South Korea's Daelim Wins $2b Iran Refinery Project

The National Iranian Oil Company and South Korea's construction conglomerate Daelim Industrial Company have reached an agreement to cooperate on improving oil refining facilities in Isfahan Province.

Daelim has reportedly received a letter of award (LoA) from Isfahan Oil Refining Company to carry out the development plan worth $2 billion (2.3 trillion won), Daelim said in a statement on Thursday, IRNA reported.

The project calls for new facilities and units that will be used not only to curb production of environmental-unfriendly mazut but also maximize efficiency and enhance crude processing to generate high value-added products, namely gasoline and diesel, in Isfahan Refinery, located 400 kilometers south of Tehran.

Under the deal which is to be officially signed in January, the Koreans will be in charge of designing, equipment and material procurement, construction and financing. Construction will take 48 months after groundbreaking.

As part of the agreement, South Korean banks will finance the project through Daelim, IRNA said without providing details.

Iran’s crude processing capacity stands at about 1.85 million barrels a day, yet with the implementation of new development plans, daily refining capacity will reach 3 million barrels.

Oil officials contend that production of mazut in refineries has become their Achilles’ heel.

Iran, currently the third-largest producer in the Organization of Petroleum Exporting Countries behind Saudi Arabia and Iraq, needs to invest billions of dollars in its aging refining infrastructure as it seeks to play a bigger in the global crude market.

Established in 1939, Daelim Group is one of the largest companies in South Korea. The fields covered by Daelim, as one of the top engineering, procurement and construction companies in Asia, include gas, petroleum refining, chemical and petrochemical, power and energy plants, building and housing, civil works and industrial facilities.

Beginning with the civil engineering work in Isfahan military facility in May 1975, the company has reportedly clinched 26 projects worth $4.55 billion in total over the past 40 years in Iran.

It marks the highest-ever number of construction deals with Iran by a South Korean company.

Iran has an abundance of natural resources, the world's second largest natural gas reserves and fourth largest oil reserves. Accordingly, it is expected to soon place orders for several projects to upgrade and repair oil refining, gas and petrochemical plants.

Iran plans to build major refineries, namely the 300,000-barrel-a-day Bahmangenoo plant at the port city of Jask in Hormozgan Province, a 150,000-barrel-a-day facility at Anahita in western Kermanshah Province and Pars Refinery to process 120,000 bpd of condensates.