Petroleum Ministry Outlook for Defeating Oil Challenges

Iran is reported to own 159 billion barrels of crude oil in place. Overall, as far as crude oil and natural gas reserves are concerned, Iran holds 431 billion barrels of oil equivalent, ranking first in terms of hydrocarbon reserves in the world. However, due to the impact of sanctions on the economic and management sectors in recent years, Iran’s production and economy, particularly in the oil sector, has experienced tough conditions. In the wake of the US’s unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA), conditions became more difficult.

Iran’s newly appointed Minister of Petroleum Mohsen Paknejad has presented short-term and long-term plans for overcoming petroleum industry challenges.

Noting that the Iranian petroleum industry is experiencing a tough time, requiring urgent action and decisive decisions, the minister said: “By operating production preservation and enhanced production projects including completion and operation of wells, overcoming challenges to production and renovation of installations, we intend to enhance oil production.”

He said Iran planned to add 400 tb/d to its oil production up to March 2025.

Solutions

Examining petroleum industry challenges shows that this industry faces a major imbalance affecting energy supply and associated revenue. In order to overcome these challenges, it is necessary for all ministries and organizations to be cooperative with a national view, regardless of sector-wise attitudes.

The main challenges taken into consideration by Paknejad are gas imbalance, challenges and barriers to crude oil recovery in light of global peak, gasoline imbalance, financial shortages in financing upstream oil and gas development projects, and international restrictions. He has insisted on finding proper solutions to existing challenges in the oil and gas sector.

One key point highlighted by Paknejad is the restoration and enhancement of Iran’s crude oil production capacity. After the JCPOA took effect in 2015 with sanctions removed, Iran raised its output to 3.826 mb/d. But after the US withdrawal in 2018 and the restoration of sanctions, the oil production rate declined. Currently, major obstacles to oil exports have been lifted, and Iran can maximize recovery from oil fields. Iran’s output currently stands at 3.4 mb/d.

According to Paknejad’s plan, any delay in implementing oil field development projects and insufficient implementation of plans to preserve production capacity constitute two major reasons behind output fall. Should this trend go on, Iran would see its oil production drop sharply to 2.75 mb/d in four years. That is due to the rising trend of petroleum products consumption, the foregoing production would be enough only for the refining sector and domestic purposes, in which case about 950 tb/d would be left for exports, which would pose serious challenges to Iran’s income generation.

Highlighting the possible problems in the way of the petroleum industry, Paknejad has offered his solutions that would bring Iran’s crude oil production up within four years.

Mehdi Hosseini, an energy expert, told “Iran Petroleum” that national development and growth were dependent on the oil sector.

“The Achilles’ heel of the Iranian economy and its growth lies in two major ministries. One is the Ministry of Petroleum to become the source of wealth generation and the other is the Ministry of Foreign Affairs to help resolve national issues through diplomacy,” he said. “In case these two ministers can interact and work together effectively, we will subsequently witness good days.”

Hosseini said: “From an expert view, the basic issues highlighted in the minister’s agenda are exactly what we need and we cannot ignore or play down.”

Short and Long-Term Plans

Paknejad has divided his plans into short-term and long-term ones. His short-term (one-year) plans include restoring the production capacity of oil fields through preservation projects. To that effect, he has said: “By making arrangements for the workover of existing fields, acidizing, perforation and injection of solvents into wells with production decline and accelerating production capacity projects, by drilling new wells in the developed fields that are estimated to need $3 billion in investment, we will see the oil fields’ production capacity rise from the current 3.4 mb/d to 3.85 mb/d.”

Another point highlighted in Paknejad’s short-term plans is accelerating production enhancement through agreements signed for improving the production capacity of fields. That involves the development of the South Azadegan, Yadavaran, Yaran, Sohrab as well as Sepehr and Jofair oil fields with a planned 56 tb/d output hike.

Paknejad’s long-term (four-year) plans lay emphasis on output enhancement and preservation. One of the key long-term plans presented by Paknejad is reaching a 4 tb/d output hike by completing IPC agreements for 12 oil fields. This plan mainly applies to agreements signed for enhanced recovery from the Yaravan, Sohrab, Aban and West Paydar, Sepher and Jofair, Shadegan, Kupal, Cheshmeh Khosh, Dalpari and East Paydari fields and the South Pars Oil Layer. The idea is to bring about a 257 tb/d production capacity increase and enhance output by 150 tb/d by full implementation of enhanced output projects.

Paknejad’s next proposed plan is about increasing output by more than 250 tb/d after the development of eight fields: Azadegan, Changuleh, Azar, Band Karkheh, Sumar, Saman, Delavaran and Masjed Soleiman. The objective is to increase output by 700 tb/d with a $15 billion investment.

Another perspective envisaged by Paknejad is to reach the final output of 870 tb/d with a $25 billion investment. To that end, he considers

signing agreements for the development of 14 oil reservoirs. His plan involves enhanced recovery from the Yadavaran, Dehloran and Danan, Esfandiar, Ab Teimour (Bangestan), Mansouri (Bangestan), Ahvaz (Bangestan), Maroun (Asmari and Bangestan layers), Gachsaran, Bibi Hakimieh, Susangerd, Darquain and Abuzar oil fields.

Touching on Paknejad’s emphasis on enhanced oil recovery, Hosseini explained: “As far as developing oil fields is concerned, we should take into consideration several points. First and foremost, we have 1.8 mb/d of oil production projects that need to be implemented to bring our output to nearly 5 mb/d. These projects were adopted years ago and we’re still waiting for them to come online. However, I think that comparing our reserves with other countries, such an increase would be meager. Expert work has been done on this issue.”

“Another issue highlighted in Mr. Paknejad’s plans is to preserve our production capacity. We have big fields whose output is falling. Such massive fields as Ahvaz, Aghajari, Gachsaran, Maroun, and Bibi Hakimeh have been active for years and they are now on the decline. Therefore, we need to apply new technologies to keep this decline in check and maximize output for coming years,” said Hosseini.

Oil Installations Renovation

Another issue highlighted by Minister Paknejad pertains to the renovation of surface installations, which the minister estimates to require $17.5 billion in investment. Regarding this plan, the minister has said: “Given the aging installations of the petroleum industry, to boost crude oil production stability and upgrade the safety and performance of these installations, projects related to renovation, optimization, and reparation of existing offshore and onshore installations need to be drawn up.”

Another perspective considered by Paknejad has been investment in oil and gas production preservation. National Iranian Oil Company (NIOC) is forecast to need about $124 billion in financial resources over eight years for implementing development projects and preserving oil and gas fields’ output. Such investment may be provided through money and capital markets, the National Development Fund of Iran (NDFI), and investment agreements. Paknejad hopes for an $80 billion investment in this sector over four years.

Technically speaking, Hosseini said, Iran’s proven oil reserves add up to 600 billion barrels in place. The rate of recovery with old technologies and methods is 23-25%.

“We can recover 150 billion barrels of crude oil and the rest would lie underground,” he said, adding: “If we can acquire modern technologies and increase our recovery rate to 35%, we would have added about 60 billion barrels, worth $6 trillion, to our national production and wealth. Therefore, one necessity would be to use new technologies to reach new oil and gas production capacity and finally export crude oil or petroleum products as I mentioned, we have defined projects for them.”

Foreign Investment Absorption

Paknejad has also laid emphasis specifically on awarding more agreements for upstream development projects, improving procedures for accelerating implementation, and completing projects underway. Therefore, attracting foreign investment by making investment in the oil and gas sector more attractive and agility of the structure of NIOC and its subsidiaries should be prioritized.

Increasing oil exports was another issue that Paknejad deems to be a must, and dependent on increased cooperation with target countries, including neighbors. Detailing this objective, he said: “In parallel with boosting diplomacy and enhancing cooperation with target nations and attracting necessary investment for oil and gas field development, NIOC should pursue the issue of oil and petroleum product exports. To that end, it is necessary to continue and expand cooperation with the traditional and current buyers of Iranian oil and petroleum products, negotiate with refinery owners, and present diverse packages to them, reimbursing costs spent on field development in the form of products and benefiting from the potential of private companies and other state organs for increased export.”

The Ministry of Petroleum is also expected to focus on increased international interaction and transfer of technology. Amid the expansion of the 4th Industrial Revolution in the world, its main functionalities, particularly AI technologies, should be considered for use in the oil and gas industry.

Highlighting the necessity of investment attraction, Hosseini said: “The main challenge in the way of our plans is investment. For each barrel of oil capacity building, we need a $20,000-25,000 investment. We need a big investment. The other issue is access to technology. We need modern technologies to preserve production and our potential in the oil and gas sector using modern technologies. Our existing equipment and technologies are outdated and they need to be upgraded and modernized.”

“Meantime, we need to develop new methods of recovery. Both of these issues are subject to sanctions. In the meantime, some conservative approaches in industrial management are putting a bake on our move. Our managers should freely make expert and specialized decisions,” said Hosseini.

He said the issue of sanctions should be resolved in the shortest possible time, for which there are fruitful solutions.

“Through legal channels and by filing lawsuits with The Hague court, Security Council, and other fora, we may take action against these sanctions. Expert studies show that we may resolve the issue of sanctions in this way. Another issue is that our oil and gas industry is attractive to Western and particularly European buyers both geologically and in terms of low costs,” he said. “Therefore, we can introduce this attractiveness inside a country like the US and convince legislators in that country to make efforts to defeat sanctions. It is noteworthy that we have already tested this solution which has proven to be fruitful.”

Regarding the attraction of investment, Hosseini said: “Finally, by resolving the issue of sanctions, we will bring in significant investment. Even under sanctions, we can attract investment by promoting Iranian oil and gas attractions. Then, we can find access to state-of-the-art technology and implement enhanced output plans at an acceptable pace.”

Paknejad has also outlined the challenge of tough imbalance, saying: “Fuel production and consumption imbalance is a key element of imbalance challenge. It has wasted our national wealth specifically in gasoil and gasoline. Therefore, the possible solution for this sector is to resolve the issue of gasoline imbalance. Any decision on this subject must be taken with maximum sensitivity and after winning public confidence by using legal capacities.”

As has been specified in Paknejad’s plans, the main plans of this ministry are based on using Iran’s potential and capacity for production, which requires attracting more investment. Therefore, this ministry and other related organs must familiarize investors with the attractions of this sector and practice more interaction with other countries, particularly neighbors, to revive Iran’s valuable resources and benefit from its full potential for economic growth and upgrading Iran’s status.”

Golden Global Chances for Iran Petchem

The petrochemical industry internationally plays a key role in production, economic growth, hard currency generation, and job creation. In Iran too, given the valuable stance of the petrochemical industry in the economic sector, this sector has become important and considerable. Furthermore, as the bulk of petrochemicals is exported, this industry is instrumental in currency generation and banking system improvement. The petrochemical industry has so far yielded valuable achievements and significant capabilities for growth and development.

Background

Previous reports put Iran’s petrochemical production at 75 million tonnes (mt) during the last calendar year (ended on 21 March 2024), up 7% year-on-year. Recently, new petrochemical projects have come online. One case in point is the first phase of the Persian Gulf Hoveyzeh Gas Refinery (NGL 3200) that became operational in May 2023 with a processing capacity of 250 mcf/d of associated petroleum gas released during crude oil recovery from West Karoun fields. Cost $1.338 billion, plus IRR 2.210 trillion, it was aimed at gathering flare gas from the Yadavaran, North Azadegan, South Azadegan, North Yaran, South Yaran, Darquain, Sohrab, Sepehr, Jofair, Susangerd, and Band Karkheh fields. The NGL 1000 precompression facility, one of 27 projects for flare gas gathering in East Karoun, came on-stream. The inauguration of this project added 100-150 mcf/d to the Persian Gulf Bidboland gas refinery’s feedstock intake. The NGL 900 pre-compression facility came online last calendar year.

Other instances of significant progress in the petrochemical industry include the olefin unit of the Gachsaran Petrochemical Plant in Kohguiluyeh and Boyer Ahmad Province. Established with a €1.3 billion investment, it has a production capacity of 1 mt/y of ethylene and 84,000 tonnes a year of C3+. With more than 83% of its equipment sourced domestically, this project has saved Iran €269 million in hard currency, thanks to €33 million in key equipment having been manufactured domestically for the first time. To reduce industrial pollution and improve environmental conditions, the ammonia recovery unit of the Khorasan Petrochemical Plant was launched. Construction and installation of a stripper to separate ammonia from the waste and its recycling to the production line came online in one year with IRR 150 billion credit, resulting in cleaner air and a better environment.

