Petrobras’ signature bonus, to be paid in April 2024 by the company, is about R$116 million. The partners’ proposed minimum exploratory program was another factor in the awards, the company added.

A total of 193 blocks were auctioned in Brazil’s Dec. 13 oil and gas licensing round, 192 under concession and one under production sharing agreement, "signaling strong optimism for the industry," according to Wood Mackenzie.

Afentra Consolidates Its Position in Angola

Afentra has completed acquisitions of non-operated interests in two blocks offshore Angola.

In Block 23, the company has taken a 40% stake, in a concession which it says offers long-term upside potential.

It has also acquired lifted its interest in Block 3/05 to 18% following a sale and purchase agreement with Sonangol, and expects to raise its stake further to 30% on completion of a further share held by the bp/Eni venture Azule Energy, probably in 1Q 2024.

Production from Block 3/05 averaged 20,560 b/d last month, with Block 3/05A delivering around 1,300 b/d from the Gaz-101 well.

UK North Sea Contingent Payment Update

Capricorn has entered into an agreement for the full and final settlement of the subsequent payment terms of its sale and purchase agreement with Waldorf Production UK Plc relating to the disposal of its previously held interests in the Catcher and Kraken fields.

Under revised terms, Capricorn will now receive payment of $72.5 million over the next 13 months and Waldorf’s 25% non-operated working interest in the Columbus gas field in the UK Central North Sea.

Under the original terms of the sale, Waldorf was required to make three additional annual contingent payments (2024-2026).  The quantum of the remaining contingent payments was subject to Brent oil prices and field production performance.

Jackup Rig Contract Offshore Vietnam

Shelf Drilling Ltd. and Shelf Drilling (North Sea) Ltd. have been awarded a contract for the Shelf Drilling Perseverance jackup rig with PetroVietnam Domestic Exploration Production Operating Co. Ltd. (PVEP POC).

The rig will begin mobilization soon to southeast Asia, and the planned startup of operations with PVEP POC in Vietnam is third-quarter 2024.

The firm term of the contract is about 16 months, and the total estimated contract value for the firm period is about $73 million.

CO2 Storage Aims Offshore Australia

deepC Store and Azuli (Australia) have agreed to pursue CO2 storage acreage acquisitions offshore Australia.

They also have a letter of intent with PGS Australia concerning a service-for-equity agreement under which they would issue shares to PGS, in exchange for the latter PGS performing geological and geophysical advisory services.

deepC Store and Azuli have jointly bid for greenhouse gas (GHG) assessment permits released by the Australian Commonwealth Government under its 2023 offshore GHG storage acreage release.

Was the Russian Oil Embargo Successful?

Shuaib Bahman

Ever since the outset of the war in Ukraine, Western governments have sought to ratchet up pressure on the Kremlin by resorting to sanctions in a bid to force Russia to change its approach. However, none of the Western sanctions against Russia have significantly impacted the country’s foreign policy or led to a change in Moscow’s attitude towards Ukraine. This is while the Americans are still insisting on the imposition of more sanctions against Russia, especially in the energy sector.Their latest action wasthe intensification of thesanctions regime against Russian oil exports, which once again raised the debate about the effectiveness of limiting oil purchases from this country. Of course, it had its repercussions.

The Group of Seven nations (G7), Australia, and the 27 European Union countries imposed on Dec. 5, 2022, a price cap on Russian crude oil transported by ships, aiming to reduce Moscow’s ability to finance its war in Ukraine and preserve stability on the global oil market.The price cap came on top of an EU embargo on buying seaborne Russian crude oil as a measure aimed mainly at providing third-party countries with an option to still buy it if the transaction is at or below the price cap level.

G7 and European Union insurance and reinsurance companies that provide services for tankers carrying Russian crude oil, as well as institutions financing Russian crude transactions, will not be allowed to handle such cargoes unless the oil is bought at the price cap or below it.

Shipping companies will not be allowed to provide tankers for the transport of Russian crude unless the oil is sold at the $60 price cap or below it.

Although in recent months, some oil tanker companies have refused to transfer Russian oil, the fact is that application of this type of sanctions cannot lead to any significant achievement.

However, an analysis by the Centre for Research on Energy and Clean Air (CREA) think tank shows Western countries’efforts to cap Russia’s oil revenues after Moscow launched its war on Ukraine has essentially failed a year since it was first agreed.

