Int’l Firms Vying for Iran’s Refinery Contracts

Int’l Firms Vying for Iran’s Refinery Contracts Int’l Firms Vying for Iran’s Refinery Contracts

International oil services companies are eager to win contracts worth tens of billions to modernize Iran's oil refineries once sanctions are removed.

Officials from National Iranian Oil Refining and Distribution Company, National Petrochemical Company and the privately-owned Persian Oil and Gas are holding talks with services firms to clinch projects to renovate Iran's refining and petrochemical sectors, Reuters reported.

Iran needs to complete modernization plans that ground to a halt after sanctions hit the country five years ago over its nuclear program.

The projects are worth at least $100 billion, according to sources close to firms that have held talks in Iran.

The talks accelerated after a nuclear agreement between Tehran and world powers in July paved the way to lifting sanctions. Sources close to the talks said Iran is moving forward with its pre-sanctions goal to refine more of its own oil and upgrade its petrochemical plants, with a view to boosting earnings.

Iranian officials have already held meetings with a string of international companies to outline their plans and even organized group bus tours for service companies to visit refineries, according to industry sources.

Business prospects in the sector were also discussed during a string of trade visits from Italy, Germany, Japan and other countries in recent weeks.

"There is also great potential in the modernization of existing plants for extraction and processing of raw materials and the infrastructure sector," Wolfgang Büchele, chief executive officer of German gas and engineering company Linde , told Der Spiegel magazine after visiting Tehran as part of a German delegation led by Minister of Economic Affairs Sigmar Gabriel last month.

Oil service companies that had been active in building refineries in Iran prior to the sanctions, including Australia’s WorleyParsons , France’s Technip and Axens, South Korea's Daelim and China's Sinopec Engineering were all interested in resuming business in the country, the sources said.

Several large refinery upgrades were stopped in their tracks when sanctions hit, leaving parts and equipment stranded, according to a person who operated in several projects.

Oil Minister Bijan Namdar Zangeneh said last month Iran planned to invest $80 billion over the next 10 years to upgrade and expand its petrochemical sector.

Repairing the country's 10 oil refineries would likely generate $100 million in projects for international companies in the short run, according to industry officials and analysts.

  Wrong Capacity

Years of restricted access to technology have left Iran's refineries limping into the 21st century, forcing them to produce low quality and polluting fuels and creating safety hazards.

For a country with big aims, huge oil reserves and nearly 80 million fuel-hungry consumers, addressing the refining problem is a priority for Iran, according to analysts.

Mehdi Varzi, president of Varzi Energy consultancy, said, "Iran has 1.5 million barrels per day of refining capacity, but it is the wrong capacity. Iran wants western technology and American technology specially."

Sara Vakhshouri, president of SVB Energy International, said scores of western oil industry officials are clamoring for this business.

"There would be huge competition but the right companies should be able to succeed," she said.

"If you can bring the technology needed, it shouldn't be tough."