Among other petrochemical projects was the fourth industrial gas production unit of Damavand Energy Co. with the capacity to produce 73,500 normal cubic meters of varieties of industrial gas. Jetty No. 17 of Phase 2 of Assaluyeh Port came online last winter as the first Iranian-made cryogenic loading arm. Meantime, Jetty No. 3 of Parsian Port was launched.

Projects Underway

Among projects that have got under way is construction of the Ibn Sina petrochemical plant (for the production of up to 300,000 tonnes a year of ethylene with €291 million investment, first construction phase of the petro-olefin unit of the Fanavaran Petrochemical Plant (for building methanol storage tanks), the urea/ammonia unit of the Golestan Petrochemical Plant, construction of the Sigloo Petrochemical Plant in the Lamerd Special Economic zone (for producing methylamine and its derivates for the first time in the country with €227 million investment), construction of the “Be’ssat Petrochemical Plant” in Bijar (with €750 million investment and production capacity of 500,000 tonnes of terephthalic a year and 500,000 tonnes a year of expanded PET), construction of the Torbat-e Heydarieh polystyrene project (with a view to value chain completion to supply domestic needs and export the surplus to neighboring countries), the first phase of construction of the olefin site of the Almas megaproject in Mahshahr.

Regarding petrochemical diplomacy, a key development was the agreement signed for the first time in June to renovate overseas petrochemical plants. Iran and Russia also signed 19 documents for cooperation at the end of their 17th Business Council forum. Two MOUs were signed for building petrochemical units, valued at IRR 40,000 billion, in the Special Economic Petrochemical Zone. An MOU was signed between a Chinse firm and the Special Economic Petrochemical Zone Organization for a sodium formate production plant. MOUs were also signed for the development of oil and gas fields.

That along with other achievements based on domestic manufacturing is indicative of the promoted standing of Iran’s petrochemical industry, technical savvy, and capabilities. It can also serve as a key factor for attracting domestic and foreign investment. As long as this industry is growing nonstop there would be nothing to worry about with regard to the return of investment. The 14th administration is now focused on the removal of sanctions and overcoming challenges in banking and financial interactions with other nations.

131mt Capacity Possible

Behzad Mohammadi, a former CEO of National Petrochemical Company (NPC), told “Iran Petroleum”: “The production capacity in the petrochemical industry currently stands at 97 mt a year. But through planning at the level of the Ministry of Petroleum in the 14th administration, the 131-mt capacity 

projected in the development vision for this industry is achievable as new petrochemical projects are coming online.”

It was earlier announced that the strategic priority of the petrochemical industry would be to supply domestic needs before the issue of exports is brought about, thereby necessitating feedstock supply to the petrochemical industry first. That would require cooperation and convergence for sustainable feedstock supply to petrochemical plants at affordable prices.

On the importance of feedstock supply, Mohammadi said: “Naturally when a local investor is assured about the sustainability of feedstock, he/she would show more inclination for investment. Among the main four factors of investment (feedstock, investment, technical know-how, and market), the most important factor for the genuine private investment would be assurance about sustainable feedstock.”

Cooperation with Neighbors

Mohammadi touched on the necessity of negotiations for the removal of obstacles in the way of interaction, saying: “As long as the political context is not balanced no foreign investor would show inclination for investment in the petrochemical industry. That would be possible only by providing a calm political atmosphere and becoming assured of the stability of local rules and regulations. Therefore against the backdrop of sanctions-related restrictions, investment in Iran would be risky for foreign companies, thereby impossible. Market development in neighboring countries is directly tied to our political circumstances. Recently even neighboring countries intend to downgrade their trade ties with us. Under the current political conditions with sanctions and banking restrictions, enhancing cooperation with neighbors would require a well-thought-out plan.”

Mohammadi had earlier said the petrochemical industry should be viewed with more care as it is generating value and is able to accelerate national development and have a big share in hard currency generation. He had called for the 14th administration to pay more attention to this sector.

As far as the 14th administration’s plans are concerned, he had called for action concerning feedstock supply. “Currently 70 petrochemical plants are running with an annual production capacity of 96 mt. While nearly 20% of their capacity is idle, which is due to insufficient feedstock. This challenge needs to be resolved by the Ministry of Petroleum because it would be instrumental in hard currency revenue for the country.”

Future Plans

Minister of Petroleum Mohsen Paknejad has laid emphasis on the petrochemical industry in his vision plan. Among the main points highlighted in the minister’s plan are policymaking for attracting investment from the capital market and using modern financial instruments and project funds for development and 8% annual growth in the petrochemical industry.

The former administrations had also paid attention to spatial planning for the balanced development of Iran’s petrochemical industry. Paknejad is following in their footsteps, stressing the need for the completion of spatial planning for the petrochemical industry, introducing petrochemical projects at chemical parks (in collaboration with the Ministry of Industry, Mine and Trade) with the focus on border provinces, while taking into consideration feedstock and water requirements, infrastructure for export, and access to international markets and domestic distribution network.

Petrochemical officials and experts say one key issue to be highlighted by researchers and policymakers of the petrochemical industry is to study challenges and obstacles in the way of development of the value chain of the petrochemical industry. Another issue that applies to the petrochemical sector too is attracting investment. Therefore, it is necessary to make necessary arrangements for attracting foreign investors into this sector. Meantime, necessary guarantees should be given for using foreign facilities and offering necessary incentives to attract investors, particularly in downstream industries.

Key Techno-Engineering Player

What should be taken into consideration in introducing the national petrochemical sector is the technical know-how and self-sufficiency Iran has achieved during years of sanctions. The domestic potential and skills Iranian specialists have achieved can rival what is underway in the world and may serve as an example for them. 

Iran has become fully self-sufficient in developing technical know-how for ammonia, urea, olefin, and gas conversion to methanol, ethane, ethylene, and other products. Meanwhile, Iran’s petrochemical industry is a key player in terms of technical and engineering services. It is now ready to cooperate in the manufacturing of commodities and equipment. The key point would be to focus on fruitful actions in line with interaction with the world.

Paknejad has highlighted this point in his vision, saying active diplomacy in the petrochemical sector would be prioritized for market development in neighboring countries and target markets. He has noted that it could be fulfilled under the aegis of cooperation on the part of big petrochemical holdings, the Ministry of Foreign Affairs, specialized associations, and the Iran Chamber of Commerce.

On the other hand, in line with introducing petrochemical attractive features to domestic and foreign investors, the potential of this industry should be highlighted. One case in point is the possibility of enhancing the petrochemical production capacity to 131 mt. According to the 7th National Economic Development Plan, where special attention is paid to developing the chains of propylene, methanol, ethylene, and aromatics, expanding the 2nd and 3rd petrochemical hubs in the Makran Special Zone (Chabahar) and Parsian Energy-Intensive Industrial Special Economic Zone (PEISEZ) and the focus on sanctions waiver in Chabahar Port, the petrochemical industry in the 14th administration is tasked with reconsidering current procedures of issuance of permits and determining priorities for financial facilities receipt, which would result in the fair and smart distribution of opportunities for investment in the petrochemical sector.

Implementation of these plans would ease, even remove legal and financial restrictions in the way of investors, and would allay foreign investors’ concerns about investing in Iran’s petrochemical industry.

Another issue incorporated in Paknejad’s plans, which could be considered as the strength of Iran’s petrochemical industry, is the development of necessary technologies by identifying and working up strategies for acquiring technical know-how needed by the petrochemical industry within a 10-year horizon. Implementing this plan, along with Iran’s geographical position, abundant feedstock, effective manpower, competitiveness, technical savvy, and domestic specialized potential are among the advantages of the petrochemical industry for would-be investors.

NIORDC Open to Domestic, Foreign Investment

National Iranian Oil Refining and Distribution Company (NIORDC) is one of the four main subsidiaries of the Ministry of Petroleum tasked with steering its own offshoots – National Iranian Oil Products Distribution Company (NIOPDC), Iranian Oil Pipelines and Telecommunications Company (IOPTC) and oil refining companies, among others.

One aspect of the significance of refining is visible in petrochemical refineries and petrochemical plants, and the other aspect is seen in fuel supply and distribution. Although value chain completion is a key achievement for the country and the energy market, dependence on energy supplied mainly by fuel and oil cannot be ignored. Mohammad Sadeq Azimifar, CEO of NIORDC, has said: “Since oil and gas pipelines are the main arteries in the national energy supply chain, the key middle link in crude oil and petroleum products production and supply chain rests with NIORDC.”

Expert Assessment

Azimifar, speaking at the start of his official career, said enhancing productivity from existing capacities and potentialities would be a key priority.

Noting that NIORDC would not hesitate to resolve any challenges faced by its subsidiaries, he said: “In this new term in office, we expect expert assessments to be done to identify existing challenges with the priority for protecting assets, first human capital and then installations and equipment. In parallel, operational plans would be drawn up and put into operation by an agile group.”

He said that about 1,000 km would be added to national petroleum products pipelines by next March, adding that necessary arrangements should be made from now on, to avoid any halt in activities.

Refining Growth

After the 1979 Islamic Revolution, the oil refining industry has been growing. As new refining projects came online, and the processing capacity of existing refineries increased, the total crude oil and gas condensate processing capacity in the country reached 2.37 mb/d. In light of the rapid progress in this industry and the daily growing need for high-quality petroleum products, special plans were considered, as a result of which the oil refining industry reached an acceptable position.

Refineries are symbols of the oil and gas industry and are instrumental in fuel supply to public transport, households, and industries.

According to the last reports by VCM Study, a think-tank studying value chains, 9 oil refineries are currently converting crude oil to a variety of products like gasoline, gasoil, kerosene, jet fuel, and other products. They are the Abadan, Isfahan, Bandar Abbas, Tabriz, Tehran, Shazand, Shiraz, Kermanshah and Lavan oil refineries.

According to a report released in June this year, the nine refineries have a total processing capacity of 2.286 mb/d and all of them are currently implementing development and optimization plans to boost productivity and supply products conforming to quality and environmental standards. The refineries have seen their feedstock – either crude oil or gas condensate – increase; thereby increasing the refining capacity by 11%.

The other issue is that with the completion of optimization projects at refineries, the average gasoline production has grown about 10%, going from 9.076 ml/d to 103.067 ml/d. That did not affect gasoline production only as it brought about an 11% growth in gasoil output – up from 102.081 ml/d to 114.014 ml/d.

Another important issue pertains to access to technical knowhow and implementation of projects to upgrade the quality of fuel oil at refineries, as a result of which more clean fuel was produced in the country and refining has continued without having to worry about surplus production of fuel oil or its inutility.

Capacity Perspective

The 14th administration attaches special attention to the strategic plans of the refining and distribution industry.

Mohsen Paknejad, the minister of petroleum, has presented his plan based on basic necessities such as the domestic need for petroleum products, the necessity of minimizing crude oil sales, building new crude oil and gas condensate refineries, upgrading efficiency and quality of refined products using state-of-the-art technologies based on spatial planning and environmental considerations.

To that end, the minister of petroleum has highlighted the crude oil and condensate processing capacity increase to 3 mb/d by 2028, stating it would be achieved using existing legal capacities in favor of the development of the upstream oil and gas industry and using private investment.

Paknejad emphasized the operation of the Shahid Soleimani oil refinery, the Siraf gas condensate refinery, and the Mehr Khalij Fars refinery. He said that accelerating the construction of new crude oil refineries would hinge upon attracting foreign investment. “To that end, making efforts for building a 300,000-b/d refinery in partnership with foreign investors would

be among Ministry of Petroleum plans in the 14th administration.”

In May, the then head of NIORDC announced a $19 billion investment opportunity in the refining industry, saying: “The Middle East’s largest isomax unit with the capacity of 42,000 b/d would come online soon at the Abadan refinery. That would enable the Abadan refinery to produce an additional 3 ml/d of gasoil and 1.5 mb/d of gasoline.”

Other projects that are expected to become operational this calendar year include the quality upgrade project at the Tehran oil refinery. That would bring gasoline production at the Tehran refinery from the current 6 ml/d to 7.5 ml/d, while the quality would rise from Euro-4 to Euro-5. As far as domestic manufacturing is concerned, NIORDC has installed homegrown terminals, while in partnership with knowledge-based companies, it has mastered the technical know-how for fuel oil quality upgrades.

