Iran’s oil diplomacy is racing ahead as hopes are soaring for the lifting of sanctions following the implementation of Iran’s nuclear deal with six world powers. Iran’s Minister of Petroleum Bijan Zangeneh is hosting foreign oil officials regularly.
Over the past month, he met with Sweden's Minister for Enterprise and Innovation Mikael Damberg and Executive Chairman of Russian oil company Rosneft Igor Sechin. Iran’s Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia also met with Finnish Minister of Foreign Trade and Development Lenita Toivakka in Tehran.
In his meeting with Damberg, Zangeneh said energy efficiency, petrochemical production and manufacturing of machinery and equipment are among the most important grounds for cooperation between Iran and Sweden.
He further said Swedish companies could finance replacement of aging transportation machinery in Iran.
Zangeneh further said cooperation in the petrochemical sector was another highlight of the meeting.
“Iran enjoys the cheapest, most accessible [petrochemical] feedstock supplies in the region,” which can be used to feed petrochemical plants, he said.
Zangeneh also met with Sechink who voiced readiness for investment in Iran’s oil projects.
In addition to Lukoil from Russia which is ready to return to Azar oilfield, Zarubej Neft and Rosneft are set to invest and participate in the Changuleh field located in the western border province of Ilam.
Zamani-Nia and Toivakka in a meeting reviewed areas of cooperation in the oil industry in the wake of the removal of sanctions.
“Iran has defined and put on the agenda environment-friendly projects in oil, gas, refining, and petrochemical fields. Finland’s world-class capacities in this area can be employed by Iran in the post-sanctions era,” Zamani-Nia said.
Although Finland does not have a powerful oil and gas industry, it enjoys a noteworthy rank in the industry’s modern technology, he added.
The utility unit of the Persian Gulf Star Refinery has been completed and is ready to go on-stream, a deputy chief of the treatment facility has said.
“The line for transmitting electricity from national grid to this refinery has recently been launched with a capacity of 25 megawatts per hour. Furthermore, a GIS system is [to be installed] so that the national power grid could feed the refining systems in this project,” he said.
Dadvar added that the firefighting systems of the refinery have come online.
He said that with the entry of seawater into the refinery’s site, the staff of the plant managed to operate the first water desalination units with a capacity of 4,000 cubic meters per hour. Dadvar said two more water desalination units are also close to coming on-stream.
He also said a steam boiler with capacity of 275 tons per hour is being launched at the refinery soon. He added that the piping system of the steam boiler would push water steam to the distillation unit at 40-Bar pressure.
“Air compressors of the Persian Gulf Star Gas Condensate Refinery are ready to come online and with the entry of an Iranian manufacturing company, the air instrument site of the facility will be created,” said Dadvar.
The Persian Gulf Star Refinery which is located near the Bandar Abbas oil refinery is the first refinery fed on gas condensate with a capacity of 360,000 b/d. It incorporates units of distillation, liquefied gas treatment, catalytic conversion, naphtha treatment, isomerization, kerosene and gasoline treatment for producing gasoline, gasoil, liquefied petroleum gas (LPG) and jet fuel.
The feedstock for the refinery will be supplied through a pipeline, more than 485 kilometers long, from the offshore South Pars gas field.
This refinery would add 35 ml/d of premium gasoline and 14 ml/d of gasoil to the country’s petroleum products production capacity. Other products of this facility include 4 ml/d of LPG, 3 ml/d of jet fuel and 130 tons a day of sulfur.
The storage capacity of petroleum products at this refinery is around 11 million barrels. The construction of this refinery started in 2006 on 700 ha of land. It is expected to come on-stream up to next March.
The launch of this refinery will make Iran self-sufficient in gasoline and gasoil production.
Iran is currently consuming, on average, 63 million liters a day of gasoline and 102 million liters of gasoil a day. The country produces 43 ml/d of gasoline and 91 ml/d of gasoil now.
Tens of foreign companies have voiced readiness to attend the 12th international energy exhibition in the Persian Gulf island of Kish in January 2016.
It will be Iran’s first petroleum industry exhibition after the implementation of nuclear deal with six world powers.
The event is due to be held during January 11-14. The focal point of the exhibition will be “investment”. Foreign companies are attending directly for the first time in nearly 10 years.
Italy’s oil and gas group will have an exclusive pavilion. Other countries to be represented are: China, Turkey, the Netherlands, India, South Korea, Taiwan, Azerbaijan, Malaysia, France, Austria, United Arab Emirates, Spain, Germany, Belgium, Australia and Russia.
The latest achievements on opportunities and potentialities of investment, achievements of manufacturers of oil, gas, petrochemical, water, electricity and renewable energies will be on display.
Alexander Ivanovich Medvedev, the deputy chairman of the Management Committee of Russian energy company Gazprom, led a 25-memebr delegation to Tehran in December to discuss a variety of issues including the establishment of technical committees for cooperation in different sectors of gas industry.
During the visit, Medvedev referred to Iran Petroleum Contract (IPC), saying the new terms of oil contracts defined by Iran present a new perspective for investment in Iran’s energy sector.
He said that Iran and Russia have many things in common and they can broaden energy cooperation, particularly in the energy sector, through IPC.
He added that these commonalities include firm political determination for the expansion of relations in all sectors and sitting atop significant gas reserves.
In a meeting with the deputy minister of petroleum and managing director of National Iranian Gas Company, Hamid-Reza Araqi, Medvedev said that Gazprom is ready to share its valuable experiences with Iran’s gas industry. He also expressed Gazprom’s readiness to turn its heads of agreement with Iran into memorandums of understanding next year.
In the meeting, Araqi underlined the significance of development of the infrastructure for using liquefied natural gas (LNG) in Iran, saying Gazprom can help Iran in this sector.
NIGC and Gazprom agreed on the formation of six committees to cooperate in different engineering, commercial, research and gas application sectors.
North Yaran oil field in the southwestern province of Khuzestan is located along Iran-Iraq border. It is situated at the longitude of 24 kilometers and latitude of 2.9 kilometers.
The field is estimated to contain 998 million barrels of oil equivalent in place with a recovery rate of 5.3%.
The development of the northern section of Yaran field is under way in two phases. The first phase, which involves early production, targets 2,000 b/d output and the final production target is 30,000 b/d from a total of 18 production wells, one work-over well and one appraisal-production well.
