Global Interest in Iran’s Refining Projects

Global Interest in Iran’s Refining ProjectsGlobal Interest in Iran’s Refining Projects

Investors from Japan, Spain, India and South Korea have contacted the National Iranian Oil Refining & Distribution Company and asked for detailed information about oil projects in Iran, yet serious negotiations are underway to choose the best contractors, planning manager of NIORDC said on Tuesday.

"Isfahan and Banda Abbas refineries' development projects top NIOC's priority list," Shahaboddin Motaji also told Shana, adding that as soon as the projects are completed, the refining complexes' mazut output will decline significantly.

According to reports, crude refining capacity in Iran, including gas condensates, stands at 1.8 million barrels a day. Notwithstanding the large capacity, the loss borne by refineries outweighs their profit as they are deprived of state-of-the-art technology to convert mazut into gasoline.

Motaji believes that construction of Siraf Refining Park, aka the Octopus of Persian Gulf, in the coastal city of Asaluyeh near the South Pars offshore gas field in southern Iran can help Iran curtail the sale of low-valued crude. The design process of the refinery will be completed by mid-2016.

Iran is ranked 11th, ninth and 13th in terms of oil refining, gasoline and diesel production capacity, yet when it comes to producing low-valued mazut, it ranks first in the world.

According to Abbas Kazemi, managing director of NIORDC, investing in refinery projects is viable, if their minimum output is 150,000 barrels per day, but the ones whose daily capacity amounts to 5,000 are not recommended since their return is based on long-term profitability.

This explains why Kermanshah Oil Refining Company will be closed down in the near future, as its output does not exceed 15,000 bpd.

Commenting on building viable refineries, the official noted that refineries are considered economical if their mazut production is less than 10% and the quality of oil products should be compatible with that of Euro-4 standards.

Elaborating on the importance of undertaking fuel quality enhancement projects in old refineries, he said, “Serious negotiations are underway with Japan, China and South Korea to implement such projects in Abadan, Lavan and Bandar Abbas refining companies.”


***No More Procrastination

A Chinese oil company was presented with an ultimatum by the Iranian National Oil Company due to its procrastination to implement Abadan Refinery development project, managing director of the NIORDC said.

"If the Chinese enterprise continues to kill time, it will definitely be replaced by another company," he said.


Underscoring NIOC's policy to cooperate with the Chinese firm to complete Abadan Refinery development project, Kazemi said, "NIORDC held lengthy negotiations with the company to make it finance the project, as NIOC has large capital in China, which must be used to fund mega oil projects."

According to the official, 85% of the much-needed fund should be managed by the Chinese company and NIOC still would rather cooperate with it, but any further delay in fulfilling the financial commitment will definitely result in choosing another contractor.

"Interestingly enough, upon receiving the ultimatum, the company has increased its activity," he said.

Pointing to the preliminary studies and 20% progress in designing, Kazemi noted that plans have been made to commence the operational stage of the project in mid-2016.

"Developing the project requires $3 billion in investment," Shahrokh Khosravani, the deputy head of National Iranian Oil Refining and Distribution Company said.

"The project is implemented with the aim of improving the quality of oil byproducts, especially gasoline and diesel, in Abadan Refinery to meet Euro-5 standards in addition to reducing mazut output to make the refinery more eco-friendly."

According to oil officials, the engineering, procurement and construction contract to develop Abadan Refinery took effect in mid-2013 after signing an "early work" agreement with the Chinese company.