Azimifar referred to plans for the NIORDC, saying the application of the latest instruments for financing projects would be key to realizing objectives in this sector. “Financing is the Achilles’ heel of the refining industry. For this purpose, we will activate the investment division of NIORDC to use the latest financing methods. Necessary planning has been made and we hope that we can funnel a bigger share of local and foreign resources towards the National Iranian Oil Engineering and Construction Company (NIOEC) and in line with market development move in the direction of projects with no financial burden for the company, and overseas projects could be developed. As far as financing instruments are concerned, we should set up a specialized working group to identify investment potential.”

He said projects associated with petroleum products imbalance included the delivery of pipelines, particularly the Bandar Abbas-Sirjan-Rafsanjan pipeline whose operation is vital for the national transmission grid. We hope that the first phase of this project will come online in one or two months and the remaining projects will become operational in the shortest possible time.”

Securing shareholder interests and revising economic mechanisms would be the main approach of the refining industry during Azimifar’s term in office. A major challenge to this industry is the “economics of the refining industry” which has caused a decline in its dividends, which would be addressed.

Distribution Infrastructure

One of the major plans envisaged by Minister Paknejad is to upgrade the quality of services to be offered to fuel consumers at fuel stations and expand infrastructure for fuel distribution in the country.

He insisted on investment in overseas refineries, as they can create security for crude oil demand while helping meet domestic needs for products.

He said that necessary arrangements should be made with regard to obtaining legal permission for acquiring at least 200,000-b/d share in foreign countries. Another issue worth mentioning is swapping petroleum products and supplying liquid fuel to thermal power plants.

Investment Opportunities

NIORDC and its subsidiaries are determined to attract domestic and foreign investment and consider new plans. Some of the opportunities for investment in the oil refining industry projects include the Shahid Soleimani petro-refinery with a capacity to process 300,000 b/d of crude oil, Negin Lavan estimated to cost $7.1 billion and has a capacity of 150,000 b/d, Negin Makran petrochemical refinery with an estimated capacity of 300,000 b/d of crude oil, Anahita oil refinery with an estimated capacity of 150,000 b/d, Entekhab refinery in Jask with an estimated capacity of 200,000 b/d of crude oil, Ghadir oil refinery in Jask with estimated capacity of 300,000 b/d of crude oil, Morvarid Makran oil refinery with capacity of 300,000 b/d, and Khuzestan oil refinery with capacity of 180,000 b/d.

Meanwhile, construction of gas condensate refineries like Pishgaman Siraf with an estimated capacity of 60,000 b/d, Setareh Sabz Siraf with a capacity of 120,000 b/d, Javid Energy Partow with a capacity of 60,000 b/d, and Mehr Khaleej Fars with the capacity of 120,000 b/d are other projects in this sector for investment.

Opportunities for investment by NIORDC’s subsidiaries include upgrading the quality of products and building pipelines and storage tanks like the Tehran bypass pipeline with an estimated capacity of 300,000 b/d, the Rafsanjan-Torbat-e Heidarieh pipeline with estimated capacity of 150,000 b/d, the Fasa-Sirjan-Shiraz pipeline with estimated capacity of 75,000 b/d and the Shahid Mahdavi storage tank with estimated capacity of 600 ml of products.

All these perspectives presented by the minister of petroleum and the CEO of NIORDC, as well as opportunities introduced by NIORDC and subsidiaries, are indicative of the perspective of this ministry for the growth and development of refining and distribution. Proximity to the feedstock production and export spots, reducing secondary costs by establishing joint infrastructure, lower costs compared with crude oil refineries, not using local water resources due to water shortages; and the possibility of gradual development of investment and boosting profitability are among investment attractions in this sector.

Oil Market Outlook

OPEC+ Role in 2024 and 2025

Afshin Javan

Iran’s Acting OPEC Governor and GECF EB Member

OPEC+ hopes to comply with the planned oil production cut for October despite a supply glut and a weak demand outlook in the oil market. This strategy in support of prices has effectively encouraged higher supply outside the group, particularly on the part of the US. That would leave a limited room for maneuvering by OPEC+ to ease its restrictions.

Output Cut Challenge

OPEC faces a production cut challenge (180 tb/d from October) in a market with a supply glut and bleak demand outlook, particularly in China. Rather than shoring up prices due to price cuts, this strategy has empowered external suppliers, particularly US shale producers. The US has increased shale production by over 2 mb/d from 2020. While OPEC continues to keep oil prices artificially high by limiting production, non-OPEC+ production is likely to increase to cover a significant portion of marginal production, which would in turn accelerate oil demand growth and enable the group to scale back on output. The US, Canada, and Brazil account for 31% of the global oil supply, which is equal to that of the OPEC. In 2017, OPEC held 39% of the global oil market, compared with the trio’s 17% share.

OPEC+, IEA Different Views

OPEC+ and the International Energy Agency (IEA) have significantly different expectations about oil demand in 2024. Uncertainty is specifically high in China’s bleak economic prospects. Normally, Q3 is a stronger season where a significant increase in demand growth can prove important for OPEC+’s plans and the beginning of the production cut.

By the end of the third quarter, strong supply by other non-OPEC suppliers would give rise to serious challenges for OPEC+ that are protecting themselves with the motivation of higher prices. Growth forecasts for OPEC demand are higher than IEA’s. OPEC forecasts demand to increase 2.1 mb/d in 2024 year-on-year. The IEA estimates half of that. Such a big gap indicates a lack of transparency in consumption in the second half of 2024. In the long run, the IEA sees oil demand reach 105.6 mb/d in 2029, compared with OPEC’s 116 mb/d forecast for 2045.

Energy industry analysts share the same view. Constant oil demand growth along with more limited supply extension outside OPEC+ would affect its plans for production cuts. Given strong consumption growth, OPEC+ considers a production cut of about 5.9 mb/d. However, this idea is less accepted in light of the strong increase in consumption that has pushed OPEC+ to consider an output decline of 5.9 mb/d. However, forecasts indicate that there is a significant supply glut in this decade. The IEA has reported that the simultaneous supply and demand growth (administered by the United States) up to the end of the decade would result in 8 mb/d spare production capacity. The IEA expects supply growth outside the OPEC+ alliance to exceed increased demand in the future. Supply by the US, Argentina, Brazil, Canada, and Guyana is expected to add 4.8 mb/d to production capacity in this period.

OPEC Calculations

In the current year, demand for OPEC’s crude oil is likely to decline anew. A relatively slower-than-expected growth, increased supply outside OPEC, and disruptions in Russian oil production indicate lower demand for OPEC’s crude oil this year.

The IEA forecasts OPEC demand to stand at 27.4 mb/d in 2024, down from 28.4 mb/d a year earlier. In 2021, OPEC and the US Energy Information Administration (EIA) updated their forecasts for global demand for crude oil due to predictions for lower demand and higher production in other zones.

OPEC’s production data is indicative of discrepancies between global demand for oil and non-OPEC crude oil production. Saudi Arabia and big companies like Aramco, BP, Shell, TotalEnergies, ExxonMobil, Chevron, Rosneft, and Lukoil are among the leading oil producers in the world.

On account of output restrictions in effect up to the third month of 2024, production decline at pipelines is always on the agenda. The prospect of short-term demand for crude oil depends on China’s economy amid prevailing uncertainty.

OPEC+’s decision to modify production during the third quarter of the year is cautionary. However, the coalition is pursuing a strategy for a 2.2 mb/d output decline through voluntary reduction during the coming 12 months, starting from October. That along with a 300 tb/d output hike by the United Arab Emirates (UAE) planned for the three quarters of 2025 shows that supply will be back to the market. That is likely to bring about oversupply in 2025 and in case demand keeps falling oil prices will be seriously affected.

Only the UAE has a higher quota with no more plans up to November 2025. In the meantime, it is likely that other members like Kazakhstan and Iraq would supply more than the determined level.

Withdrawals from OPEC Likely

Saudi Arabia, the de facto leader of OPEC+, would need oil prices at $80 a barrel to finance its ambitious projects. OPEC+ producers are likely to lose a higher market share.

Some experts believe that Saudi Arabia’s leadership of OPEC+ is imperfect due to the non-convergence of many members. Meanwhile, some members are likely to oppose or resist continuing declines due to lower financial balance costs, which would cause challenges for Saudi Arabia. 

In case demand does not rise significantly in the second and third quarters of the year, OPEC+ is likely to be forced to extend output cuts until the end of 2024. Such measures are likely to instill doubt into some nations for continued OPEC membership, leading to some withdrawals as it was the case with Angola in December 2023.

In the meantime, smaller members who returned after withdrawal – Gabon (back in 2016), Equatorial Guinea (2017), and the Republic of Congo (2018) – are likely to reconsider their membership. It is noteworthy that Gabon and Congo are not able to pay membership fees to OPEC, which would motivate them to quit their membership.

OPEC+ Challenges

OPEC+ is bracing for numerous challenges in 2024, some of which are as follows:

Inaccurate demand growth projections: Sudden changes in demand and the need for quick supply-demand adaptation may pose a challenge to OPEC+.

Global geopolitical tensions: Political tensions are likely to adversely affect oil production and supply to add to OPEC+’s challenges.

Supply-demand balance: Maintaining the balance between supply and demand would be a major challenge to OPEC+ as it would seek to prevent price fluctuations.

International sanctions and agreements: International sanctions and agreements are likely to affect oil production and supply, which would make OPEC+ face with economic challenges.

Rivalry with alternative energy sources: Competition with other energy sources is likely to affect the market and oil prices, posing a new challenge to OPEC+.

Strategies and Plans

As a union of oil producers, OPEC+ may have numerous plans and strategies for countering challenges that are likely to emerge in 2024. Some possible solutions and plans that OPEC+ is likely to adopt are as follows:

Output regulation: OPEC+ can regulate its oil production based on market demand and undertake efforts to bring about a favorable balance between supply and demand.

Talks with non-member nations: Establishing a dialogue with non-OPEC+ countries and arranging for agreements on oil production and price control can help market management.

Renewables development: Investment in renewable technologies and lower dependence on oil may reduce price discrimination and ward off sudden price fluctuations in the market.

Diversity of energy sources: Creating diversity in energy sources including the development of non-oil sources may protect OPEC+ against oil-related risks.

R&D: Boosting investment in R&D for oil technologies can help improve productivity while cutting costs.

Climate Changes

Climate changes largely affect the energy industry, particularly the petroleum industry. These changes may even impact OPEC+ strategies and functions. Some of the approaches OPEC+ is likely to adopt in countering climate changes are as follows:

Greenhouse gas emission cuts: OPEC+ can focus on reducing greenhouse gas emissions from its oil operations and adopt plans for that purpose.

Investment in renewables: Increased investment in renewable technologies and clean energy projects can help cut dependence on oil and reduce the negative impacts of climate changes

Diversity of energy resources: Diversity in sources and less dependence on oil can help the fight against climate changes, driving OPEC+ towards more stable policies.

R&D for climate change adaptation: OPEC+ can pay more attention to R&D work on technologies that would help more adaptability to climate changes.

Global agreements: Joining global agreements related to GHG emission cuts and economic stability may further link OPEC+ decision-making to environmental issues. Climate change require paying more attention and effective action. By choosing proper strategies, OPEC+ can help manage more effectively the impact of such changes on the petroleum and energy industry.

Iran-Turkmenistan Energy Cooperation

President Masoud Pezeshkian, during his recent visit to Turkmenistan, stressed gas imports and energy cooperation between the two countries. Iran should improve its ties with Turkmenistan because the latter serves as an entry gate for the former into Central Asian, Russian, and Chinese markets.

Iran may cover its growing gas demand when consumption hits its peak in a bid to maintain grid stability, specifically in the north and northeast. It can also enter into a gas swap agreement with Turkmenistan and take its gas to its southern neighbors. That would be a win-win deal in the gas market.

Turkmenistan is Iran’s northeastern neighbor and the two share cultural points. With more than 1,000 km of a joint border with Iran, Turkmenistan has upgraded its energy cooperation with the Islamic Republic in recent years.

In the aftermath of the collapse of the Soviet Union in 1991 and Turkmenistan’s independence, Iran was among the first nations to recognize Turkmenistan as a state. They have since had good ties and cooperated in the economic, transport, infrastructure, and energy sectors.