Arash Baqerzadeh, North Yaran development project manager, told Iran Petroleum that the project which is 1.5% ahead of plan, will be fully developed while saving $95 million in costs.
He gave an upbeat assessment of development of North Yaran field, saying this project is now 76.5% complete.
Baqerzadeh said the project made 5.5% progress over 28 months starting in autumn 2013.
“Since then and following extensive changes in the management of implementation of project and enhanced cooperation between the client and the contract, the Petroleum Engineering and Development Company (PEDEC) is serving as both client and contractor,” he said.
He said that 95% of drilling service operations are handled by Iranians, while drilling commodities have been supplied by Iranian manufacturers at 50%.
Baqerzadeh said 140 tender bids have been held to raise the number of drilling rigs used for the development of this field. He said that two out of four drilling rigs have no more work to do, adding that a third rig will also see its work done soon.
Baqerzadeh said drilling record has been smashed in this field, adding that the longest well was spudded up to 1,600 meters by horizontal drilling. Drilling 160 meters a day is a record, he said.
He said that early production from this field reached 5,000 b/d in October, adding that the main objective is to raise this field’s production to 30,000 b/d.
Baqerzadeh said following management changes and $95 million saving in costs, the final output is forecast to be achieved next spring.
He touched on the domestic supply of required commodities, saying the commodities manufactured domestically were purchased from Iranian producers.
“Any domestic company or manufacturer that proved its capabilities to us was among our suppliers. In case it was impossible to purchase commodities domestically, European made equipment has been used,” he said.
He underlined the significance of HSE in North Yaran field, saying certain roads have been built for access to wells. These roads are 18 kilometers long.
Moreover, 55 watercourses, measuring 2 meters long, have also been built in order to supply running water. Aquatics are also being protected along the border by Iran’s Department of the Environment, he said.
Baqerzadeh said a special advisor in HSE affairs is regularly providing advice.
He said the Yaran field is entirely covered with plants and the start of precipitation will revive Hoor al-Azim Lagoon.
At the time Iran petroleum conducted this interview, HE Amenhotep Zambrano was the then Ambassador of Venezuela to Tehran. At the moment he is not Venezuelan Ambassador to Tehran anymore. HE Amenhotep Zambrano says OPEC and non-OPEC oil producers should close ranks in a bid to shore up oil prices.
In an interview with Iran Petroleum, HE Ambassador Zambrano said his country is preparing for further cooperation with Iran after sanctions are lifted on the Islamic Republic.
Here is the full text of the interview. The answers have been provided by the official interpreter of the ambassador who spoke Spanish during the interview.
IP: So Iran and Venezuela have always had good cooperation in oil sector. How do you think the conditions will change after the sanctions are lifted on Iran?
Ambassador: We were with Iran during the time Iran was under sanctions and during the hard times of Iran, during the hardships of the sanction, after the sanctions are removed this relationship is expected to continue in a desirable way and we are interested in continuing win-win relationship.
There has always been political and economic dialogue between the two countries. Our ministers of oil and energy have always exchanged views and have had dialogue regarding oil issues.
So a lot of the strategies being implemented during the sanctions were discussed and they were agreed upon in conversations held by our ministers of energy. They had meetings and also tried to implement during the sanctions. We hope this trend will be maintained after sanctions, as well.
The relationship between the two countries has been based on certain principles, taking very concrete steps. We are of the opinion that both OPEC and non-OPEC countries have to sit down and talk and make coordination in order to be able to improve the position of oil industry which is the main industry which fuels economy of the entire world.
Throughout all these years, the level of coordination and cooperation between Iran and Venezuela has been excellent. We have had meetings at the presidents' level, at the ministers’ level, at the foreign affairs ministers’ level, looking to control and to strengthen the oil industry.
Ambassador: There are a few agreements that have been signed in the first decade of 2000. There is an agreement regarding blending our heavy and extra heavy crude with light crude from Iran. We have discovered that the Iranian crude has very good quality, and blending it with our crude, improves the quality of our products.
So both the technical teams from Venezuela and Iran are currently working on blending the two crudes, and they are working on different technologies to upgrade the quality of our oil products. They are working on technologies such as nanotechnology to enhance quality of our oil products and of course to produce and to exploit the biggest oil reserve in the world which is in Venezuela.
So the relationship has always been based on partnership. Relationships have never been declined to a level of seller or provider. And we have been working very closely on improving the quality of our products not only on our side but also on the Iranian side as well, and we have been working on the technical and the technological enhancement of the product, in this regard we have always taken into consideration environmental issues as well as global energy security. To that effect, we have been working with Iranian institutions. Based on the agreements made between the two countries, some ideas were raised that have been considered right now by Venezuela and they are being implemented right now.
The two countries enjoy strategic geopolitical positions; Iran is in Asia and it is very close to some of the very important countries from the BRICS; and Venezuela being in the south, we can have cooperation with each other, that is to say, Iran can assist us to reach the Asian countries, and we can assist Iran to reach the Latin American countries markets, as well.
We are also holding talks with some technical teams in Iran to help us combat the smuggling of our final products as well, so we are currently working on that to control our domestic market, as well.
So I am sure the relationship will continue to be at the same level and even is expected to improve. We are going to have more agreements to establish more joint companies. We are going to have more cooperation on various issues. That is what we are looking for, as far as cooperation between the two countries is concerned.
We also are always looking for new options as well. For example Iran has provided us with technical advice to increase the longevity of our oil reservoirs.
So in that way we can enhance the recovery factor and always increase the production and get more and more of out of our reservoirs.
So both countries have long history in the oil industry. For example, they have leading players in the petrochemicals as well. Working together may lead to synergy and greater cooperation between the two countries. Basically, our presidents have agreed on the cooperation, both presidents are in tune on this matter and what we are looking to do is to depend less on the crude and work more on final products which are going to be granting greater added value to the market .
IP: In your opinion, what are the consequences of oil price slump on OPEC member states?
Ambassador: This is an oil crisis which is a new development. Some countries are already very heavily affected: their national budget and their national finances. Some countries are implementing social budget cuts.
So as it has been said, there have been some economic and international rules that have been violated. Producers should be able to keep producing; final product must cover the production cost and investment; in addition it should have a profit margin that allows you to invest in the future, as well.
So we have witnessed that balance point has been broken, it is breaking and the energy security of the world is being compromised.
In Venezuela based on our thesis, we strongly believe that the energy security has direct impact on the food security as well.