It is not that the price limit has had no effect. Over the last year, the scheme has cost the Kremlin €34 billion in export revenues, the equivalent of around two months of earnings this year. But that is far less than those who designed the rules had hoped; moreover, the impact was felt most intensely in the first half of 2023 before beginning to fade. Russian oil now consistently sells for more than the $60 limit.

US Pressure

                                                           The United States recently sent letters to oil tanker companies about the possible violation of the Group of Seven oil price cap mechanism for Russian oil trade, accusing them of not complying with these regulations.These letters, sent by the Treasury Department’s Office of Foreign Assets Control (OFAC), show a change in US regulatory tone because Washington and its allies had a soft approach to implementing the price ceiling mechanism.

The US’s strict action, while Europe is about to enter the cold season of winter, has raised concerns and fueled oil prices in global markets as US toughness is likely to hinder Russian export flow, and impact prices. The US actionmay also bring about a supply shortage.

Efficacy of Sanctions

The US and fellow G7 members have failed to impose their price cap decisions on Russian oil buyers. Almost all theRussian oil sold in the market is traded above $60 a barrel. That shows decisions of the G7 have failed, at least so far,to adverselyimpact world markets regarding the purchase of Russian oil. G7 memberswere hoping to deprive Russia ofthe provision of such services as financing, transportation, and insurance of oil shipments. However, even the companies operating in the G7 countries did not follow the above-mentioned rules.

The fact is that the embargo on Russian oil can have a very negative impact on global energy markets. Because Russia is the second-largest producer of oil in the world and one of the most important exporters. For this reason, sanctions have not been able to prevent the export of this country’s oil. Currently, at least two important issues will prevent the enforcement of anti-Russian sanctions. The first factor is the estimates related to the growth of global oil demand, which itself maydrive prices up. The second factor is the imminent advent of winter, which is often accompanied by a significant increase in energy consumption.

The Americans are also likely to use the tactic of pressure on Russian oil exports in their grand strategy to put pressure on the Europeans to further strengthen their position in the European energy market. Also, US sanctions against tanker owners that have been carrying Russian oil at prices above the Western price cap may limit India's ability to receive cheaper oil.

Overall, setting a ceiling for the sale of Russian oil, although it will cause damage to the country’s economy, cannot pose any serious challenges to Moscow and paralyze the Russian economy. At the same time, the imposition of such sanctions will not change the attitude of Russia's foreign policy towards Ukraine or Western countries.Western countries have realized that it is difficult to economically isolate a big country like Russia. Besides, the attempt to limit Russia’s energy exports to Western markets has changed the destination of this country’s oil exports to Asian and Eastern markets.

Therefore, even if all G7 and EU member states comply with the price cap restrictions they could not impact Russia’s oil exports to Asian nations as oil is transported by non-Western companies. Therefore, one cannot expect a full enforcement of sanctions to harm Russia’s economy severely.

What Will Happen to Oil?

Shuaib Bahman

In its latest report, OPEC slightly revised up its forecast for oil demand growth in 2023, announcing that global oil demand would increase by 2.5 mb/d during the second half of 2023. The Organization of the Petroleum Exporting Countries has also predicted oil demand to keep growing in the future, while according to the International Energy Agency (IEA) to limit global warming to 1.5 degrees Centigrade, the annual $800 billion investment in the oil and gas sector in the world should be cut by half by 2023.According to the IEA report, the realization of environmental goals requires shutting down some current projects and quitting long-term plans in the oil and gas sector. OPEC’s oil output hike approach and the IEA’s call for a halt to long-term projects in the oil and gas sector – two conflicting approaches – indicate a tough choice ahead. Exactly at a time when the world is faced with oil demand growth, reducing fossil energy consumption would be the only way to save the planet.

Demand Hike

At present, the global energy markets may undergo a severe transformation in line with growth in the oil demand, for several reasons. First, there is still strongdemand for the purchase and consumption of oil in the global markets, and major countries are seeking to increase purchase plans. For instance, China’s October crude oil imports increased to 11.4 mb/d, which is likely to hit a new record by the end of 2023. Second, the global economy is growing. According to International Monetary Fund (IMF) estimates, the US will most probably go ahead with its strong growth in the third quarter while China is forecast to experience 5.4% economic growth. The US economy is expected to growmore rapidly in 2023 and 2024. IMF staff have therefore upgraded real GDP growth for 2023 to 4.5 percent (from the previous range of 1-3 percent when the Extended Fund Facility first review was completed). However, growth is expected to soften to a range of 3-4 percent in 2024 as the war continues, and downside risks to the outlook remain exceptionally high.