However, differences may have emerged from time to time between the two countries, in which they have settled.

Energy Diplomacy

Iran first signed an agreement with the newly independent Turkmenistan in 1995 to import gas. Under the 25-year agreement, Turkmenistan undertook to export 33 mcm/d of gas to Iran at the fixed price of $42 per 1,000 cubic meters. This is how the Korpeje-Kordkuy pipeline started pumping gas from Turkmenistan to Iran in 1997, which rose to 6 bcm/y. As more pipelines were added, Iran’s gas imports from Turkmenistan doubled to 12 bcm a year. Iran used Turkmenistan’s gas to meet Northern provinces’ needs. But in 2006, the Turkmen government reneged on its commitments, demanding that prices increase. In late 2008, a new round of talks was held between the two countries on price modification and the National Iranian Gas Export Company (NIGEC) said at the time, that the price gas formula for purchase from Turkmenistan had been finalized. Several rounds of talks were held between Iranian and Turkmen officials, and an addendum was added to the preliminary agreement. Under this new addendum, the price of each 1,000 cubic meters of gas rose from $42 to $75 in two stages.

Cold Ties

Due to such price challenges, Iran and Turkmenistan experienced cold ties occasionally from 2007 to 2011. When amid cold weather, gas had been cut to some northern and northeastern provinces, Iran-Turkmenistan ties were exposed to a litmus test. But ties between these two nations were not limited to gas. Therefore, both nations moved to resolve differences to spare other sectors any harm.

When the administration of Hassan Rouhani took office in 2013, Bijan Zangeneh took over as minister of petroleum. Iran started paying back Turkmenistan for gas. Iran did not base its calculations on $36. Turkmenistan announced that Iran owed it $1.8 billion for 2007 and 2008 gas imports. In the winter of 2017, Turkmenistan once again threatened to halt its gas supply to Iran and practically decreased its gas exports to one-tenth. But this time, the story was different. Thanks to the massive offshore South Pars gas field, Iran could not be overcome by threats. Iran made it clear to Turkmenistan that it would not bow down to bullying tactics. Turkmenistan realized that if the case of not reach an understanding with Iran, Tehran may take the case to international arbitration and would be likely to win. Therefore, a new memorandum was signed based on Iran’s terms. Settlement of gas dispute with Turkmenistan was considered under the 13th administration. One sector of economic cooperation between Iran and Turkmenistan is energy and gas. Tehran is receiving gas from its northern neighbor to serve its northern provinces. Therefore, Iran would not need to finance the expansion of the pipeline from the gas fields in the south to northern areas and along the border with Turkmenistan. Iran, Turkmenistan, and the Republic of Azerbaijan in November 2021 signed a trilateral gas swap agreement, which they implemented a year later. Under this agreement, Tehran receives gas from Turkmenistan and delivers the same volume to Baku. Meantime, Iranian companies would be building a new gas pipeline for 125 km, fitted with three gas compressors, on Turkmenistan’s soil. That could enhance Turkmenistan’s gas export to Iran to 40 bcm a year. Gas swaps between Turkmenistan and Iran had already been done at the destination of the Republic of Azerbaijan in 2022 and 2023.

According to a trilateral swap agreement reached between Iran, Azerbaijan, and Turkmenistan on the sidelines of an ECO summit, it was agreed that Iran would take necessary gas for the five provinces of Khorasan Razavi, North Khorasan, South Khorasan, Golestan, and Semnan as transit fee. Although it is among the world’s leading gas producers, Iran would need an extra source due to high gas consumption and the possibility of pressure fall-off for Northern provinces. In other words, supplying gas to northern areas in the winter could be the main point of this agreement.

Turkmenistan Open to World Markets

As seen in the cultural, political, and economic history of Iran and Turkmenistan, this neighboring country has geo-economic importance for Iran, as it is a gateway for Iran to the markets of Central Asia, Russia, and China. On the other hand, according to many energy experts, to stabilize the gas network in the north and northeast of the country, especially during peak shaving, we may meet our domestic demand through Turkmenistan.

These conditions, which make Iran’s gas trade flourish without the country exporting any gas, are part of the advantages of this contract. Also, the advantage that the gas swap from Iran may have for us today is the development of regional gas trade, which will eventually lead to the prosperity of the gas production and export market, and secondly, it will create stability for the network in the north and northeast of the country.

Once the 14th administration took office, government officials said they would try their best to supply winter gas, particularly to the domestic and industrial sectors. Before this administration started work, many energy experts and analysts had emphasized Iran-Turkmenistan ties.

That is why President Pezeshkian followed up on gas imports when he visited Turkmenistan where he was actually on a cultural visit. Even if no concrete agreement is reached on gas, this cultural visit would ensure better ties between the two nations.

Upon returning from Turkmenistan, he said that his visit had cultural impacts. On the sidelines of an event held in memory of a great Turkmen poet, Pezeshkian met with four heads of state and government.

Regarding his meeting with the president of Turkmenistan, he said: “During this meeting, we reached an agreement on cooperation, gas exchanges, electricity, and prosperity of border markets. These issues are to be finalized during the upcoming meeting of the Iran-Turkmenistan Business Council.”

Pezeshkian also referred to his hourlong meeting with Russian President Vladimir Putin, saying: “During this meeting, we held constructive talks on agreements and treaties between the two nations on gas, road, railway, water desalination, energy, and petrochemical cooperation, and it was decided that we accelerate the implementation of agreements.”

The undeniable truth is that sanctions have imposed a heavy strain on Iran’s petroleum industry. However, the oil industry has not stopped in recent years and the Ministry of Petroleum has tried its best to minimize the impact of sanctions. That is why the Ministry of Petroleum under the 14th administration is trying to maintain its diplomatic ties with other nations, particularly neighboring countries. This diplomacy has been visible specifically in Turkmenistan in recent years.

Iran and Turkmenistan hold respectively the world’s 2nd and 4th largest gas reserves. Russia is the first and Qatar comes third. These four top gas owners are located in the same geographical area. Therefore, they have a good chance to develop a mechanism for the regional management of gas trading. The results of such cooperation would not be limited to Middle East and Central Asian nations; rather, the entire global gas trading would benefit.

18th Iran Plast Review

Iran Polymer Output Capacity to Hit 17 mt/y

The 18th edition of the “Iran Plast” international exhibition, in line with the policy of value chain completion in the petrochemical industry with the slogan of “global business”, was a big stride in favor of the development of Iran’s petrochemical industry specifically in the polymer sector. Iran’s polymer production capacity currently stands at 8.7 million tonnes (mt) a year. In the light of growing demand for polymer products in local and foreign markets, implementing 24 new polymer projects would bring this capacity up to 16.7 mt by 2028.

Economic development and progress of hydrocarbon-rich Iran depend on the development of the petroleum industry. Meantime, value chain completion and investment in the petrochemical industry is the most reliable and most effective strategy in preventing crude sales to increase value-added and job creation for national development. Running 73 production plants and 3 utility plans, Iran’s petrochemical industry is receiving 1.1 mb/d of crude oil in feedstock to be converted to high-value products.

Iran’s nominal petrochemical production capacity currently stands at 96.5 mt a year, polymer products account for more than 8.5 mt of that. Polymers are highly valued due to their widespread use and the development of the polymer chain would earn Iran significant revenue.

Meantime, in addition to expanding downstream petrochemical industries that would bring about job creation and lower imports, polymer products would upgrade Iran’s share of global trading.

Iran 1st Polymer

Polyvinyl chloride (PVC), was the first polymer produced in Iran at the Abadan Petrochemical Plant in 1970 at 36,000 tonnes a year. However, with the development of the petrochemical industry in recent years, currently 30 polymer plants are active in Iran, supplying such products as low-density polyethylene (LDPE), high-density polyethylene (HDPE), medium-density polyethylene (MDPE), polypropylene, linear low-density polyethylene (LLDPE), expanded polystyrene (EPS), general purpose polystyrene (GPPS), PVC suspension and PVC emulsion, PET (bottle and fiber-grade), polycarbonate, liquid and solid resin epoxy, synthetic rubber (PBR-SBR) and medical-grade PVC.

Today, polymers are largely used in a variety of industries including car manufacturing, food packaging, pharmaceuticals and chemicals, household appliance manufacturing, the construction industry, sports tools, medical equipment, foodstuff industry, and electronics among others. Owing to their unique features, polymers are likely to be used for more industrial purposes in the future.

813 companies

Given the growing demand for polymer products both internally and externally and in light of the diversity of polymer use in various industries, Iran has undertaken extensive plans to develop its polymer industry. The “Iran Plast” exhibition is in line with this objective, showcasing the plastic industry. Petrochemical players attend this annual event.

Iran held its first “Iran Plast” exhibition in 2002 when 223 local and 71 foreign companies from 18 nations were in attendance.

During the 18th “Iran Plast” exhibition, held September 8-11, 228 foreign and 525 local companies came together at the Tehran International Permanent Fairgrounds. The event was held in various groups of petrochemical raw materials and products, technical and engineering services, premanufactured and manufactured products, machinery and equipment, scientific, research, and academic centers, HSE lab tests, IT and digital transformation, other master batch services, granule, and polymer compounds.

Event for Cooperation

The “Iran Plast” exhibition provides a suitable platform for companies to hold talks, and sign MOUs and agreements to broaden domestic and international cooperation and develop this industry.

In parallel with interacting with foreign companies for the fast realization of development objectives, as has been the case in the past, Iran’s petrochemical industry has never neglected self-sufficiency in the petrochemical industry. That explains why a large number of MOUs and agreements were signed on the sidelines of the “Iran Plast” exhibition. As more than 100 petrochemical projects are currently underway in the country, Iran’s petrochemical industry remains the largest scientific and research market in Iran. Universities, research centers, and local companies can offer great help to the development of this sector. Therefore, signing research cooperation documents were among the development plans that had been handled at the “Iran Plast” exhibition, the most important of which was 3 technological agreements and MOUs between Petrochemical Research and Technology Company (PRTC) and local companies.

PRTC signed an MOU with Euroslot Pars, a knowledge-based company, for developing technical knowhow for propane dehydrogenization (PDH), an MOU with Afra Vandad Iranian on developing transmission lines for power and granule to polyolefin production units, and an MOU with Arman Pasargad Energy Technologies Development Company (APETDC) on developing necessary technical and technological knowhow for petrochemical refining and petrochemical industries.

Value Chain

On the sidelines of the 18th “Iran Plast” exhibition, Special Economic Petrochemical Zone Organization (SEPZO) signed five agreements and MOUs for development of the petrochemical industry: agreement for methylamine production and downstream chain with a capacity of 36,000 tonnes a year on Site 2 of the Special Economic Petrochemical Zone with Petrosam Eurasia, agreement for silk, fabric, liner and jumbo bag manufacturing with capacity of 6,000 tonnes a year with $3 million plus IRR 2,500 billion investment on Site 1 of the Special Economic Petrochemical Zone with Ojaa Tabdri Alborz Co., and agreement for the development of pharmaceutical substance for lab solvent with capacity of 15,000 tonnes a year and $2.8 million plus IRR 760 billion investment on Site 1 of the Special Economic Petrochemical Zone with Jaber Aznagh Chemical Co. 

Meantime, memorandums for the development of PVC2/VCM/E by the Arvand Petrochemical Plant with an annual capacity of 300,000 tonnes. In addition, a $626 million investment, VAM development by the Fanavaran Petrochemical Co. with an annual capacity of 100,000 tonnes, and an $87 million investment agreement were signed to increase nonoil exports, achieve self-sufficiency, and benefit from the private sector’s potential.

Attractive to Foreigners

In addition to 525 local companies, 244 foreign companies, and 44 agents of foreign companies from China, Italy, Taiwan, South Korea, Turkey, France, India, Germany, Spain, and Russia participated in the 18th “Iran Plast” exhibition. Furthermore, 12 business delegations comprising 150 persons visited the “Iran Plast” exhibition from Russia, Serbia, Kazakhstan, Tajikistan, China, Pakistan, Uzbekistan, Afghanistan, Belarus, Syria, Iraq, and Oman to expand cooperation with Iranian companies.

Olga Antonina, Gazprom’s sales executive director, said on the sidelines of the “Iran Plast” exhibition: “We’re currently trying to begin our negotiations for signing agreements and establishing trade and industrial cooperation with Iranian petrochemical companies and be able to benefit from the existing potential in the petrochemical market of this country.”