So what Venezuela and the OPEC countries are looking for is to reverse the consequences of the impact of the oil price decline. The President in Venezuela has convinced world leaders to sit down and work towards the [subsidization] of the market again because all the people in the world, not only the oil producing countries but also consuming countries are being currently impacted because the energy security in the world is being compromised. As Venezuela, what we are looking for is to support the poorest people, to protect humans especially the poor people because they are going to be the first impacted group. And of course what we are looking for is a fair price something between 70 and 90 dollars per barrel. That is what we are looking for because that is what the world had been paying before and it is a fair price for most producers and what we are also trying to avoid is an overprice of the oil which is a natural consequence of this market. After the current period the market will face overprice. It will also impact the market negatively and we are looking for is to protect that idea in the poor countries. So we believe that Venezuela along with the support of the OPEC and non-OPEC countries, and based on agreed upon strategies could guarantee a stable market that allows for a constant industrial and production development in the world.
The impact of oil price decline on Venezuela has been moderated. We had already taken provisions, and prepared ourselves to encounter such a situation. So a long time ago we already diverted the destiny of our oil production. We started reducing oil production level and we reduced our exports to the United States; furthermore, we started looking to other countries like China, India and other countries in Latin America, as well.
IP: What is Venezuela’s solution for curbing oil price decline and what do you expect OPEC fellow members like Iran to do?
Ambassador: Our ministers just spoke about 7 days ago in OPEC where they had a meeting in Vienna. So they have met and they have made efforts to increase the oil price.
Just this year alone, our minister of oil has visited Iran twice, and Venezuelan President himself also visited Iran to meet President Rouhani. He came to Iran with a very tight agenda to exchange the oil prices. Just last week President Nicolas Maduro sent a letter to President Rouhani but they have never cut communications. Sometimes they talked face to face, sometimes they talked on the phone, sometimes they exchanged letters, sometimes they conveyed messages through our ambassadors but there has always been a constant communication.
During the two days of the 12th Iran Petrochemical Forum (IPF), seven panel discussions were held. Three were held on the first day and four on the second day.
In the panels of the first day, different issues including the future of ethylene and polypropylene and paraxylene markets, challenges and opportunities of petrochemical investment in global markets, German BASF’s investment in Iran’s petrochemical projects, estimates of opportunities for investment in Iran’s petrochemical industry and process of development of Iran’s petrochemical sector as well as instruments and necessities of developing a reliable industry were discussed.
The first panel discussion was presided over by Iran’s deputy minister of petroleum for international affairs and commerce, Amir-Hossein Zamani-Nia. Didier Houssin, chairman and CEO of France’s IFP Energies Nouvelles, Christian Bruch, Member of the Executive Board of Germany’s Linde AG and Rainer Diercks, President of Petrochemical Division of Germany’s BASF SE delivered presentations.
Houssin was the first speaker of the panel. He said that world economic growth “has slowed and is forecast to be +3.1% in 2015,” mainly supported by advanced economies.
“Developing economies are weaker than previously thought,” he added.
Houssin said oil supply has been in excess since mid-2014, with demand beginning to weaken over a year ago.
“With prices more or less following oil prices, natural gas has become very attractive in the US and, to a lesser extent, in Europe,” he said.
He said that “abundant and cheap” ethane has given a boost to the US petrochemical industry.
“In 2010, the ethane price was divided by three in the US (due to shale boom), leading to a new high in ethane processing steam cracker profitability,” said Houssin.
He said that commodity prices have been falling over the past four years, following prices of petrochemicals in all regions.
“The petrochemical industry is linked to two types of markets: energy (feedstock) and commodity/specialty (end users),” said Houssin.
“Since the price fall of mid-2014, European and Asian profitability have been satisfactory due to the delay in passing on this decrease in prices to the downstream industry,” he added.
“Ethylene should roughly follow GDP, while benzene is expected to be in an uncomfortable position due to tough competition from PS and other polymers,” he said.
Houssin underlined the significance of ethylene, saying that demand for this petrochemical product reached 140 million tons in 2014, versus 89-million-ton demand for propylene.
He said that ethylene production capacity is expected to reach 200 million tons by 2010.
“Oversupply and weak demand are leading to falls in oil and gas prices: energy prices are driving the drop in commodity prices. Petrochemicals will benefit from the decrease in energy prices,” said Houssin.
In his presentation, Christian Bruch said his company, like other international companies, expects the lifting of international sanctions on Iran as soon as possible.
“Iran’s petrochemical industry is growing at rates much above average, due to a considerable domestic market and advantaged gas and oil reserves that gives Iran a competitive edge in export markets,” he said.
“As Iran’s Petrochemical Industry has advantaged gas feedstock as starting material, future growth will be based to a large extent on natural gas to be converted into Ethylene and Propylene via existing routes as Methanol to Olefins and via new efficient technologies such as the Oxidative Coupling of Methane (OCM),” he added.
Bruch said the capacity of ethylene market currently stands at 136 million tons, which could grow 3%.
“The petrochemical industry is currently changing significantly as a consequence of low oil prices affecting all petrochemical products and the economics of the production processes,” he said.
Bruch said there have been major changes in technologies applied for producing plastics and resin.
“That puts Iran in a very important position,” he said, adding that Iran plans to double its production by 2020 and then triple by 2025.
Rainer Diercks, President of Petrochemical Division of Germany’s BASF SE, said BASF is investing in the future. He noted that development of downstream petrochemical industry can result in the realization of the value chain.
He said that the petrochemical industry is growing rapidly across the globe, adding that it indicates that petrochemical sector is the heart of industry.
He said the most important feature of BASF is its presence in all sectors of the petrochemical industry.
Diercks said petrochemicals could be divided into four groups: crackers, acrylics, solvents and alcohols.
Crackers enjoy a reliable supply and the market constantly needs them, he said, adding that BASF is the top seller of acrylics in the world.
According to Diercks, BASF is the second largest supplier in the world while it has become the second supplier of alcohols to European markets.
He said that petrochemical industry has grown significantly in Asia and continues to grow at a fast pace. He added that petrochemical sector is also picking up speech in North America.
Zamani-Nia gave a positive assessment of the IPF in the light of issues discussed in the panel.
He said that following the positive resolution adopted by the governing board of the International Atomic Energy Agency (IAEA), sanctions will be lifted on Iran.
