NIOC Plans 2nd APG Auction

NIOC Plans 2nd APG AuctionNIOC Plans 2nd APG Auction

National Iranian Oil Company will auction more than 20 million cubic meters of associated petroleum gas in the near future, NIOC's investment and finance director said on Wednesday.

"In view of Iran's increasing oil production, inevitably more petroleum gas from the oilfield's flares will be produced," Ali Kardor was quoted as saying by Shana.

The state-run NIOC held the first auction nearly two years ago, but it failed to interest potential buyers.

Kardor said the new auction will be similar to the first one in terms of the base auction price.

APG is a form of natural gas found in deposits of petroleum. It is often released as a waste product. When it is burned off in flares, it is referred to as flare gas.

"Gas flare is predominantly used for power production, but there has not been much interest to burn APG for electricity generation in Iran because of the government's low purchase price for APG-fueled electric power that leaves little room for profitability," he said.

The upcoming auction could generate interest from foreign companies due to their advanced technologies that turn power generation via APG into a cost-effective process.

"The auction can be an economical investment for some international companies who boast cutting-edge technology," Kardor said.

He stressed that the electric output of power plants using flare gas should have a different price tag compared to that of thermal power plants that largely burn natural gas—an abundant and inexpensive feedstock—for power production.

"Let's keep in mind that it (APG-fuelled electricity) goes through a different process … It reduces the wastage of associated petroleum gases and helps curb pollution," Kardor noted.

"It is produced from a useless and polluting fuel, thus it can be considered a renewable form of energy."

Arvandan Oil and Gas Company, a subsidiary of NIOC, said last month it had signed a contract with a privately-run firm to produce 100 megawatts of electricity per day, in addition to 1,300 barrels of liquid petroleum gas and condensates from APG.

The contract calls for providing the private sector with 680,000 cubic meters of flare gas per day at an estimated cost of 4.11 cents per cubic meter for five years.

But the first step to supply flare gas for power production is to collect APG from Iran's oilfields.

According to Kardor, contracts have been finalized to gather APG from four oilfields, including 5.7 million cubic meters of flare gas from Forouzan Oilfield.

The field is located 100 kilometers southeast of Kharg Island in the Persian Gulf and is linked to Marjan Oilfield of Saudi Arabia.