“We held talks with several Iranian companies involved in the petrochemical industry, including Arya Sasol, Jam, and the Persian Gulf Petrochemical Industries Company. We hope that this trend would continue to result in positive cooperation for both parties,” said Antonina.

The CEO of a Chinese firm said Iran’s petrochemical market represented an attractive venue for international cooperation. “We’re in talks with several Iranian companies for long-term agreements,” he said.

Mohammad Ehsan Nematzadeh, the CEO of Behkaran Kahkashan Co. which is active in the plastic industry in Afghanistan, said his company receives raw materials and industrial machinery from Iranian companies.

“We’re about to sign agreements with some Iranian companies and we hope that Iranian and Afghan companies would be able to expand their activities in various fields, particularly petrochemical and polymer industry,” he said.

The head of Uzbekistan’s Maya Plast said the “Iran Plast” exhibition was a good opportunity for pushing ahead industrial objectives, particularly in the plastic industry.

“We’re seeking to cooperate with Iranian companies while expanding our activities not only in the plastic industry but also in all branches of the petrochemical industry,” he said.

7.5% Market Growth

Specialized workshops and panel discussions were among other strategic programs on the sidelines of the “Iran Plast” exhibition. These meetings and workshops were held on a variety of subjects including technological projects in the petrochemical sector, studying the Iranian catalyst industry market, the role of the petrochemical industry in sustainable development, studying challenges and opportunities in the export sector, reviewing future developments of the petrochemical industry and opportunities for investment in the capital market, artificial intelligence (AI) in the polymer industry, knowledge-based companies’ business development in the petrochemical industry value chain and the current status of biodegradable plastics in Iran and the world.

A training workshop on the “role of the petrochemical industry in sustainable development” was one of them. Highlighting the fact that economy, technology, and politics should be pushed towards sustainable development, the forum stressed that sustainable development requires parallel and simultaneous focus on society, economy, and the environment. 

The petrochemical industry market in the world was valued at $617 billion in 2023, which is projected to reach $1.162 trillion in 2032. This workshop emphasized the development of an environmentally friendly value chain, management of resources and costs, reducing energy intensity, waste management, green industry development, and compliance with international environmental regulations for sustainable development in the petrochemical industry.

AI Document

The AI document in the petrochemical industry was unveiled on the final day of the “Iran Plast” exhibition. This document has been drawn up based on comprehensive studies conducted on how to apply AI to the petrochemical industry. For that purpose, about 80 sources have been studied since 2021.

AI is used in various sectors of the petrochemical industry, including optimization of processes, optimization of energy consumption, HSE, and optimization of transportation. AI applications have been identified in 14 categories in the petrochemical industry. More than 30 projects are envisaged in the first edition of the document.

24 Polymer Projects

Iran’s petrochemical industry has a cohesive plan for completing the value chain for high-valued products while increasing the volume of production, particularly in the polymer sector. Last calendar year, more than 1.3 mt of varieties of polymer had been purchased locally. That would create high value-added for the country.

Currently, 24 polymer projects are underway in the country, whose completion would bring the production capacity of these products to 16.7 mt by 2028. Of course, planning is underway for building polymer units. A stunning jump is largely expected in polymer production in the coming years.

The world is increasingly focused on developing biodegradable polymers and recycling technologies with a view to allaying environmental concerns about plastic waste. Innovation in the chemistry of polymers and engineering would result in better performance. The polymer industry is instrumental in modern technology and manufacturing, and it can affect various aspects of everyday life as well as industrial processes.

Furthermore, manufacturers are expanding their access to new markets and optimizing production and distribution processes in a bid to respond to growing demand on a global scale. To that end, given the applicable regulatory rules about the environmental and health impacts, actors of this industry are expected to comply with tough regulations regarding the production, use, and disposal of polymers and minimize environmental damage.

Iran, Turkmenistan Agree to Boost Gas Cooperation

Iranian President Masoud Pezeshkian, who recently visited Turkmenistan, said he had met with Turkmenistan’s President Serdar Berdymukhamedov.

“In this meeting, we reached an agreement on cooperation and exchanges in gas and electricity, as well as bringing prosperity to border markets,” Pezeshkian said, adding that the “Iran-Turkmenistan Business Council” would further discuss the issue in a meeting in Tehran.

He also referred to his hour-long meeting with Russian President Vladimir Putin, saying: “We held constructive talks on bilateral treaties and agreements regarding gas, road, railroad, water desalination, energy and petrochemical cooperation. We decided to accelerate the implementation of agreements between the two nations.”

Pezeshkian said regional issues were discussed, adding that he asked Russia to act more effectively in the face of the Zionist Regime’s crimes in Gaza and Lebanon.

“I also met with the presidents of Turkmenistan and Uzbekistan and it was decided that joint working groups of these two nations hold their meetings with Iran in a bid to prepare the ground for further cooperation,” he said.

“During these meetings, we tried our best to expand our regional communications and cooperation in various sectors in a bid to blunt the impact of unjust sanctions imposed on Iran as much as possible,” said Pezeshkian. “The Islamic Republic of Iran shares borders with many countries, and increased interaction with these countries can largely help resolve our problems. We had good achievements which we hope would continue.”

Sepehr, Jofair Supply More Oil to Export Terminals

CEO of Petroleum and Engineering Development Company (PEDEC) Nasrollah Zarei has emphasized increased oil production from the Sepehr and Jofair oil fields, saying accelerating the Central Treatment Export Plant (CTEP) operation in the South Azadegan field was planned.

“Due to the acceleration of the CTEP commissioning we will fully use the storage capacity of West Karoun fields and other petroleum industry projects in a bid to avert any problem with procuring necessary commodities in this project,” he said.

Zarei, who was visiting the West Karoun cluster of oil fields, visited the Sepehr and Jofair fields. He met with Abdullah Ozari Ahvazi, the CEO of Arvandan Oil and Gas Production Company (AOGPC) and the company financing the Sepehr and Jofair projects, to learn about oil delivery to the West Karoun plant.

Zarei stressed enhanced production from these fields, asking the investor and the operator to hold regular meetings in a bid to accelerate oil supply from the Sepehr and Jofair fields to export terminals.

Hossein Mohseni Zonouzi, project manager of Yaran oil field development at PEDEC, said the agreement for this field was finalized in October 2022. The objective is to extract 39.5 million barrels of oil from this field over 10 years.

He said that the first targeted production in the agreement was 4,800 b/d.

The extra output from this field is the result of updating reservoir studies, conducting surface engineering activities, drilling engineering, supplying and installation of 10 downhole pumps, supplying light drilling rigs for pump installation, and procurement of necessary equipment and services for installing pumps.

Energy Imbalance Management under Review

Minister of Petroleum Mohsen Paknejad recently visited Platform A of Phase 18 and Platform of Phase 5 of the South Pars gas field.

He said his visit was aimed at reviewing problems causing an imbalance in gas production and consumption as we are almost reaching cold months.

Paknejad said oil service workers in Assaluyeh, mainly those working on platforms, were the frontline staff of the energy sector.

Touching on the challenge of imbalance in the energy sector, he said: “We will follow up on management of energy imbalance in the production of energy carriers and efficient use.”

“Imbalance is not an issue to have occurred in six months or one or even two years; rather it has happened during a long period due to hindered investment in the upstream sector for production or energy efficiency issues. Overcoming imbalance completely would be time-consuming; however, we are doing our best at the Ministry of Petroleum to leave the winter behind with as fewest challenges as possible.”

Noting that energy imbalance should be discussed from various aspects, the minister said: “Energy imbalance is partly blamed on the mechanisms of energy carriers’ production that have to increase. Naturally, we are faced with challenges in output enhancement, one of which is financing, and we need to find solutions.”

“Another aspect of energy imbalance, which is more important, is associated with efficient use, management of demand and consumption. There are some solutions in this regard and people have to shoulder the main burdens. They need to show necessary cooperation so that we gradually resolve the issue of imbalance,” he added. 

Paknejad touched on speculation about energy carriers’ price hike, saying: “The current administration has no such plan. This issue is not limited to the Ministry of Petroleum, as the ruling establishment should decide about it. Our priority is to move towards management of demand and consumption.”

Linking Iran-Russia Gas Network Strategic Move

Saeed Tavakoli, the CEO of the National Iranian Gas Company (NIGC), has stressed the need for linking Iranian and Russian gas grids in favor of regional and global energy supply.

Addressing the 13th St. Petersburg International Gas Forum (IGF), he said Iran’s geographical position in the center of the International North-South Transport Corridor (INSTC) was unique for energy transmission.

He said Iran could yield more than 1 bcm/d of gas, highlighting the importance of Iran’s extended distribution network for domestic energy supply as well as filling the needs of regional countries.

Tavakoli said Iran remained a key energy supplier in the region, adding: “Iran is the only supplier of gas to Iraq and is one of the main gas suppliers to Turkey. We intend to boost our gas exports to both of them.”

“Russia and Iran are the first and the world’s second-largest gas reserves holders. They can cooperate to play a significant role in clean energy supply to the region and the world and elucidating international policies suitable for this purpose,” he added.

Tavakoli said a success story case was the establishment of the Gas Exporting Countries Forum (GECF) by Iran and Russia. He expressed hope that the GECF would be playing a more effective role in the gas market and serving the maximum interests of exporting countries. 

He said Iran’s geographical position empowered it to cooperate with Russia in gas swap and transit agreements, adding that Turkey, Iraq, Pakistan, India, and Persian Gulf littoral states were the target nations.

After signing a memorandum for cooperation, Tavakoli expressed hope for positive results for both countries.

Tavakoli said that gas-fired power plants supplied 83% of Iran’s fuel mix, adding nowhere in the world spends so much gas for electricity generation.

“Iran’s gas industry is the pioneer of production and development, standing on the frontline of economic warfare. Regardless of political considerations, it looks into national interests to supply maximum gas to consumers in the industrial, service, and household sectors,” he added.

“Gas makes up about 70% of the national energy mix, and NIGC’s top priority particularly in the cold season would be to keep the gas flow in motion,” said Tavakoli.

Petchem Sector to Reach 8% Annual Growth

The acting CEO of the National Petrochemical Company (NPC) has said the petrochemical sector would experience an 8% annual growth rate under the 7th National Economic Development Plan.

Hassan Abbaszadeh said: “The petrochemical industry has grown and prospered along with God-given gifts such as oil and gas in the country, and along with the development of the petrochemical industry in the country, other industries, consultants, and contractors have also grown and developed.”

“The installed capacity of the petrochemical industry has now reached 100 million tonnes a year. We hope to bring it up to 130 million tonnes by realizing development objectives of the petrochemical industry enshrined in the 7th Development Plan,” he said.

Abbaszadeh called on petrochemical industry players to take action for investment in this industry to help realize the 8% growth goal.

Referring to methanol-to-gasoline (MTG) projects, he said they were a solution to fuel imbalance in the country. He said the methanol production capacity in Iran stood high.

Emphasizing the urgency of fuel consumption management, he said: “We can apply various methods to enhance gasoline production in the country. MTG is one of them, and other countries are using this technology.”

He said that a team had traveled to a country possessing the MTG technology, adding it had agreed to share this technology with Iran. He added that five companies had applied to build MTG units in Iran.

Abbaszadeh said that a 16-17% discount would be considered for plants with higher efficiency.

He said that second-hand MTG plants could be also transferred into the country should they meet the necessary standards. He added that transferring such units would take 1 and a half years while building new units would take 3 years.

He said that the MTG plants’ capacity was 200,000 tonnes, adding that NPC could issue permits for eight MTG units.

Regarding Iran’s petrochemical exports, Abbaszadeh said: « Thanks to the variety of its products, the petrochemical industry has diverse markets. There is no problem with exporting petrochemicals, despite sanctions. Petrochemicals are shipped to various countries and we are making good foreign-currency earnings this year.”

CNG Development and Fuel Mix Diversification

The CEO of the National Iranian Oil Refining and Distribution Company (NIORDC), Mohammad Sadeq Azimifar, while stating that national conditions needed to apply non-pricing policies to control and manage fuel management; continued as saying “One of the most important plans for this period is to diversify the fuel mix by using CNG. All NIORDC organs should mobilize for this purpose,” he said.