Zamani-Nia said that the recent conference held in Tehran to introduce Iran Petroleum Contract (IPC), the new model of contracts developed by Iran’s petroleum ministry, and now the IPF both prove Iran’s success in attracting foreign investment.
Chairman of Axens in France, Jurgen Brandes, CEO of Process Industries & Drives Siemens AG in Germany, and Dieter Grabenbauer, Group Vice President Air Liquide Global Management Services GmbH in Germany.
Bakkerud said Iran will with its vast amount of natural resources like oil and gas become one of the major players in the global petrochemical business.
“Upon lifting of the sanctions from 2016, it is expected that a number of large projects will be initiated over the next many years,” he said.
He added that a number of methanol, ammonia and refinery projects, signed before the sanctions, will be reactivated in 2016.
“New projects within above-mentioned areas are expected to be signed during coming years,” he added.
“With special attention to commodities like ammonia and methanol Topsoe looks forward to assisting Iranian companies by supplying our technology and catalysts for these two important chemicals,” Bakkerud said.
Jean Sentenac, Chairman of Axens in France, said that his company is active in different areas ranging from petrochemicals to refinery and submission of license.
“Our company is present in all stages of project. At present, we have new refinery projects in the US under way and at the same time we are active in the auto industry to examine methods of combating pollution,” he said.
Sentenac said due to fluctuations in the oil and gas markets, the petrochemical industry, as the first sector in contact with oil and gas, is enjoying a good growth rate.
He noted that the petrochemical sector’s growth rate in the Middle East has been even higher than the global average in recent years.
Sentenac said estimates show that the Middle East will get a 7-17% share of the global market in the petrochemical sector in the future and will specifically influence crackers.
“What places Iran at the forefront of this industry in the region is desire and the existence of sufficient feedstock along with experienced engineers and specialists,” he said.
Dieter Grabenbauer, Group Vice President Air Liquide Global Management Services GmbH in Germany, said IPF is a unique event held at a proper time.
“The 12th IPF is an exceptional opportunity for introducing Iran’s potentialities,” he said.
Grabenbauer said Iran’s current strategy in benefiting from its superior status in terms of energy deposits and its conversion to petrochemicals by knowledge-based industries is remarkable.
He said Iran’s nuclear deal with six world powers was a big achievement and expressed hope that the future removal of sanctions on Iran would prepare the necessary financial and banking infrastructure for increased activities of foreign companies in Iran.
“At the beginning, we are looking for the transfer of technology to Iranian partners, but in the mid and long-term, we have an eye on investment opportunities,” he said.
The third and the last panel discussion on the first day of IPF was chaired by Mohammad-Hassan Peyvandi, deputy head of the National Petrochemical Company of Iran (NPC). The panel was about methanol and its products.
Speakers in this panel were Matthias Stein, Director Chemical Conversion Market of Air Liquide Global E&C Solutions in Germany, Andrew Spiers, Senior Vice President of Nexant Asia Limited in UK, and Issa Mashayekhi, CEO of Petrochemical Commercial Company International (PCCI) in Iran.
Peyvandi said a significant number of Iranian and foreign companies are represented in the 12th IPF, adding that the coincidence of the forum with adoption of Iran’s nuclear agreement with world powers is of high significance.
He said that the reason explaining the massive presence of German firms at the 12th IPF was Germany’s vice-chancellor visit to Tehran following the signature of Iran’s nuclear deal.
Peyvandi said Iranian Foreign Minister Mohammad Javad Zarif’s presence in the IPF was indicative of influential support for foreign investment in Iran.
He said that the visit of German vice-chancellor to Tehran laid the groundwork for cooperation between Iranian and German businessmen.
Peyvandi expressed hope that the 12th IPF would contribute to attracting investment for Iran’s petrochemical industry.
Matthias Stein, Director of Chemical Conversion Market of Air Liquide Global E&C Solutions in Germany, focused his presentation on “methanol – one product – many possibilities”.
He said that propylene is an important petrochemical product enjoying a good market.
“Given China’s daily-growing demand, the ground is paved for Iran to raise its methanol exports,” he said.
Stein said China will need a large amount of methanol because it has inaugurated several methanol conversion plants. “Iran will be of the best options for supplying this need,” he said.
Stein also said that methanol has become a rival for crude oil and that many big companies in the world are determined to benefit from the potentialities of this product.
Referring to the environmental advantages of methanol, he said that this product is appropriate for refineries to be used in gasoline production.
He also said that preliminary talks have been held for the construction of methanol-to-gasoline plants as Iran is in need of gasoline.
Stein said Air Liquide has long been present in Iran’s petrochemical industry and expressed hope that with the removal of sanctions, the company would be able to increase its activities in Iran and conclude its projects.
Lars Martiny, Managing Director at Ferrostaal Topsoe Projects GmbH from Germany, said the company is engaged in the construction of world class ammonia, urea and methanol facilities.
He said Ferrostaal Topsoe has had “long and trustful relationship with financial and ECA institutions”, adding that financial and structuring knowhow is turned to the petrochemical industry and is fit for the economy of emerging markets.
Martiny touched on Iran, saying the country sits atop very large oil and gas resources.
He said Iran has ambitious plans to become a major petrochemical producer and exporter.
He stressed the need for the completion of supply chain, saying the value chains of natural gas and aromatics are disconnected today.
“Overall, FTP in conjunction with its partners is capable of coordinating and structuring projects using appropriate and competitive financing schemes,” said Martiny.
Andrew Spiers, Senior Vice President of Nexant Asia Limited in UK gave an upbeat assessment of Iran’s investment in the petrochemical industry, saying there are many opportunities for Iran in the future.
He said that Iran’s NPC is pursuing specific goals in relation to the development of the petrochemical sector by 2025.
“This is built on the back of a targeted annual supply of some ten million tons of ethane by 2025,” said Spiers.
On the second day of the IPF, four panel discussions were held to discuss important issues such as the effects of ethylene production in the Middle East, the face of petrochemical industry in the world, adoption of a roadmap for Iran’s petrochemical strategies, SACE’s potential support for petrochemical development projects, post-sanctions investment in Iran’s petrochemical industry and investment facilities for Iran’s petrochemical sector.
