In line with policies to boost the processing capacity of crude and gas condensates, the Oil Ministry has issued licenses for constructing oil refineries and petro-refining complexes in the southern regions, the Oil Ministry's deputy for planning and economic affairs said.
"Eight domestic firms have been assigned to increase the National Iranian Oil Company’s oil and gas condensates output by 1.220 million and 240,000 barrels respectively per day over the next three years," Houshang Falahatian was also quoted as saying by ISNA.
Javid Energy Parto Company, a subsidiary of the Pasargad Financial Group, Parsian Oil and Gas Development Group and Pishgaman Siraf Refining Company have been tasked with constructing petro-refining complexes to process condensates, he added.
Five other local corporations, namely Makran Mofid Energy Development Company, Social Security Investment Company, Ghadir Investment Company, Lavan Oil Refining Firm and Entekhab Investment Development Group have been granted licenses to build crude oil refineries.
Falahatian said all refining facilities will be built in the southeastern port of Jask in Hormozgan Province at an estimated cost of $50 billion.
Referring to ongoing projects, the official noted that South Adish Gas Condensates Refinery in Kangan, Bushehr Province, has registered 50% progress and the rest of the plan is expected to be funded by the money borrowed from the National Development Fund of Iran, the country's sovereign fund.
Adish Petro Refining Complex will process 60,000 barrels of condensates per day.
Incentivizing Investors
To incentivize investors in refinery projects, the government has decided to supply the new refineries with cheap feedstock (crude and condensates).
“Iran's oil industry is largely state-owned and usually entangled with political issues, that’s why sanctions can easily undermine the key sector,” the official said.
Washington withdrew from the Iran nuclear deal in May 2018, after US ex-president, Donald Trump, abandoned the historic agreement and imposed tough new economic sanctions. Trump wanted a new and comprehensive deal with Iran that rejected the proposal outright.
“Under the current circumstances, private companies can help minimize the negative economic effects of US restrictions by getting involved in oil and gas projects, namely refining projects,” he said.
"The Oil Ministry cannot embark on such plans due to financial constraints," the official admitted, noting that the ministry welcomes proposals from qualified private firms capable of undertaking refinery construction projects near the country’s borders.
According to Oil Minister Javad Owji, raising the quality and output of oil refineries and building new refineries are on the ministry’s agenda for increasing Iran's oil refining capacity by 1.5 times in five years.
“Development programs are underway to bring the country’s refining capacity, including crude oil and gas condensates, to 3.5 million barrels per day from the current 2.1 mb/d,” he said.
Investors have been identified for generating and developing refining capacity, and they have signed agreements with the Oil Ministry in this regard.
Lack of Investment
Lack of investment has severely impaired NIOC’s ability to process crude, which explains the firm’s declining refining capacity over the past eight years.
According to data from the Oil Ministry and NIOC, failure to capitalize on the private sector’s experience, absence of rehabilitation plans and the focus on sale of low value-added products have reduced oil processing capacity by 231,000 barrels per day since 2013.
Refining complexes across Iran processed 2.331 million barrels of crude per day in 2013. Nonetheless, the capacity has now dwindled to 2.1 million, registering an 11% decline.
Abadan, Bandar Abbas and Isfahan refining facilities have experienced the largest decline of 68,000 barrels, 48,000 barrels and 44,000 barrels in processing capacity respectively over the eight-year period.
The capacities of refineries in Tehran, Kermanshah, Hormozgan and Tabriz have also dipped by 25,000 barrels, 19,000 barrels, 18,000 barrels and 9,000 barrels per day respectively.
On the other hand, the inauguration of the Persian Gulf Star Refinery in Bandar Abbas in southern Hormozgan Province in 2018 helped boost its gas condensate refining capacity.
An estimated 400,000 barrels per day of gas condensate are supplied to the complex from the giant South Pars Gas Field off the Persian Gulf.
Owji further said several ongoing programs are aimed at enhancing the country’s refining capacity.
“We have two plans in this regard: the first one is to boost the capacity of its refineries [those fed by crude oil and gas condensate] in terms of quality and quantity of products, and the second plan is to build new refineries,” he added.
Pointing to the strong market for petroleum products and fewer problems for exporting them while the country is still facing unfair US sanctions, Owji said, “According to the demand of neighboring countries and the region, investment in the field will be profitable, create jobs and prevent crude sales.”