Addressing a group of CNG contractors, he said that increased gasoline consumption had caused an imbalance in this product. “In addition to the measures and policies for this new period of management for increased gasoline production, while maintaining the quality of this product, the current trend of gasoline consumption in the country would result in increased gasoline imbalance.

“Over the past month, a study has been conducted to have a count of the current situation in the CNG sector. The main challenges of stakeholders in this national project were identified; and some short-term, mid-term, and long-term plans were adopted,” said Azimifar.

“In the short-term horizon, such measures as paying liabilities to CNG contractors, increasing CNG stations’ commissions, and optimizing fuel quota to dual-fuel cars are underway in a bid to increase the capacity of dual-fuel cars in the country tangibly in six months,” he said.

In the mid-term horizon, he added, building new CNG stations, replacing aging stations, and considering a specific share for dual-fuel cars would be considered.

“In the long-term, we expect to complete the coverage capacity of stations and convert heavy gasoline-burning vehicles to CNG-burning cars,” said Azimifar.

Stressing NIORDC’s fulfillment of obligations to pay back liabilities, he said: “We’ll have regular meetings to review the trend of progress in the refining and distribution sector in partnership with all CNG stakeholders to guarantee the interests of all organs involved in the CNG chain and subsequently the sustainable progress of this national project.”

Azimifar stressed the need for the safety of dual-fuel cars, saying replacing clapped-out fuel tanks would be done to guarantee the safety of vehicles that had been converted earlier. He added that the quality of installed parts would be prioritized.

“I hope that in cooperation with stakeholders at various levels of governance and enterprises and implementation of plans, we would be able to enhance the CNG share in the fuel mix,” he said.

Readiness for Winter Gas Supply

CEO of National Iranian Oil Company (NIOC) Hamid Bovard has said that the Ministry of Petroleum would be in full readiness to supply gas needs during winter.

Addressing the Majlis Energy Committee and a group of petroleum industry engineers in the Pars Special Economic Energy Zone (PSEEZ), he said the Pars zone supplied 70% of national gas demand. PSEEZ is also home to 50% of petrochemical plants across Iran.

He said the Ministry of Petroleum and NIOC were ready to deal with winter challenges, adding that the Ministry of Petroleum is fully ready for winter.

“The petroleum industry should be assisted. This is the industrial locomotive of the country. Majlis’s assistance for the petroleum industry has been unique over the past two months,” he added.

Bovard touched on energy intensity in Iran, saying: “The energy intensity stands very high in the country. This trend should change. We ask people, industrialists, and power plants to undertake efforts to reduce energy intensity in the country. With ambient temperature set at 20 degrees Centigrade in winter, we would see energy intensity decline significantly.”

Touraj Dehqani, CEO of Pars Oil and Gas Company (POGC), said PSEEZ was home to massive assets. “Nearly 8% of global gas reserves lie in this zone. Furthermore, 50% of petrochemical feedstock is supplied here.”

Touching on the geopolitical significance of PSEEZ, he said: “Efforts have been underway round the clock at PSEEZ to allay winter concerns and energy imbalance.”

“As far as pressure compression at South Pars phases is concerned we have to make arrangements to prevent pressure fall-off,” he said.

Annual Natural Gas Exports at 20 bcm

Saeed Tavakoli, CEO of the National Iranian Gas Company (NIGC), has said that the company has drawn up macro strategies and policies under the 14th administration.

He said annual natural gas exports had reached 20 bcm, adding: “NIGC runs 21 refineries with capacity of 1.075 bcm, 40,680 km of natural gas pipelines, 3.4 bcm a year of storage capacity and recovery of 30 mcm/d of stored gas.”

He reaffirmed Supreme Leader Ayatollah Ali Khamenei’s emphasis on the application of modern technologies to industries, saying upgrading energy diplomacy, governance, development of local technology and management system were among NIGC’s strategies and policies.

Referring to the governance model of NIGC, he said: “This is the locally developed model based on the FAS model experienced by Russian Gazprom, EMRA experienced by Turkish Botas and EC experienced by Malaysian Petronas.”

The results of this new model, Tavakoli said, included offering incentives to distribution companies to develop innovation in consumption reduction, scaling back dependence on natural gas consumption by replacing renewables and CNG and hydrogen as well as penetration of Gen-4 technologies.

He said that optimization of NIGC-end user chain was essential, adding: “NIGC’s chain consists of refining, transmission and distribution and end user including domestic sector, utilities, steel, cement and petrochemicals.”

Gholam Abbas Hossieni, acting head of South Pars Gas Complex (SPGC), said the 13 refineries at this group were running at full capacity. He said gas transmission from South Pars would increase in the current calendar year year-on-year.

He said that 196,000 standard mcm of sweet gas was fed into national trunkline last calendar year, which is expected to grow in the current year.

“Last calendar year, 580 mcm/d of gas was fed into national trunkline. We are expected to hit a new record in the current calendar year,” he said.

Hosseini said South Pars refineries were producing 740,000 b/d of condensate, 15,000 tonnes a day of ethane, 13,500 tonnes a day of propane, 9,000 tonnes a day of butane and 2,200 tonnes a day of sulfur.

As far as overhaul is concerned, he said overhaul of all South Pars refineries had been over, except for the 5th refinery that would be completed soon.

BRICS Keen for Better Ties with Iran

President Masoud Pezeshkian has said at its recent summit, the BRICS showed its deep willingness to deepen its ties with Iran.

It was also decided that agreements signed with some countries be implemented as fast as possible.

“It was the first BRICS summit where we attended as a full member. Whatever happened at this summit was a favorable achievement,” he said.

Pezeshkian said dealing with security, economic and social issues constituted the very foundation of the BRICS meeting in Russia, adding: “In the economic sector, the BRICS is trying to counter US unilateralism, dollar dominance on global economy as well as unjust and unpopular sanctions against various countries.

BRICS was initially comprised of five members, said Pezeshkian, adding that currently more than 30 countries have applied to join it.

“One key issue at these meetings was that in light of US dominance on the International Monetary Fund (IMF), a separate fund be set up to enable nations to help each other and overcome US sanctions,” he added.

Pezeshkian also referred to his talks with the heads of state from China, Russia, South Africa and India, adding: “The final statement of the BRICS summit condemning Israeli crimes in Gaza and Lebanon as well as emphasizing development of monetary, economic, cultural, scientific, expert and security communications between member states was remarkable and important.”

He said that the BRICS summit as seeking to stabilize its own standing to counter unilateralism, adding: “The summit provided a good chance for us to hold constructive talks with the heads of state from 10 nations.”

Pezeshkian said BRICS member states welcomed Iran’s position, adding: “Some heads of state including Egypt said some European ambassadors gave totally different image of you. You should boost your communications with the countries in the region. The emir of the UAE also showed willingness to visit Iran and he believed that we should settle our differences on our own without letting others interfere with our affairs.”

“This visit was really a golden opportunity for us to upgrade our convergence with fellow members,” said Pezeshkian. “I think that if we manage to put into practice the objectives of this organization as well as agreements, we would be able to neutralize the conspiracy hatched by the US and its allies.”

PGPIC Output Up 16%

CEO of Persian Gulf Petrochemical Industries Company (PGPIC) Abdolali Ali-Askari said the holding’s production would reach 28.7 million tonnes by the end of the current calendar year, up 16% year-on-year.

He said that the output was already reported at 15.8 mt.

“PGPIC’s global standing among 100 petrochemical companies has been promoted from 27 to 18th position,” he said, adding that ICIS had given it the ranking 5 in terms of profitability.

Ali-Askari said that PGPIC was the top company among 100 Iranian companies.

He said that PGPIC’s production reached 23.2 mt during the calendar year to March 2023, which then increased to 24.7 mt the year after.

He added that the 1.5-mt increase in PGPIC’s output was due to a 518,000-tonne increase by Bandar Imam Petrochemical Plant, a 400,000-tonne increase by Pars Petrochemical Plant, 608,000-tonne increase by Persian Gulf Bidboland Gas Refinery and 273,000-tonne increase by Persian Gulf Hoveyzeh Gas Refinery.

Regarding PGPIC’s sales, he said the holding’s sales totaled IRR 1,650 billion in the calendar year to March 2021, IRR 3,070,000 billion in the calendar year to March 2022, IRR 4,180,000 billion in the calendar year to March 2023 and IRR 5,090,000 billion last calendar year. He said the figure is expected to reach IRR 7,090,000 billion in the current calendar year.

Ali-Askari said PGPIC’s gross profits reached IRR 390,000 in the fiscal year ending June 21, 2021, which increased to IRR 560,000 billion a year later. During the fiscal year ending June 21, 2023, the gross profit rose to IRR 680,000 billion. It is expected to have reached IRR 770,000 billion for the following fiscal year.

“The consolidated net profit has increased from IRR 1,010,000 billion in the fiscal year ending June 21, 2022, to IRR 1,240,000 billion during the following fiscal year,” said Ali-Askari, noting that PGPIC experienced 107% growth over the past three years despite stock market fluctuations.

He said that PGPIC was running 32 development projects, adding 17 main projects accounted for an annual production capacity of 24 million tonnes with $10 billion capital. They are Persian Gulf Apadana, 2nd phase of Hengam Petrochemical Plant, Dehdasht Petrochemical Plant, Gachsaran Polymer Plant, 2nd phase of Persian Gulf Hoveyzeh Refinery, West Karoun flare gas gathering facilities construction and optimization, Persian Gulf Hormuz, Mahshahr’s Almas, Andimeshk’s Ibn Sina, PDH/PP of Persian Gulf Bidboland Refinery, PDH/PP of Pars Petrochemical Plant, Arvand PVC, Golestan Petrochemical, Chabahar Ofoq Parks, Arya Taftan Petrochemical Plant, Boroujerd Petrochemical Plant, and Shahid Soleimani Petrochemical Refinery.

He said that the poly aluminum chloride of Urmia Petrochemical Plant, Arghavan Gostar in Ilam, Sadaf in Assaluyeh, Petro Armand in Lordegan, Negin in Sonqor, Petropark Pouya, Petro Faraz Houran, and Avat Uraman Petrochemical Plant were the eight projects with a total annual production capacity of 542,000 tonnes.

He said that six projects are expected to become operational in the current calendar year.

GECF Ministerial Meeting Delayed

The interim acting general manager of the OPEC & International Energy Fora Directorate Ali Akbar Dizaj Khalili has said that the 26th ministerial meeting of the Gas Exporting Countries Forum (GECF) had been put off.

The meeting was scheduled to be held in Tehran from October 29 for three days. It is being delayed due to regional conditions, the official said.

Minister of Petroleum Mohsen Paknejad said in a meeting with GECF Secretary General Mohamed Hamel in Tehran that as a founding member of the GECF, Iran would be happy to host the ministerial meeting at the beginning of the 14th administration.

He expressed hope that the 26th ministerial meeting of the GECF would be held with the maximum number of member states and observer countries in order to mark a new turning point in the history of the Forum.

“As the first GECF meeting was held in Tehran with positive results for its member states, the forthcoming meeting is expected to yield valuable achievements for all members,” said Paknejad.

The GECF was established on 23 December 2008 based on an idea proposed by Iran. Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, UAE, and Venezuela are the 12 main members of the GECF while Angola, Azerbaijan, Iraq, Malaysia, Mauritania, Mozambique and Peru hold observer status. GECF members account for 39% of the world's gas production and hold 69% of the world's gas reserves, 40% of pipe natural gas (PNG) transmission, and 51% of LNG trading.

The GECF has held 25 ministerial meetings and 7 summits since its establishment. Ministerial meetings decide about the general policy of the GECF

Given estimates about the increase in the natural gas share in the global energy mix from the current 23% to 26% in 2050, the upcoming meeting in Tehran would provide Iran with a chance to improve its ties further and enhance its share of natural gas trading and help supply growing gas demand in the world.

The GECF holds summits every two years in one member state. The summits pave the ground for the heads of state and government to exchange views on key issues. The summits enable member states to discuss developments and policies associated with energy in general and pertaining to gas, in particular. During summits, member states review and reaffirm the GECF’s objectives.

The GECF has thus far held seven summits with the first one having been on 15 November 2011.

The origins of the GECF can be traced to the First Meeting of Ministers held in Tehran, Islamic Republic of Iran, on May 19-20, 2001. This 1st Ministerial Meeting was convened by the Minister of Petroleum of Iran and was attended by the governments of Algeria, Brunei, Indonesia, Iran, Malaysia, Oman, Qatar, the Russian Federation, Turkmenistan, and Norway (Observer).