The first panel was chaired by Mohammad-Hadi Rahbari, advisor to CEO of Pasargad Energy Development Company. Speakers were Ali Ashraf Afkhami, CEO of Iran Bank of Industry and Mine, Issa Mashayekhi, CEO of Petrochemical Commercial Company International, Mohammad Hassan Peyvandi, deputy head of National Petrochemical Company, and Marzieh Shah-Daei, director of projects at NPC.
Ashraf Afkhami said "Iran Bank of Industry and Mine" has in the past years made good contribution to petrochemical projects through financing or other methods of partnership.
“Now, we are close to entering the post-sanctions era and we are ready to have a stronger presence in the development of this industry in partnership with foreign investors,” he said.
“Focus on the financing of development projects in the country after the end of sanctions is of high significance and in this regard the banks play an important role,” he added.
Ashraf Afkhami said that "Iran Bank of Industry and Mine" will support all industries including petrochemical sector in the post-sanctions era.
“In the post-sanctions era, it is necessary to reduce investment risks and examine options for entrance into Iran’s competitive market,” he said.
Issa Mashayekhi said investment in Iran’s petrochemical industry has a return on investment rate of over 25% which turns out to be a promising outlook for potential investors.
He said the rate of return on investment (ROI) in Iran’s petrochemical projects makes the country more luring for potential investors.
He added that post-sanctions Iran enjoys massive investment potentialities which are just apt for new investments.
Mashayekhi who was also representing the Persian Gulf Petrochemical Industries Company (PGPIC) at IPF said the company holds some $16.2bn worth of assets and is one of Iran’s leading private companies which is operating numerous major petrochemical projects.
PGPIC also owns 10% of shares in Iran’s stock exchange making it one of the most influential companies in the market.
The company’s output accounts for 45% of Iran’s annual petrochemical production, he added, saying that PGPIC’s subsidiaries supply 24.6 million metric tons/y of petrochemical items which are sold on domestic and foreign markets.
Furthermore, he added, PGPIC needs an investment of $15bn in its projects to materialize its plans and is hunting out potential investors.
Iran has 67 incomplete petrochemical projects up for grabs with 20 to 90% physical progress which are planned to come on-stream based on a schedule, he added.
Peyvandi said Iran’s methanol production, which currently stands at five million tons, will rise to 19 million tons over the coming five years. He said that Assaluyeh region in southern Iran will make up the bulk of this output hike.
Peyvandi said facilities are under construction across Iran for the production of 19 million tons of methanol. He noted that some of these facilities with a capacity of 7 million tons are making slow progress.
He said the projects that are less than 10% complete had better turn to Propylene via Methanol (PVM) technology developed in Iran. “But the facilities that have more than 10% progress [are recommended to] continue their activities and produce methanol,” he added.
“Now the question is if it would be economical for investors to invest in Iran or in China,” he added.
Iranian companies carried out as many as 350 petrochemical projects worth over 70 billion dollars under the sanctions over the course of the recent years, said Marzieh Shah-Daei.
She said Iranian companies have grown very strong during the sanctions years and can ensure safety of foreign investments in Iran in the post-sanction era.
“Iranian companies are being run by more than 100,000 expert personnel across Iran and can manufacture hundreds of sophisticated petrochemical equipment” she said.
The official said Iranian companies can now produce 170-megawatt gas turbines, 20-megawatt steam turbines, piston compressors, process pumps and steam pots.
She said Iranian petrochemical plants process 44.5 million tons of petrochemicals annually which is less than their nameplate capacity due to feedstock shortages.
She said Iran has defined 67 major petrochemical projects which are expected to double the country's production capacity to 120 mt/y by 2025.
"The projects are estimated to cost $40bn for their completion," she added.
Shah-Daei, who is also a member of NPC's board of directors, said 36 new projects have been defined in the country's petrochemical hubs which will add another 60mt/y to the country's annual output for which 32 billion dollars are needed to be invested.
Iran has 67 incomplete petrochemical projects up for grabs with 20 to 90% physical progress which are planned to come on-stream based on a schedule.
The fifth panel discussion of the 12th IPF was chaired by Amir-Hassan Fallah, director of investment development at National Petrochemical Company (NPC). The first speaker in this panel was Giulio Dal Magro, Head of SACE Heavy Industries Department, SACE SpA, Italy.
The second one was Christopher Edward Ind , Editorial Director, The business Year, UK. He spoke about investment in Iran in the post-sanctions era.
And the third speaker was Heiko Ammermann, Senior Partner in the Civil Economics, Energy & Infrastructure Competence Center, Roland Berger, Germany. His speech was focused upon facilitation of investment in Iran’s petrochemical sector.
Dal Magro said SACE’s mission is to promote Italian exports and investments abroad, support internationalization of the Italian economy as well as projects of strategic importance.
“SACE is also targeting the opening of an office in Tehran in the near future to maintain a stable relationship with Iranian institutions and companies,” he said.
“As of September 2015, SACE’s exposure towards Iran amounted approximately to about 650 million Euros, mainly related to transactions in the oil and gas sectors,” he said.
“A credit due diligence is ongoing to define credit limits on 11 target banking counterparts in Iran in both public and private sectors,” he added.
Dal Magro said the Italian company is developing tools and instruments to further “facilitate business relations” between Iran and Italy and provide additional financing support to bilateral trade after Iran’s nuclear agreement with world powers takes effect.
The second speaker in the panel was Christopher Copper-Ind , the Editorial Director of The Business Year, a leading international publishing and research firm that specializes in annual business and investment resources on national economies.
As such, Christopher coordinates TBY’s range of 25 country-specific publications and is responsible for planning and shaping their content.
Previously, Christopher was Middle East Editor, then Editorial Director, with Stacey International in London, working to develop projects across the Persian Gulf littoral states, and in Lebanon, Syria, Yemen, Iran, and Egypt. In 2010, he then became Founder and Editorial Director at Horizons Editions, where he continued to specialize in the economies and culture of the Middle East. While developing Horizons, he lived in Dubai and Paris.
“Iran’s ambitious objective to triple its petrochemicals output over the next decade is a hallmark of its economic development plan,” he said.
“Long- ‐term plans include tripling petrochemical production across the next decade and position Assaluyeh as a petrochemical hub to rival Qatar, the UAE, and other jurisdictions,” said Copper.
“Most importantly, however, I will talk about how these developments are creating an environment ripe for foreign direct investment, with over $30 billion in investment opportunities identified by” the NPC, he noted.