Third, geopolitical tensions and military conflicts have escalated in the world. In the last two years, the war in Ukraine has been an important factor in determining the level of global oil demand. In the last two months, the war in Gaza has intensified geopolitical tensions and affected the global energy markets. Undoubtedly, the continuation of this war may affect the energy transport routes in the world.

Tough Route

While the world continues to increase the use of fossil fuels and suffers from the worsening impacts of the climate crisis, it has no choice but to reconsider its energy consumption and turn to clean energies because the continuous use of fossil fuels and GHG emissions would destroy the environment.According to the IEA, oil, and gas industries must reduce GHG emissions by 60% by 2030 to achieve climate goals and curbglobalwarming to 1.5 degrees Celsius above the pre-industrial average defined in the Paris Agreement.

However, the realities on the ground are still far from the ambitious goals such as reducing the use of fossil fuels and GHG emissions. Oil and gas companies comprise only one percent of the global investment in the field of clean energy, of which 60 percent is from only four companies.In other words, neglecting the emission of GHG and not moving towards the production of renewable energy continues on a large scale. The main reason for this should be found in the lack of sufficient capital to shift from fossil energy to clean energy.

In the status quo, global demand for oil and gas is expected to reach its peak by 2030. This means that not only the Paris Agreement will not be respected, but countries will also increase oil and gas use.Therefore, the growth ofoil demand will continue until at least 2030. The increase in demand in the market will in turn lead to an increase in investment in the petroleum industry because even in 2030, it would be costly for big industries to shift from oil and gas to renewables.

COP 28 and Oil Producers

Fereydoun Barkeshli

Energy Market Analyst

Delegates from nearly 200 countries gathered in the United Arab Emirates from November 30 through December 12 to address one of the most important, complicated, and controversial issues of our era, namely Climate Change and Net-Zero Carbon Emissions. By all accounts so far, the use of fossil fuels, oil, gas, and coal is blamed as the main source of carbon emissions. The first United Nations Climate Summit was held in Berlin, Germany in 1995. COP 27 held in Egypt was the latest climate change summit before Dubai COP 28. It was in Egypt that the conference agreed and decided to move the summit to an oil-producing country. Before COP 27, the influential members of the summit opposed the participation of oil-producing countries in the climate change summit, as those countries were considered the main culprits for much of the CO2 emissions and global warming. However, in Egypt’s COP27 summit, participants recognized that the inclusion and engagement of oil producers and OPEC is essential in the decision-making processes of the summit. Oil producers aren’t a part of the problem but a part of the solution.

Sharm El Sheikh Summit

The UN Climate Challenge Summit held in Egypt in November 2022 ended with a hasty and confused declaration. The main obstacle was the insistence of some participants and how fast the use of fossil fuels should be passed out and the date beyond which the governments were to be panelized if they stayed behind. One positive note was the issue of loss and compensation for the countries that lagged due to legitimate criteria. However, this achievement was undermined because no sources or funds were allocated for the compensation. OECD members sounded to blame the developing and emerging economies for all the pollution and carbon emissions that had damaged the ozone layer over the years.

Egypt Cop27 might have been named one of the least impactful UN Conferences of the Parties, so far. However, it is needless to mention that the 26th Glasgow COP wasn’t any better by all counts. Nevertheless, many of the key subjects from Sharm El Sheikh were left for discussion at UAE’s COP28 in late November 2023.

As mentioned earlier, this is the first United Nations Conference of the Parties to engage an important and committed oil-producing country and an OPEC member country as the host. Some of the leftover objectives of the COP27 and certain expected goals of the conference are referred to below:

Financing Zero Carbon Emissions

The issue has been raised in almost all COP meetings and the discussion has been postponed to the following meeting. However, the topic was severely addressed in the Paris COP meeting when African and Caribbean countries walked out of the meeting saying that they could not shift from wood and coal to solar and hydrogen overnight.