Natural Gas Role in Energy Transition

Afshin Javan

Energy transition has added significance due to various environmental, geopolitical, and economic crises. Many countries are looking for sustainable and reliable energy sources to guarantee their economic growth and security.

In its 2023 report on energy transition, the World Economic Forum (WEF) presents approaches to maintaining state and non-state actors’ initiatives to that end. What countries across the globe are seeking, is to upgrade energy security and take benefit from sustainable energy sources.

A wide spectrum of crises, from the COVID-19 pandemic to regional tensions, showed how unreliable energy security and stability were. Therefore, it would be important to strike a balance to access to climate objectives due to their direct impact on people’s lives.

Natural gas, known as a bridge fuel, is vital in energy transition. Although it is a reliable and flexible source of energy, it is often seen as a transition source to help cut GHG emissions.

Gas-fired power plants, which are environmentally friendly, can support renewable energies in power supply particularly when sufficient renewables are not available.

Natural gas may help diversify the energy mix, thereby enhancing energy security and resilience at the national and regional levels. A key point with gas-fired power plants pertains to their flexibility which allows their capacity to be enhanced quickly.

The present article is aimed at reviewing the role of natural gas, its advantages, and potential impacts on the global energy system during the energy transition period.

Understanding Energy Transition

Due to various geopolitical, environmental, and economic crises, a growing number of households, including those living in advanced economies, are making efforts to meet their basic heating and lighting needs at affordable costs. This impact is more significant for vulnerable consumers in developing nations. About 75 million persons recently connected to power networks are said not to afford bills.

Large-scale policymaking packages recently implemented in developed nations have great potential for boosting energy security and accelerating transition. However, these policies are associated with subsidy rivalry risk that can prove disadvantageous for financially-strained countries.

Guaranteeing energy security and stability is of significance, but energy justice is also important. That requires international financial support for low-income countries.

For the first time in 2023, investment in low-carbon energy technologies – $1 trillion –exceeded investment in fossil fuels.

New clean energy superpowers are emerging to offer a new definition of energy hegemony in the coming years. China has the biggest share of investment from GDP in renewable energies. It has invested more than 1.5% of its GDP in renewable energies. It is followed by Vietnam, Azerbaijan, and Bosnia and Herzegovina.

Financial investment in clean energies will continue to serve as a lifeline for economies in a state of transition. Such investments, along with the transfer of new technologies to emerging and developing economies, would be instrumental in ensuring a just transition.

As the world population has gone beyond 8 billion persons since November 2022, global energy demand will increase in parallel with population growth.

Over the past decade, 95% of countries have improved their Energy Transition Index (ETI). That is seen more clearly in major energy consumers like China and India.

Attention is correctly shifting towards densely-populated developing countries as the general power of energy transition depends on commitment and progress by all economies, regardless of their development status.

The ETI, which benchmarks 120 countries on their current energy system performance and the readiness of their enabling environment, finds that while there has been notable progress in energy efficiency and a marked increase in the adoption of clean energy sources, energy transition momentum has been held back by setbacks in energy equity, driven by rising energy prices in recent years. Energy security also continues to be tested by geopolitical risks.

The ETI is a weighted average of two sub-indexes, system performance (60%) and transition readiness (40%) that rates countries on 46 indicators, including regulation and political engagement, innovation, and infrastructure.

Since the launch of the ETI in 2015, the global average increased from 53.4 to 56.8. However, momentum has slowed recently, and is down 0.3 points since 2022, due to the consequences of the tension between Russia and Ukraine, and surging inflation interest rates.

Developing countries have quick access along with appropriate transition routes. For instance, the average cost for GHG emission cuts is half of the costs seen in advanced economies. However some developing countries, despite the commitment to cut carbon, simply are not financially and technologically able to enjoy such opportunities. Under such circumstances, developed nations should constantly cooperate, but some contradictions like unilateral sanctions, geopolitical tensions, and ambitions of advanced countries call into question any quick access for realizing environmental objectives.

Some experts believe that

reaching long-term energy objectives would require a sustainable move. Only two big economies – India and Singapore – are moving sustainably towards energy justice, stability, and security.

The highest energy transition scores come from advanced economies and the top three are Sweden, Denmark, and Finland. The lowest scores, however, come from sub-Saharan Africa.

However, even though sub-Saharan Africa has the lowest regional average score, individual countries are making significant progress. For example, Zimbabwe’s score has increased by 33% since 2015, thanks to the increase in their hydropower capacity.

On the other hand, the ETIs of some advanced economies are declining, such as Norway, whose score decreased by 0.4 points over the past nine years. This decrease is due to rising electricity prices and a decline in renewable capacity buildout.

The world’s largest economy, the United States, has remained at 64.0 over the past year. China, however, has moved ahead to 64.1 from 2023 to 2024, thanks to significant growth in areas like batteries, EVs, and high-voltage transmission. The country also allocates the largest share of its GDP to investments in renewables, at 9%.

All countries must dramatically increase their ETI scores to prevent global warming above 1.5 degrees Celsius. While many countries, such as Norway, are stagnating in their progress, others, such as Zimbabwe, exceed expectations for their wealth, signaling the possibility for all countries to meet their climate targets.

Renewables

Energy transition generally refers to shifting from fossil fuel-based energy systems to renewables like wind, solar, and hydropower energies. Such a shift is aimed at mitigating GHG emissions, fighting climate change, and guaranteeing energy access globally.

Although renewable energies are on the frontline, many fossil fuel importers are ignoring the role of fossil fuels and even natural gas.

The International Energy Agency (IEA) defines the zero-carbon energy transition as a process that aims to mitigate GHG emissions, especially carbon dioxide, to the minimum possible. This transition includes major changes in energy systems, including:

1. Transition to renewable energy sources: Increasing the use of solar, wind, tidal, and other renewable energy sources instead of fossil fuels;

2. Increasing energy efficiency: Energy efficiency in industries, transportation, and buildings;

3. Development of clean technologies: Investing in technologies that help mitigate GHG emissions, such as decarbonization and energy storage;

4. Change in consumer behavior: Encouraging change in consumption habits and use of public transportation or electric vehicles.

But Organization of the Petroleum Exporting Countries (OPEC), Gas Exporting Countries Forum (GECF), and fossil fuel producers define zero carbon and energy transition as a process that aims to gradually reduce dependence on fossil fuels and reduce GHG emissions by emphasizing the continued use of existing energy sources and creating a balance between energy security, economic growth and environmental protection. That involves the following points:

a) Diversification of energy sources: Emphasizing the importance of diversity in energy sources to meet global needs, including fossil fuels as part of the energy mix;

b) Development of clean technologies: Encouraging investment in technologies that can help reduce the environmental impact associated with fossil fuels, such as decarbonization technologies and energy efficiency;

c) Sustainable energy supply: Maintaining reliable and economical energy supply, especially for countries heavily dependent on fossil fuel exports;

d) Addressing economic needs: Emphasizing that the transition to zero carbon should be done in a way to not harm economic growth and employment in fossil fuel-producing countries.

Bridge Fuel

The role of natural gas could not be ignored in the energy transition. Natural gas can play the following roles:

Transition Fuel

When burned to generate electricity, natural gas emits significantly less carbon dioxide than coal and oil, approximately 50% less than coal and 30% less than oil. These lower emissions conditions make natural gas an attractive option for countries trying to reduce their carbon footprint.

Flexibility and Reliability

Natural gas is a reliable source of energy that can complement variable renewable energy sources. Wind and solar energy are variable and dependent on weather conditions. Natural gas plants can scale up or down quickly to meet demand and provide grid stability. This flexibility is critical to integrate a greater share of renewables into the energy mix.

Infrastructure and Market Development

Natural gas infrastructure, including pipelines and storage facilities, is already operational in many areas. This existing infrastructure facilitates the transition

to new renewable energy sources without having to make significant investments. In addition, the global natural gas market is increasingly interconnected, promoting energy security and price stability.

Advantages

Natural gas is a cleaner fuel than other fossil fuels. Its use can lead to significant reductions in air pollutants, including sulfur dioxide (SO2), nitrogen oxides (NOx), and suspended particles. These reductions can improve air quality and public health, especially in urban areas.

The development of natural gas resources can stimulate economic growth that would create jobs in extraction, transportation, and processing. In addition, natural gas can be a catalyst for technological innovation, particularly in carbon capture and storage (CCS) technologies, which will help further mitigate GHG emissions.

Natural gas can increase energy security for countries with limited access to renewable resources. By diversifying their energy mix and reducing dependence on coal and oil, they may reduce the risks associated with disruptions in energy supply.

The globalization of natural gas markets has led to increased competition and lower prices. Liquefied natural gas (LNG) would increase access to international markets and allow countries to import and export natural gas more efficiently. This flexibility can help stabilize energy prices and boost energy security.

Challenges

Natural gas is mainly composed of methane, which is a potent greenhouse gas. Methane emissions during extraction and transportation may affect the climate benefits of natural gas, so reducing these emissions is critical.

As renewable technologies advance, the long-term role of natural gas in a zero-carbon energy system is uncertain. Policymakers must consider how to balance the use of natural gas with the need to drastically reduce emissions.

Transition to natural gas requires significant investment in infrastructure and technology. Supportive policies and regulations are necessary to facilitate this transition while ensuring environmental protection.

Iran’s Role

As a country with massive natural gas reserves (more than 17% of the world's proven reserves), Iran is a key member of the GECF. Despite this big potential, Iran has failed to reach full production and export capacity in its gas sector due to economic sanctions and insufficient foreign investment. However, thanks to recent efforts made to increase production and improve export infrastructure have turned Iran into a key player in the gas market.

The GECF should also try to support increased investment in natural gas infrastructure and enhance production and export by making arrangements between its member states. This could play a vital role in meeting global demand and preventing anticipated shortages in the future. Iran also seeks to increase its share in the gas export market by developing new projects in the South Pars gas field which is known to be the world’s largest.

In general, Iran’s role in GECF and increasing gas supply to the world market is highly dependent on the easing of sanctions barriers and attraction of more investments. If these conditions are met, Iran can act as one of the key suppliers of gas at the global level and help materialize GECF objectives in providing global energy security.

The development of gas infrastructure in Iran is very important due to its rich resources as well as domestic and international needs. In this context, the following solutions can be mentioned:

Foreign Investment

Investment Attraction: Offering financial facilities and incentives to attract foreign investment, particularly in gas and LNG megaprojects;

International Partnership: Cooperation with top world oil and gas companies for the transfer of technical know-how and technology.

Pipeline Extension

Transmission Networks: Increasing capacity and developing pipelines to different parts of the country and neighboring countries to facilitate exports;

Diversity of Routes: Creating new routes to transfer gas to new markets and reducing dependence on existing routes

Technology Upgrade

Innovation in Technology: Investing in new technologies to increase productivity and reduce gas production and transmission costs

R&D Projects: Supporting research projects in gas extraction and processing

Gas Installations Development

LNG Facilities: Construction and development of natural LNG facilities for export to international markets;

Underground Storage Facilities: Establishing underground gas storage facilities for better supply and demand management

Policymaking and Planning

Supportive Policies: Developing and implementing policies to support the gas industry and simplify regulations for investors

Long-Term Planning: Development of long-term plans to meet domestic and export needs

Manpower Training and Development

Human Resources Training: Creating training and internship programs for the training of specialists in the gas industry

Skills Development: Improving existing skills and teaching new techniques to employees

Conclusion

Natural gas plays a vital role in global energy transmission. Its low emissions, flexibility, and existing infrastructure make it a valuable asset in a state of transition to renewable energy sources.

However, addressing the challenges associated with methane emissions and ensuring sustainable development is essential to maximize its benefits. As countries grapple with this complex landscape, a balanced approach that integrates natural gas with renewables may help achieve a cleaner and more resilient energy future.

Iran’s natural gas industry has great potential owing to its huge reserves and strategic location, but important challenges such as sanctions, decrepit infrastructure, and geopolitical issues need to be overcome. The global energy transition period provides many opportunities for Iran to play a role as a supplier of cleaner energy, but to fully benefit from these opportunities, it needs to modernize the industry, invest in LNG capacity, and pursue strategic cooperation.

In the meantime, investing in Iran and GECF fellow member countries is of great importance, and at the same time, we must consider time management. If we do not take action for investment as part of preparations for jumping into the energy transition before 2028, we would miss the chance.