“In conclusion, I aim to talk about how FDI, the licensing of technology, and the lifting of barriers related to banking, insurance, transportation, and brokering are impacting the outlook for Iran’s petrochemical industry, regional supply lines, and ultimately the country’s overall global competitiveness,” he said.
Heiko Ammermann, who was the third speaker in this panel, referred to potentialities for investment in Iran and enumerated some impediments hindering investment in Iran.
“Sanctions, legal ambiguities and oil price fluctuations are among challenges on the way of investors,” he said.
He added that the lifting of sanctions and the removal of legal ambiguities will to some extent remove these impediments.
Ammermann said his company, like many other international companies, has been waiting for relationship with Iran.
“We are interested in facilitating investment in Iran after the sanctions are lifted,” he said.
“All Iranian companies would be happy with the presence of foreigners in Iran and foreign companies are willing to be present in Iran. They will bring big sums into the country and naturally they will expect a good rate of return,” he said.
Ammermann said any future deal has to be drawn up meticulously so that all risks would be hedged and first-time investors will come to Iran with a peace of mind.
He said people’s need for energy consumption will grow 35% and the petrochemical industry will see a 200% growth.
Mir-Moezzi said the main driver in the demand for chemicals was the growth of middle-class.
“More than 65% of the middle class growth stems from developing countries. China holds the top position, followed by India and African continent,” he said.
He said that the supply model of petrochemical industry is changing, adding: “Until recently, proximity to consumer markets was a contributing factor in the supply of petrochemical industry, but today the trade volume of these products amounts to 10% of total production, which will double to 20% by 2020. This change in pattern has already started from the Middle East and the Persian Gulf,” said Mir-Moezzi.
He said the advantage of access to feedstock in the long-term would be in the interest of investment in the petrochemical industry.
“Relying on advantages like rich hydrocarbon reserves, access to consumer markets due to its geographical position, strong infrastructure and strong private and public entities, Iran can be a proper place for investment in the petrochemical industry in the coming decades,” he added.
Jean Paul Laugier from France’s Technip said the French company’s technology is used in 67% of ethylene production in Iran.
“Technip is the main ethylene licensor with 2 available technologies and unmatched level of expertise,” he said.
Laugier noted that Technip has the largest market share in the Middle East. “Technip’s ethylene technology is the reference in Iran with 2/3 ethylene produced using Technip’s technology,” he said.
Noting that Technip’s technology reduces operation costs, he said: “These new technologies will be available for new projects or ongoing projects once the sanctions on Iran are lifted”.
Laugier said there is “high potential” in Iran to build new ethylene plants. He added that except for Qatar and Iran, no more ethane is available in other countries for future ethylene projects in the Middle East.
“Iran has many gas projects which will allow Iranian companies to foresee many ethane crackers and mixed crackers,” he said.
“The majority of ethylene projects in Middle East will be based in Iran in the next future,” he added.
“Considering that the last wave of projects in Iran were based on technologies developed before the sanctions (early 2000’s); Technip would be keen – if the lifting of the sanctions on Iran enable it to do so both from a legal and operational perspective – to provide latest optimized and patented technologies for projects in Iran,” said Laugier.
Andrew Spiers said Iran can accelerate investment in its petrochemical projects as oil prices keep falling.
He said the ongoing cycle of oil price fall can be a chance for Iran to speed up investment in the petrochemical industry.
He said that many countries in the Middle East cancelled their petrochemical projects after oil prices dropped to their decade low. He noted that this issue can make Iran an attractive destination for investors.
Spiers said like other industries, the petrochemical industry has been through cycles of loss and gain.
He said Iran can easily outpace its rivals as investment in the petrochemical industry is on the decline.
Spiers said due to the sharp fall in global oil markets, many investors in the Middle East have lost their relative advantage vis-à-vis their European rivals; therefore, they are disappointed with investment in this sector.
Eduardo Neto said the global chemical markets will more than double in the next 20 years although overall growth levels are expected to decrease.
He said that Iran’s petrochemical sector will outgrow the Middle East region.
“With the production capacity coming online within the next five years, Iran will produce approximately 30% of the region’s ethylene by 2020 – a total of 6.2 mt of ethylene is expected to come online by 2020 in Iran,” said Neto.
He added that the total polyethylene capacity in Iran currently stands at 3.1 million tons.
“By 2020, Iran’s share of polyethylene capacity in the Middle East is expected to decrease to a total of 7.8 mt, representing 32% of the region’s capacity,” he said.
According to Neto, while the quantities of ethane are on a decreasing trend in the Middle East, the unlocking of new gas capacity in Iran will increase its relative importance in the region.
He said Iran’s petrochemical exports are expected to increase by up to 25% within two or three years.
However, he said, exports are currently concentrated on some destinations. For instance, 90% of Iran’s MEG production is exported to China.
Neto said development of an Iranian petrochemical cluster requires accountable organizations to manage multiple initiatives.
He said the key requirements for petrochemical cluster development include creation of an accountable cluster management organization, development of a scalable long-term master plan with progressive milestones and objectives, offering relevant financial incentives to attract private and foreign investors, developing basic capabilities before specializing, initiating efforts to grow talent pool in order to enhance the attractiveness for potential tenants and cooperation with neighboring clusters for sharing infrastructure and feedstock.
Ronald Berger is a leading global consulting firm of European origin with 50 offices in 36 countries and more than 2,400 employees.
Founded in 1967 in Germany by Ronald Berger, it has 220 partners serving 1,000 international clients.
The seventh and the last panel discussion on the second day of the 12th IPF centered on the issue of regional markets and the flexibility of petrochemicals.
Vadim Konakov said Russia’s economy and its petrochemical industry are in critical conditions now.
He said that Russia has lost its leading position in the global petrochemical industry.
“The resource potential of Russia does not provide absolute advantages for the development of the petrochemical industry,” he said.
“The government prefers to invest in support projects of raw hydrocarbons export,” he added.
“Prospects for Iranian imports are associated with the development of demand in Russia,” said Konakov.
He said that the Russian economy is in deep crisis that is rooted in high consumer and industrial inflation.
“Most clearly the crisis phenomena are observed in such key segments of the petrochemical demand as the automotive industry and construction,” he said.
Konakov said the current economic crisis in Russia and the decline in the automobile sector has led to a drop in the imports of engineering plastics by 30-70%.
Russia is exporting mainly intermediate petrochemical products to China, Turkey and the Commonwealth of Independent States.