Loss and Damage Fund

One of the successes of COP27 was the establishment of a Loss and Damage Fund to support developing countries in dealing with the impacts of climate change. The Fund had been in long-term demand from the countries of the global south who have justly claimed that they are suffering the consequences of a crisis that they have done little to cause. As such, they fairly expect that the industrial countries compensate for the damage inflicted on them. However, as mentioned earlier while all delegates agreed in principle, no funding sources have been identified since the Paris climate summit. There are important problems, even once the financial resources are available. Which countries and which sectors of their economies are entitled to compensation under Loss and Damage Fund criteria?

Zero-Carbon Agenda

According to the BP Statistical Yearbook, 85 percent of total crude oil production and over 60 percent of gas is possessed and produced by National Oil Companies (NOCs). During the COP27 summit in Egypt, the issue of hydrocarbon resources was raised and reviewed from different angles. Most people in industrial countries identify oil and gas companies with big names from the 20th century and believe that International Oil Companies (IOCs) are omnipotent and omnipresent all around the hydrocarbon industry.

It is needless to say during the last couple of years, powerful and gigantic NOCs such as ARAMCO, ADNOC, NIOC, and KPC have been the most powerful oil and gas companies in the world. The NOCs are responsible for feeding nations they are funding investments in all the renewable sources of energy that COP is all about. United Nations Climate Summit cannot ignore the fact that hydrocarbon resources are the backbone of the energy transition that the whole world is talking about.

Key Technologies

Shedding more light on the role of key technologies will have an important place at COP28 in the UAE summit. Technology to develop, install, and transport new sources of energy is different from what we have known and experienced with fossil fuels. The issue was raised as early as 1991 during the Rio Climate Summit in Brazil. OECD countries admitted the importance of the topic but kept silent when ways and means to transfer the technologies and know-how to the rest of the world were brought up.

Most emerging and developing countries believed that the Western countries wanted to hold their grip on renewable sources of

energy, the way they held their dominance on fossil fuels for many years. Egypt’s summit set up a technical committee to discuss and report their findings to COP28 for a final practical decision.

As we know the agreement on any COP is based on a unanimous decision and consensus, although not quite essential in every phase. COP26 in Glasgow was more a political declaration and war of words rather than a scientific assessment and assertion based on factual evidence. Glasgow's declaration was “North versus South” and based on take it or leave it.

UAE COP28

As discussed earlier, past COP summits were all about getting the world on a path to net zero emissions by the year 2050 horizon. Undoubtedly, there is no single or uniform way to get there. There are many different and difficult choices that governments, oil and gas producers, companies, and consumers will have to examine, experiment, and make to decarbonize energy production and consumption. To take bold decisions or to be emotionally motivated does not necessarily expedite net zero carbon emissions by 2050.

In the meantime, it is interesting to note that the number of people, companies, and organizations attending COP28 in UAE is are record high of over 70,000. This is more than double the number that participated in any other COP since its inception. This is an indication that COP28 is by itself turning into a business. Many fossil fuel and fossil fuel-related companies, as well as renewable energy provider companies, attend the twelve-day-long COP28 gathering.

Financing Energy Transition

As for COP28, the United Arab Emirates has made clear that it intends to make progress on climate finance at the COP28 summit. The positive and encouraging aspect is that the UAE began work on COP28 right after Egypt’s COP27. Several scientific and technical committees were set up in different locations, and priorities were identified and featured prominently to scale up the financial aspects of net zero carbon emissions targets.

According to the secretariat that was created for the COP28 summit, the need and availability of low-cost financing are vital for most of the countries responding to climate change and building low-carbon and climate-resilient infrastructure. Low- and middle-income countries are specifically sensitive to the availability of funds. Most middle-income countries are much more concerned about energy security than environmental protection. No country is willing to sacrifice its development priorities for environmental and climate change objectives. This is particularly imperative given the losses that many emerging economies suffered after the global pandemic. Many of those countries already have piled up huge debts during the pandemic.

COP28 plans and aspires to revitalize COP15 in Copenhagen in 2010 wherein industrial economies pledged to mobilize $100 billion annually to developing nations by 2020 to be directed towards climate adaptation and mitigation efforts. The funds delivered to emerging economies via bilateral and multilateral grants and loans, export credits, and private finance that was all fell short of the goals.

