Plan to Allocate $14b to Improve Refineries

Plan to Allocate $14b to Improve RefineriesPlan to Allocate $14b to Improve Refineries

The Iranian government is planning to disburse $14 billion to renovate and optimize refineries nationwide and improve the quality of petroleum products, according to the managing director of National Iranian Oil Refining and Distribution Company.

“Most Iranian refineries have a low profit margin because of producing a huge volume of mazut, which bears little profit, and an insignificant output of other petroleum products with higher value added … NIORDC plans to adjust the process,” Abbas Kazemi was quoted as saying by IRNA at a news conference on Sunday.

Oil officials believe that mass production of mazut in refineries is their Achilles' heel. Iran is ranked 11th, ninth and 13th in terms of oil refining, gasoline and diesel production capacity respectively, yet when it comes to producing low-valued mazut, it ranks first in the world.

"Based on the plan, refineries should reduce mazut output to less than 10% and instead they are expected to produce more gasoline that is compatible with international standards," Kazemi added.

Referring to the fact that the country’s nine refineries process 1.8 million barrels of oil per day, the official said Iran will be a gasoline exporter upon the completion of the Persian Gulf Star Refinery in the early next Iranian year (starting March 21, 2017).

The long-awaited refinery will produce 12 million liters of Euro-4 gasoline and 360,000 barrels of gas condensate per day once its first phase goes on stream.

Completion of the project was delayed due to a lack of financing. The loss in profit due to startup delay is estimated at $3-4 billion. Iran is planning to boost crude processing capacity to 3.2 million barrels a day by 2021. Kazemi also announced that the company plans to increase Euro-4 gasoline distribution to 15 cities from the current eight metropolises in the near future.

The production of Euro-4 gasoline has soared nearly 10 times to reach 24 million liters a day since Hassan Rouhani took office in mid-2013, according to Oil Minister Bijan Namdar Zanganeh.  The NIORDC chief stressed that the company is holding negotiations with foreign investors on the optimization of Iranian refineries, adding that upgrading of these refineries, including Abadan Refinery, Esfahan Oil Refining Company, Tehran Refinery and Bandar Abbas Oil Refining Company, is on the NIORDC agenda.

Japan, China and South Korea have earlier been mentioned as candidate countries to implement the projects, which can cost $2 billion for large refineries.