The country imports intermediate products for varnishes, paints, fibers, advanced types of polymers, engineering and special plastics, finished products of plastics and polyurethanes.
Stefano Zehnder explained about the activities of ICIS that mainly offers financial advice by designing models for financial estimate.
He said that decision-making and planning parameters for industries are changing constantly, noting that one main cause of increase in the costs of projects of their suspension stems from these economic factors rather than geopolitical factors.
“In the rapidly evolving world where macro-economic and geo-political events are driving volatility and changing certainties for many investment plans, ICIS will provide context, examples and practical ideas on how planners have to explore scenarios to provide best possible guidance for decision making processes in our industry,” said Zehnder.
He added that ICIS can provide valuable insights at a very important time of potential change for the Iranian refining and petrochemical industries.
Zehnder said Iran is on the brink of a change, adding that it would need experience in modeling in order to have precise and reliable estimates for its future plans.
“Despite its negative complications in the crude oil market, there must be a plan for reaching an effective pattern for the future to be immune from oil and its price fluctuations,” he said.
One may ask to what extent a shift from oil to other sources would be logical.
“In the Middle East, the conditions for petrochemical feedstock are still like the past, but in North Asia, i.e. China and Russia, and in North America, plans and future are headed towards another destination,” said Zehnder.
“Given the global demand for using non-fossil fuels or fossil fuels with lower pollution rate like methanol and ethanol, refineries and petrochemical units in North America and China are moving towards production of these fuels. That would make them dependent on naphtha,” he said.
Zehnder said the logical option would be looking for new feedstock and finding alternatives to crude oil as Iran’s petrochemical industry is entering a new era.
Brianti was the last speaker in the panel. She briefed the audience about Saipem, saying the company is operating in more than 60 countries.
She said that Saipem has 4,600 employees from 129 nationalities and 11 fabrication yards located in five continents.
She touched on the history of Saipem’s presence in Iran, saying it started operating projects in Iran since the 1960s.
Brianti said that prior to the suspension of activities following international sanctions; Saipem had an important presence in Iran in both offshore and onshore sectors.
“Saipem has in his portfolio the technologies to exploit those components at their best. The Isobutylene is mainly converted in Ethers (MTBE or ETBE) or oligomerized into Di-Isobutene (Isooctene). Isobutylene at Very High Purity, suitable for rubber production, can also be recovered by backcracking MTBE,” she said.
“After Isobutylene capture in form of either ether or dimer, the remaining stream still contains Butene1- that can be recovered at Polymerization Grade and sent to polymer market. The distinguishing point of the Saipem technologies is the Tubular Reactor that is present both in the Etherification/Dimerization unit as Water Cooled Tubular Reactor (WCTR) and in the HPIB unit (High Purity IsoButene) in its heating form,” said Brianti.
Assaluyeh, whose name is reminiscent of Iran’s petroleum industry, hosted a number of representatives of foreign companies, who attended the annual Iran Petrochemical Forum (IPF) in Tehran. They visited some facilities in the first and second phases of Assaluyeh.
It is cold and rainy in Tehran, but in Assaluyeh, it is like spring. Besides officials, weather conditions are also readying to welcome foreign investors and companies. During this visit, the participants got familiar with the latest achievements and were also informed of future plans and projects. Senior managers of Iran’s National Petrochemical Company (NPC) and managers of petrochemical plants briefed the visitors.
It was 9:30 am local time on December 15. Marzieh Shah-Daei, director of projects at NPC, accompanied foreign visitors to Assaluyeh.
In a gathering held there, a documentary was screened to the visitors explaining the general activities of petrochemical plants in Assaluyeh and their progress.
After the documentary, Shah-Daei explained about ammonia and urea production plants and noted that activities have picked up speech in Assaluyeh.
“We intend to showcase Iran’s potentialities. All plants in Phase 1 have been launched by Iranian engineers,” she said.
Some foreign visitors were asking about the details of the projects and some even were willing to visit them.
After that, the visitors were given a tour of Borzuyeh, Mobin, Damavand, Jam and Pazargard petrochemical plants. They also visit Pars Port.
The first project visited by foreigners was Borzuyeh Petrochemical Plant. Nouri Petrochemical Plant (Borzuyeh), one of largest producers of aromatics in the world with a production capacity of 4.5 million tons a year, was officially inaugurated in 2007. The investment envisaged for this project amounts to IRR 8,000 billion. It has directly created some 1,100 jobs.
This company has been privatized and its stakes are now owned by Persian Gulf Petrochemical Industries Company. Easy access to feedstock, fuel and peripheral services, connection to roads and maritime transport network, application of rules and regulations governing free trade zones and generation of value-added from gas condensates are among the major geographical advantages of this project. In this facility, 20% of the equipment is manufactured domestically and Iranian engineers have done the entire work there. The main products of this plant are 750,000 tons of para-xylene, 430,000 tons of benzene and 100,000 tons of ortho-xylene.
Borzuyeh Petrochemical Plant exports its products to Europe, East and Southeast Asia, Persian Gulf littoral states, India, etc.
One of the interesting facilities visited by foreigners was the Terminals and Tanks Petrochemical Co. (TTPC).
Gholam-Reza Manouchehri, the head of TTPC information and management systems, said this company was privatized in 2014.
“Of course, the equipment and buildings and facilities of the port are owned by NPC and only its operator section has been privatized,” he said.
TTPC has two ports in Mahshahr and Assaluyeh (Pars). This port has been designed to handle 32 to 35 million tons of products. This port has 15 jetties, which are all located in the western section. The jetties 3, 4, 5 and 6 are for offloading liquid products and jetties 8 and 9 are for container and polymer products. Jetty 13 is for onshore technical work while jetties 14 and 15 are for gas vessels. Products like liquefied petroleum gas (LPG), ammoniac and ethylene are loaded in this jetty. Jetties 1 and 2 are not yet operational and they are to serve future projects. They will start their operations after the companies in the second phase are launched.
Pars Petrochemical Port in Assaluyeh belongs to NPC. Active in phases 1 and 2 of Assaluyeh, the port provides services to all petrochemical companies. In this port, 40 different petrochemical products are carried. Since the establishment of TTPC, a total of 8,850 ships have offloaded products in these jetties. In other words, 132 million tons of cargoes have been handled in these jetties.
“The destination of these products is countries like China, Singapore, Japan and India and of course countries in the Middle East,” he said.