COP28 has made it clear that it intends to bring back to life the financial support and compensation that was promised by the global north, thirteen years ago.

Loss and Damage Fund is another major controversial issue that COP28 intends to tackle and give it a new life.

For years, one of the most sensitive issues in the COP summits has been whether countries that have contributed the most to the historical CO2 emissions- first and foremost the United States of America should compensate developing economies that are already bearing the brunt of a changing climate. During COP27 deliberations, the issue was discussed and agreed in principle but the final decision was referred to the UAE COP28.

In fact, in all COP summits held so far, important decisions are deferred for the next summit. However, in the meantime and during the one year up to the next meeting a great deal of lobbying and impactful movements against the use of fossil fuels is shaped up leading to additional pressures on oil-producing countries to give up more of their bargaining strength and space in favor of the Global West. To be more specific, COP28 should redefine the net zero carbon emissions issue and the significant role that oil can play in making the energy transition possible, and with the least harm to the economy of the global south.

Among all oil-producing countries, Saudi Arabia has registered the highest number of renewable projects ranking the country as a front-runner in renewable energy projects, particularly solar and wind.

The country has five mega solar and wind projects under construction.

1- Sakaka Solar PV Park: located in the northern part of Saudi Arabia is the largest single contracted solar plant in the Middle East, with an installed capacity of 1200 MW started in 2020

2-Dumat Al Jandal Wind Farm: situated in the central part of the Kingdom and commissioned in 2021, is the first utility-scale wind project in the country. The project, developed by a consortium led by EDF Renewables and Masdar with an installed capacity of 400 MW and comprises 99 wind turbines.

3- Sudair Solar PV Project: currently under development by ACWA Power Company and Saudi Aramco Power, is presumed to be the largest single-contracted solar PV plant upon its completion in 2024. The installed capacity is designed for 1500 MW.

4- NEOM Green Hydrogen Solar PV Project: A joint venture between ACWA Power, Air Products, and NEOM Green Hydrogen Solar PV Project aims to establish the world’s largest green hydrogen facilities at the NEOM site in Saudi Arabia with an estimated investment of $8.4 Billion, the project is expected to produce 600 tons of carbon-free hydrogen per day upon its completion in 2026.

5- Al Shuaibah Solar Park: located in Western Saudi Arabia is slated to become the Kingdom’s largest solar power project upon its completion in 2024 with an installed capacity of 2600 MW.

These projects represent Saudi Arabia’s firm intention to materialize net zero carbon emissions by the year 2060. However, it is noteworthy that the percentage share of investments in renewables is one to five. Saudi Arabia’s projected investment in oil and gas is $500 Billion by 2030, while total investments in renewable sources of energy are estimated at $100 Billion for the same period. In 2022, renewables provided for 0.2 percent of the country’s electricity production.

Having said that, Saudi Arabia’s and most definitely all oil-producing countries’ route towards energy transition and net zero carbon emissions will have to pass through oil and gas.

In conclusion, oil-producing nations need to stand firm and united in the face of threats and harassment by Western countries against oil producers that have contributed generously to the industrialization and well-being of all nations.

Iran Gas Exports Booming

Iran, holding 33.98 tcm of gas reserves in place, is the world’s third-largest gas producer and the 18th gas exporter. According to the latest data provided by the OPEC Annual Statistical Bulletin, Iran’s net gas exports topped 18.79 bcm in 2022 when the country increased its gas exports 2% y-o-y. Turkey, Iraq, Armenia, and Nakhichevan constituted Iran’s main gas export destinations.

Iran exported 18.42 bcm of gas in 2021, up 59.9% from the year before. Therefore, Iran’s 2022 exports rate grew 62% from 2020 when the figure stood at 11.5 bcm. According to the National Iranian Gas Company (NIGC), Iran’s natural gas exports in 2022 were up 10% in terms of volume and 79% in terms of value when compared with the preceding year. In 2022, liquefied petroleum gas (LPG) exports ramped up 32% in terms of volume and 57% in terms of value y-o-y. 

