Abadan Oil Refinery in the southern Khuzestan Province will be renovated using the knowhow of European companies and Chinese funding, the managing director of National Iranian Oil Engineering and Construction Company (NIOEC) said.
"Abadan refinery will be refurbished at an estimated cost of €2.7 billion ($2.87 billion) in mostly Chinese finance and the knowhow from Italian, French and Danish companies," Hamid Sharif-Razi told a news conference in Tehran Saturday.
He did not name the companies or their scope of collaboration in the project.
"The project is aimed at improving the refinery's processing capacity and efficiency. More than 40% of the refinery's output is mazzut which is barely worth one-third of crude oil."
The rehab is expected to be completed in four years, with mazut output to be reduced to less than 20%.
Observers say that excessively high production of mazut in the refineries has substantially reduced their profit margins. So long as refineries do not convert mazut to higher value-added products, they will have to make do with the low profit margins.
Government officials said last month that China Export and Credit Insurance Corporation, or Sinosure, had opened credit line, worth $1.3 billion, to finance the development of Abadan refinery, Iran's oldest crude oil processing unit. Iran will provide 15% of the funding.
According to reports, China Petroleum and Chemical Corporation (Sinopec) has started work on rehabilitating the giant complex.
Once the biggest in the world, the refinery was severely damaged during the initial stages of the 1980-88 Iraq-Iran war.
According to Habibollah Abolhosseini, the refinery director, its crude processing capacity is now 364,000 barrels per day but can be augmented to 450,000 bpd.
According to published reports, the government of President Hassan Rouhani has earmarked $14 billion to recondition and improve some of the major refineries, namely in Tehran, Tabriz and Isfahan.
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