Manouchehri said methanol and LPG are the main products destined for exports. The average time considered for the loading of a vessel is 36 hours which vary for vessels.
The bus carrying foreign guests stopped near the port. Unlike in the past, foreign guests openly answer questions posed by journalists.
The representatives of India’s Reliance and companies from Japan, China and Singapore prefer not to speak, but Europeans are open to interview.
The representatives of Asian companies start filming and asking questions about ammoniac and urea projects. They were meticulously inspecting small and large structures, distillation towers, pipelines and all other equipment. They seemed to have thousands of questions in their minds.
The foreign guests also toured Bushehr Petrochemical Plant which houses sites for methanol production and ethane recovery.
Bushehr Petrochemical Plant is one of the largest petrochemical production projects in the country with capacity of over 5 million tons a year. Its products include sulfur, ethylene, polyethylene, methanol, acetic acid, ethylene glycol and vinyl acetate monomer. This project is under way with a total investment of 1.9 billion euros plus IRR 25,000 billion. One of the most important units of this plant is its olefin production unit. This project had caught the attention of many representatives of foreign companies. The representative of a Chinese company was insistent on visiting the Kavian project and another one was willing to visit the interior of the ethane production unit. It was nearly noon and the tour was nearing its end. Regardless of searing sun, foreign guests were willing to continue their visit. They were unwilling to return to Tehran so soon.
When there is talk of energy industry, everyone may imagine that the best equipment and technology only exist in the West. That is the image given of Iran by foreign media and investors.
In the past years, news of imposition of sanctions against Iran had given the imagination that Iran’s petroleum industry is in total ruin. Foreign visitors who travel to Tehran for the first time without any experience of operation in Iran are naturally holding such imagination.
Participants at the Iran Petrochemical Forum (IPF) never imagined facing a fully industrialized zone built based on global standards when they arrived in Assaluyeh.
The visit to the phases 1 and 2 of Assaluyeh changed their minds. Representatives from Azeri, Indian, British, Italian, Chinese, Dutch, German and Japanese companies were in the company.
Some of these companies that had experience of work in Iran were asking detailed questions about the progress of projects and their production capacity. But others were asking questions in rapid succession and they wanted to visit all the projects completely.
During this tour, the willingness of foreign companies for investment in Iran was tangible. They spoke openly about their plans to resume work in Iran; however, they refused to speak about details of their plans. One of foreign guests was from Germany’s Air Liquide Global E&C Solutions. This smiling guy was familiar with the place he was visiting.
“This is not the first time I’m coming to Iran. My company was also active here before the sanctions. We built two methanol units in Iran. We will repeat the same activities,” he said.
He said that Iran’s petrochemical market will see a bright future as international sanctions are being lifted.
One of foreign guests was smiling as he was talking to journalists. Donald McMillan, Senior Marketing Manager at Eleston Gas Maritime said he was visiting Iran and Assaluyeh for the first time. He, however, saw a very bright prospect for Iran.
He said that his company is very interested in exporting ethylene, propylene, liquefied petroleum gas (LPG) and ammoniac from Iran. McMillan said an exciting era is starting for Iran.
He said he believed that Iran can regain its influence in the market after the sanctions are lifted.
McMillan said most Western media are unaware of realities in Iran and they are unable to offer a realistic analysis of the country’s affairs.
He said that Iran, thanks to its domestic potentialities, would be able to regain its market share easily although it has been far from markets in recent years.
During the tour, foreign guests were captivated by tall structures and the port and they declined requests for interviews. One of them was Amit Chaudhuri from India Reliance. Speaking English with an Indian accent, he said he had never been active in Iran. He examined everything carefully and from time to time he asked about projects. Chaudhuri was willing to visit the Kavian project.
He told Iran Petroleum that Iran’s petrochemical facilities and equipment are ideal and conform to international standards. He said that Assaluyeh is huge and extraordinary.
Chaudhuri who seemed to have full information about Iranian projects said a major advantage with Iran is easy access to feedstock and raw materials available in abundance. For him, activity in Iran would be very exciting and interesting.
He finally did not speak about his company’s plan for presence in Iran, saying everything depends on upcoming developments.
“At present, we have no plan for activity in Iran and we are only examining the conditions,” he said.
“Of course, in my view, the future of Iran’s petrochemical industry is very bright. Iran has many potentialities particularly in the ethylene industry because there are abundant deposits in this sector,” said Chaudhuri.
A senior official from Azeri oil ministry was among foreign visitors to Assaluyeh. He was silent most of the time and he was concentrating on examining the situation.
In his view, Iran’s petrochemical industry is very interesting. He openly said his country is willing to invest in Iran’s facilities.
Azerbaijan is currently strolling with the problem of gas condensate transit. Therefore, Azeri officials are willing to cooperate with Iran and transfer petrochemical technology to their country in order to be able to convert gas to products of higher value in the market. In this way, they will make more gains.
Rare are those who have not heard the name of Persian Gulf; one of the most strategic spots in the world that reminds everyone of oil and gas. The Persian Gulf waters, which engulf Iran in the north, Kuwait and Iraq in the west and Saudi Arabia, Bahrain and UAE in the south, have a number of tourist attractions. Chief among them are Kharg, Abu Musa, the Greater Tunb, the Lesser Tunb, Kish, Lavan and Qeshm islands. Hengan and Hormuz are also important islands which attract a large number of tourists every year.
Hengam Island is an Iranian island located south of Qeshm Island, Iran, in the Persian Gulf. It is 36.6 km wide and shaped like a truncated cone. The island is generally calcareous and generally low-lying. The highest point on the island is Nakas Mountain with an altitude of about 106 meters. The distance between Hengam Island and Qeshm Island is about 2 km.
The primary economic activity is fishing, as well as some tourism and sightseeing. The main sights of Hengam are the English harbor buildings along with the coal storage, the Portuguese shipwrecks, and aquatic animals such as turtles, dolphins, corals, and sharks.
Located in the Strait of Hormuz, 5 miles off the Iranian coast, Hormuz Island has an area of 42 km2 (16 sq mi). It is covered by sedimentary rock and layers of volcanic material on its surface. The highest point of the island is about 186 meters above sea level. Due to a lack of precipitation, the soil and water are salty. Specialists have helped cultivar white mangrove or Hara trees to grow in the climate. Due to the lack of fresh water, Iranian engineers have constructed a water pipeline from the mainland.