The production of mazut, the environmentally-harmful fuel, in Iran’s refineries has experienced a 23% decline since 2014.
Based on information from the National Iranian Oil Company and the Oil Ministry, the mazut output in refining complexes was around 80 million liters (500,000 barrels) eight year ago, which has now reduced to 65 million liters/day (400,000 barrels).
The inauguration of the Persian Gulf Star Refinery in Bandar Abbas, Hormozgan Province, in mid-2017 not only increased refining output capacity but also improved the quality of oil derivatives like gasoline and diesel and reduced mazut production.
Despite the 23% plunge, Abbas Kazemi, an energy expert and the former managing director of the National Iranian Oil Refining and Distribution Company (NIORDC), believes that excessively high production capacity of mazut in Iranian refineries has reduced their profit margin.
"As long as refineries do not make strategic plans to convert mazut into higher value-added products such as gasoline or diesel, they will have to continue their business with the lowest ratio of profitability as most countries have started to use liquefied petroleum gas instead of mazut," he said.
“The administration has targeted the reduction of mazut production in refineries by 2% per annum, making it less than 10% under the 20-year Vision Plan."
Approved in 2005, the Vision Plan aims to promote the country's status at the national, regional and international levels and become a developed state by 2025.
Elaborating on the importance of undertaking fuel quality enhancement projects in old refineries, Alireza Sadeqabadi, director of NIORDC, a subsidiary of NIOC, said negotiations are underway with Japan, China and South Korea to implement such projects in Abadan, Lavan and Bandar Abbas refining companies, all of which came to a halt in 2018 due to the US sanctions.
Asked about the financial burden of reducing mazut production capacity by 10% in refining complexes, the official said investment funds would vary, depending on the refineries' capacity.
For instance, the implementation of such projects in Isfahan or Bandar Abbas refineries will cost $6 billion. Oil officials believe that the mass production of mazut in refineries is their Achilles' heel.
Refining Capacity
According to Sadeqabadi, crude refining capacity in Iran, including gas condensates, is 2.3 million barrels (370 million liters) a day.
“The capacity shows a 43% rise compared to 2001 when it was 1.6 million barrels per day,” he said.
“The high capacity notwithstanding, as long as the mazut output is not curbed in refineries, the loss borne by refineries will outweigh their profit.”
Iran is ranked 11th, ninth and 13th in terms of oil refining, gasoline and diesel production capacity respectively. However, when it comes to producing low-value and eco-unfriendly mazut, it tops the list.
“The implementation of projects to convert excess low-value and eco-unfriendly mazut into value-added products should be a priority,” he said.
Commenting on the construction of efficient refineries, he noted that refineries are considered economical if their mazut production is less than 10% and the quality of oil products is compatible with Euro-4 and Euro-5 emission standards.
Mazut is a heavy, low quality fuel oil, used in power plants and factories.
The other major problem is that the current levels of sulfur in mazut produced in Iran is 3.5% and cannot be sold in international markets due to the regulations set by the International Maritime Organization.
According to IMO’s new rule, which came into effect last month, global sulfur cap for marine fuels must not exceed 0.5%.
Although some petrochemical and refining firms, namely Nouri Petrochemical Company in Bushehr, will start producing low-sulfur fuel in March, the mazut currently produced in Iran is used largely in power plants, especially in winter when natural gas consumption is high in household sector and power stations must burn alternative fuels (mazut or diesel).