Deepwater Exploration Drilling in Namibia

Exploration of Namibia’s Upper and Lower Cretaceous plays in the offshore Orange Basin have delivered nearly 5 Bbbl from nine wells since 2022, according to Westwood Global Energy Group.

The seven exploration wells that followed up the Graff and Venus play opening discoveries have resulted in four follow-on discoveries with an estimated recoverable oil resource of 2.8 Bbbl, said Teresa Wilkie, director of Westwood’s RigLogix service.

This includes Galp Energia’s Mopane discoveries earlier this year. If the estimated 2.4 Bbbl is confirmed, it would be the largest oil discovery in sub-Saharan Africa and the third largest globally over the last decade.

Petrobras Enters R&D Collaboration

TGS and Petrobras have agreed to collaborate on scientific research and technological developments in Brazil.

The memorandum of understanding (MoU) is the first step in the partnership. The aim is to deploy TGS’s data acquisition and processing with Petrobras’ operational capabilities.

The goals are to develop new technologies and jointly perform research to increase efficiency and sustainability in oil and gas exploration and production.

They will also work on solutions for innovation in renewable energy technologies and carbon capture.

Joint scientific research should help improve knowledge of Brazil's sedimentary basins, including the analysis of geological and geophysical data.

FPSO Starts Operations Offshore China

Production has started from CNOOC’s Liuhua 11-1/4-1 Oilfield Secondary Development in the eastern South China Sea.

This covers the Liuhua 11-1 and Liuhua 4-1 heavy oil fields, in an average water depth of around 305 m.

Production facilities include a new deepwater jacket platform Haiji-2, and a cylindrical FPSO Haikui-1.

CNOOC plans a total of 32 development wells, with peak production of roughly 17,900 boe/d by 2026.

Equinor Wells Prove More Oil, Gas

Equinor has discovered more oil and gas at the producing Gudrun field in the Norwegian North Sea.

The semisubmersible Deepsea Stavanger drilled exploration wells 15/3-13 S and 15/3-13 A on license PL 025, in 110 m water depth.

Well 15/3-13 S encountered thin oil-bearing sandstone layers in the Late Jurassic intra-Draupne formation, and gas in two intervals in the Hugin formation. Well, 15/3-13 A also intersected encountered oil in the intra-Draupne formation.

Both have since been P&A’d.

Western Australia Seeks Transmission Projects

Western Australia’s government has issued expressions of interest to build out transmission capacity in several corridors of Pilbara, aiming to increase the penetration of renewable energy in the country.

As part of the Expressions of Interest (EOI) process, the Government will seek proponents who can build transmission to decarbonize the industry while minimizing on-country impacts.

Successful proponents in the EOI will be granted Priority Project status – meaning the project can benefit from State Government facilitation.

They would also receive the State’s recommendation to negotiate with the Clean Energy Finance Corporation to access funding through the Commonwealth Government’s AUD3 billion ($2 billion) Rewiring the Nation fund.

Energy Depoliticization; Iran Focuses on Gas

Shuaib Bahman

Iran is a leading energy producer in the world that numerous political, economic and international challenges have failed to call into question its standing in this sector. Iran largely owes its current standing to not weaponizing energy and depoliticizing it. To that effect, in spite of challenges and restrictions caused by sanctions in recent years, Iran has maintained its energy status. The country is now viewed as a reliable source of energy for neighbors and even other nations. This standing takes up added significance specifically against the backdrop of global need for a sustainable and reliable source of energy supply.

Energy Weapon

Energy weapon is defined as using sources of energy like oil, natural gas and other energy carriers as a tool to ratchet up political and economic pressure on other countries. Energy weapon would mean cutting energy supply to buyers, suddenly lifting prices or imposing tougher conditions on energy supply agreements. Such weapon is chiefly used in the midst of international tensions or political disputes between nations. For instance, a country exercising control over energy sources may reduce or halt its exports to other countries that depend on it with a view to exerting political pressure on them.

Energy-rich countries use their power of supply and distribution as a tool to realize their political objectives and impose their objectives upon others. The energy weapon would enable such countries to use energy as a lever in diplomatic negotiations or in dealing with political crisis. Such weapon has been historically used by energy proprietors on many occasions. A case in point is OPEC’s 1973 oil boycott under which member states of the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, suspended their oil supply to the United States and Western governments due to their support of Zionist Regime in its war with Arabs, known as the Yom Kippur War. That drove prices up in global markets, causing a massive energy crisis in Europe and America. That is a clear instance of using energy weapon as a political tool at the international level.

Another case pertains to Russia’s energy policy with regard to Ukraine and Europe. In 2006 and 2009, Russia cut its gas exports to Ukraine due to political and financial differences. Since many European countries received Russian gas via the pipeline crossing Ukraine, this crisis caused gas shortage in some European countries. That was viewed as Russia’s tool in ratcheting up pressure on Europe and neighboring countries.

Although using energy as a weapon may serve as an effective tool in applying pressure in the short-term, it would be followed by adverse consequences. Reducing or cutting energy exports may eat away at the exporting countries’ revenue and overdependence on a single source of energy would leave them vulnerable to political and economic changes. In the meantime, the consuming countries targeted by sanctions may look for alternative sources of energy, which would in the long term weaken the exporters. For example, after the outbreak of gas crisis in Europe following boycott of Russian gas, European countries thought of diversifying their energy suppliers and sources. Therefore, they increased their imports from Norway, Algeria and Qatar. Furthermore, development of renewable energies and reduction of dependence on fossil fuels are seen as long-term solutions.

Iran Policy

Iran sits atop the largest crude oil and natural gas reserves combined in the world. Holding about 18% of natural gas reserves in the world and ranking the fourth in oil reserves, Iran is known as a key source of energy at the global level. Iran also enjoys big potential in natural gas exports as it is pumping gas to Turkey and Iraq. Therefore, such projects as the Iran-Iraq-Syria gas pipeline would be of help in boosting exports and guaranteeing energy security in the region. In the meantime, owing to its geographical position giving it access to energy markets in the East and West, Iran is emerging as an energy hub in the Middle East. Such standing can help further trading ties and enhance energy exports. Iran’s natural gas policy is based on the following criteria:

Economic Cooperation Development: As a top gas holder in the world, Iran is seeking to broaden its economic cooperation with neighboring nations and other world markets. Gas export to neighboring countries like Turkey and

Iraq, and making efforts to find new markets in Central Asia and Europe are among key objectives of Iran.

Interdependence: Iran believes that exporting gas would bring about interdependence for exporters and importers, which would help boost economic and political ties between Iran and other nations while easing possible tensions and differences.

Gas, Sustainable Energy Source: Iran views natural gas as a sustainable and relatively clean source of energy. Given environmental challenges and global desire for reducing fossil fuels’ use, natural gas may play a key role in the energy transition.

Gas Depoliticization

Depoliticizing the energy sector would mean making decisions based on economic and technical principles, regardless of political pressure or vested interests. In such cases, nations mainly look for long-term economic interests and sustainable trade ties. This approach would neutralize use of energy as a weapon because its adverse impacts on diplomatic and economic ties may harm exporters. In the meantime, depoliticization would be instrumental in causing mutual dependence between producers and consumers. When importers become dependent on a country’s energy sources, such dependence may result in more stable ties and further cooperation. In this context, using gas as a weapon may increase tensions and reduce dependence and jeopardize global energy security, which is in contradiction to the objectives of depoliticization. Moreover, using gas as weapon may undermine the international standing of exporters. Under conditions where countries are looking for depoliticization of energy sector, improving ties and reducing tensions would be important in the energy field. When a country uses gas as a weapon it may see its standing be harmed, thereby lowering the possibility of any future cooperation.

Therefore, while many countries are using energy as a weapon, Iran does not believe in it because using gas as weapon may weaken Iran’s ties with neighboring countries and the international community, which would subsequently bring about tensions and mistrust and finally damage Iran’s macropolicies. In the meantime, as a member of some key international organizations, Iran bound to comply with international standards and some obligations in the energy sector. Gas export to neighboring countries and other markets would be a key source of income for Iran but using gas as a weapon would have an adverse impact on exports and revenue. Iran also believes that rather than using energy as a weapon, it should concentrate on sustainable development and building better ties with neighbors. Such approach would be of help to regional security and stability, not to mention help political and economic interests of every nation in the world.

Conclusion

Under the present circumstances where the world is desperately looking for sustainable and reliable sources of energy, Iran’s standing takes in added significance. The need for diversity in energy resources and less dependence on fossil fuels pushes Iran into bold relief as a suitable alternative for sustainable energy supply. Various nations are looking for new and reliable sources of energy and Iran can definitely play a key role in this regard. Iran’s policy in natural gas exports is based on economic cooperation and creating interdependence. Iran does not believe in using energy, particularly gas as weapon, which would undermine diplomatic and economic ties and harm national interests. Instead, Iran tries to use its gas resources as a tool for improving regional and international cooperation.

Oil Agreements’ Review

Pahlavi II Oil Agreements

Iran’s petroleum industry which was born nearly 115 years ago, has experienced various events and ups and downs. Numerous agreements on oil exploration and production have been signed with foreign governments over this time. Their historical documents are currently held at the “Directorate of Iran Petroleum Museums and Documents”.

We have reviewed key periods in the history of oil agreements in Iran, mainly those preceding and succeeding the D’Arcy Concession. Now, we are reviewing oil agreements signed during the Pahlavi II reign.

With the outbreak of WWII, it was clear that Iran’s oil would attract the attention of world powers, particularly Britain, Russia, and Germany. Later on, the United States jumped in as the newest player to win a share of Iran’s oil.

In November 1943, a conference was held in Tehran attended by Joseph Stalin, Franklin Roosevelt, and Winston Churchill. Stalin proposed that the Middle East oil extraction and distribution be discussed after the end of the big war. As soon as the conference ended, a representative of Shell visited Iran to demand concession for Iran’s southeastern area oil.

In 1944, two American companies Sinclair and Standard Vacuum dispatched their representatives to Iran and negotiated concessions for East and Southeast. The Iranian government hired two American experts to make an estimate of Iran’s total oil reserves and study foreign companies’ requests.

Finally, when the Iranian government decided to hold the wartime oil agreements at bay, the foreign delegates left Iran empty-handed.

USSR Eying North

As soon as it learned about other governments’ efforts to win oil concessions in Iran, the newly-established Union of Soviet Socialist Republics (USSR) sent a delegation led by Kavtaradze to Iran to discuss Khourian’s oil. On 19 October 1944, Prime Minister Mohammad Saed addressed the National Consultative Assembly about oil talks with the USSR but said the government had decided on 2 September not to award any concession to foreign governments before the big war’s outcome became clear.

On 2 December 1944, the Assembly adopted an urgent bill, stipulating that no prime minister, minister, or acting minister is authorized to hold talks with the official or non-official representatives of neighboring or non-neighboring governments about oil concession. The bill also obligated the prime minister and ministers to inform the Assembly of any talks they would hold about selling oil. Two articles in the bill considered heavy punishment for violators.

On 3 December 1944, MP Gholam Hossein Rahimian submitted a bill to the Assembly demanding that the 1933 D’Arcy Concession be annulled. But Mohammad Mosaddeq responded saying the agreement could not be annulled unilaterally.

Joint Company

Qavam visited the Soviet Union to settle the Azerbaijan riot. He also held talks aimed at reaching an oil agreement, which resulted in an agreement on 4 April 1946. The agreement was signed between Qavam and Russian Ambassador Sadchikov.

The major terms of the deal were as follows:

(1) The term of the company is to be 50 years.

(2) During the first 25 years, control was 51% in the hands of the Soviets and 49% under the authority of Iran. During the second 25 years control to be on the basis of equality for both Governments.

(3) Territory to be covered by the company’s operations is Guilan, Mazandaran, Gorgan, Northern Khorasan, and that part of Azerbaijan east of the line drawn southeast from the junction of Irano-Soviet-Turkish frontiers along the eastern side of Lake Rezaieh to Miyandoab (this excludes all territory directly contiguous to Turkish and Iraqi frontiers).

(4) All security forces in connection with company operations are to be Iranian

within 7 months.

(6)  Azerbaijan is purely an internal Iranian problem and will be settled by the Iran Government directly with inhabitants of the province.

The National Consultative Assembly voted the bill down on the strength of non-compliance with the national independence principle.