China Petroleum and Chemical Corporation, known as Sinopec, has started operations to develop the Abadan Oil Refinery in the southern Khuzestan Province, Abbas Kazemi, managing director of National Iranian Oil Refining and Distribution Company (NIORDC) said.
“Following months of negotiations between NIORDC and Sinopec, operations for the first phase of development of Abadan refinery, which entails boosting production efficiency, is now underway,” Kazemi was quoted as saying by Mehr News Agency on Tuesday.
The development plan will be carried out in two phases at an estimated cost of $3 billion, with the first phase to cost around $1.3 billion.
The agreement is said to be the first major energy deal between Tehran and Beijing after the removal of international sanctions in January.
“Iran will provide 15% of the investment for this project, while Chinese financiers will provide the rest,” he said.
The agreement calls for improving the quality of oil byproducts by upgrading the production process, Kazemi said, adding that reducing mazut output and raising the capacity of gasoline and diesel compliant with Euro-4 standards are in the works.
Underlining that the venture will be completed in four years, Kazemi said the refinery’s mazut output is to be reduced to less than 20% from the current 40-42%.
“Excessively high levels of mazut in our refineries has hurt profit margins. So long as refineries do not move to convert mazut to higher value-added products, they will have to do with the low profits,” he added.
Refinery Investments
Kazemi recently said that investors from Japan, South Korea and China are planning to invest $14 billion in six aging Iranian refineries.
Daelim Industrial Co., a South Korean conglomerate, has signed a memorandum of understanding to reduce the mazut production of Isfahan Oil Refinery. As part of the agreement, South Korean banks will finance the project through Daelim.
Stressing that Iran’s current crude processing capacity stands at about 1.85 million barrels a day, Kazemi noted that with the implementation of new development plans, daily refining capacity will exceed 3 million barrels.
Oil officials contend that production of mazut in refineries has turned out to be their Achilles’ heel.
Iran ranks 11th in the world in terms of oil processing capacity. It is the 9th producer of gasoline and 13th diesel producer. When it comes to producing the unwanted and environmental-unfriendly mazut, it tops the list.
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