Gas Delivery to Turkey

Iran is exporting gas mainly to Iraq and Turkey. Data provided by the European Commission shows that Iran’s natural gas exports topped 3.3 bcm during the first five months of 2023. Iran’s gas deal with Turkey is set to expire in 2026. Talks are underway between Tehran and Ankara to renew the agreement. NIGC has announced that the talks with Turkey were about the generalities of the agreement, noting that Iran would be able to deliver more gas to Turkey if need be. Turkey favors importing more gas from Iran,and is reported to be seeking a permit to transit part of Iran’s gas to Europe; however, no action has been taken in this regard.

9.3 bcm Gas to Iraq

Iran has two gas agreements in effect with Iraq. The first one was signed in 2013 for pumping gas to Baghdad. Two years later, another deal was signed for the delivery of up to 35 mcm/d of gas to Basra. In cold months, Iran exports 20 mcm/d of gas to Basra, which would increase to 35 mcm/d in warm months. Iran also delivers gas to the “Baghdad power plant” via the Ilam pipeline. Last calendar year to March 2023, Iran’s gas exports to Iraq totaled 9.1 bcm, which is expected to increase to 9.3 bcm this calendar year.

Gas-for-Power

Iran is also exchanging its gas for electricity from Armenia. The two countries recently struck a deal for Iran to raise the volume of gas exports to Armenia. Accordingly, Armenia would be supplying more electricity to Iran. The deal will remain in effect up to 2030.

Iran’s gas pipeline to Armenia can handle more than 1 bcm/y of natural gas. So far, only one-third of its capacity has been utilized. Iran is exporting 1 mcm/d of gas to Armenia, which is set to double under a new deal.

Turkmenistan Wants More

The resumption of the Iran-Turkmenistan gas swap to the volume of 8 mcm/d, up from 4.5 mcm/d, is another initiative accomplished by NIGC whose CEO Majid Chegeni has said that the gas swapped in 2022 recorded 358% growth in terms of volume and 530% growth in terms of value y-o-y.

In 2022, NIGC signed a gas swap deal with Azerbaijan’s SOCAR and also imported natural gas from Turkmenistan as part of its effortsto upgrade gas trading. According to NIGC, Iran’s gas swap with Turkmenistan reached 1.3 bcm last calendar year. Following the deal with SOCAR, the volume of gas imports from Turkmenistan is set to grow 70% in 2023 y-o-y.

Oman, Russia, and Pakistan

As far as gas exports are concerned, talks have been held with Oman, Russia, and Pakistan. European nations are also demanding Iran’s gas. It would be possible for Iran to deliver gas to Europe via Turkey. However, experts believe that Iran’s gas exports to neighboring nations would be more economical than exports to Europe. At issue is also the establishment of the Iran-Russia energy hub. The CEO of NIGC has said some basic agreements have been reached, while expert studies are still underway.

IRR 680tn Investment in Gas Projects

Chegeni said the 13th administration had invested about IRR 386 trillion in urban and rural gas supply projects, IRR 29 trillion in gas transmission projects, IRR 196 trillion in gas engineering and development projects, IRR 24 trillion in gas refinery projects, and IRR 47 trillion in research and technology, exceeding IRR 680 trillion in total. In the current calendar year, IRR 345 trillion is forecast to be invested in gas supply projects, IRR 24 trillion in gas transmission, IRR 234 trillion in engineering and development, and IRR 90 trillion in gas refinery projects.

$3.6bn Investment to Boost Gas Output

Although Iran’s active energy diplomacy over the past two years has helped strengthen ties with neighboring nations in favor of Iran’s energy economics, more investment and cutting-edge technology are needed for Iran to keep ramping up gas production and exports.

Mohsen Khojasteh-Mehr, the CEO of National Iranian Oil Company (NIOC), has said Iran would need $160 billion in investment toenhance its oil and gas production capacity by 50%, in which case, Iran would see its oil production reach 5.7 mb/d and gas production reach 1.5 bcm/d.

NIOC has given its nod to a $3.6 billion investment in increased gas recovery from 13 gas fields. That would add 142 mcm/d to the national gas production capacity and 100 kb/d to the national gas condensate output capacity.

Meantime, as about 50% of Iran’s gas reserves lie in the massive offshore South Pars gas field, which is shared with Qatar, more than 70% of the national gas supply is ensured by this reservoir.

Given the Petroleum Ministry’s plan to supply national gas needs in various sectors and programs for gas exports, Iran is set to increase its gas delivery to neighboring nations.