Oil, Gas Infrastructures Require Major Overhaul

Iran has an estimated $400 billion worth of physical assets in the petroleum industry, but low efficiency and high rates of incidents in the industry show the country's oil and gas infrastructures require a major overhaul, according to an Oil Ministry official.

"Iran's oil and gas equipment efficiency is between 10% and 30% of advanced countries' while oil- and gas-related incidents are nearly 10 times higher," Alireza Asl-Arabi, Oil Ministry's director for physical assets, said in a conference on oil and gas compressors in Tehran on Wednesday, IRNA reported.

The statements highlight insignificant investments over the last four decades to upgrade dilapidated oil and gas equipment as well as small measures to improve health, safety and environmental (HSE) standards in Iran's most important economic sector.

"Maintenance of equipment was not much of a concern in the past because of expensive crude. But the issue came to the forefront after prices collapsed three years ago," Asl-Arabi said.

So far this year, oil prices have seesawed in a range of $45-55 a barrel, less than half of their peak levels three years ago. The price fall put a severe strain on the budget of oil-producing companies, forcing them to bring down their costs by innovating new ways of raising production efficiency.

A string of incidents in Iran's petroleum and petrochemical sectors over the last year has put safety concerns under the spotlight. In July last year, a petrochemical complex in Bandar Mahshahr in the southern Khuzestan Province was ravaged by fire.

According to initial reports, the incident was triggered by the leak of paraxylene, a highly flammable fuel. Officials said the leak, which caused the largest incident in Iran’s oil and gas industry in recent memory, could have been avoided if proper maintenance and modern equipment were in place.

The ministry official underlined a lack of funds and inadequate standards as key issues in the oil industry.

According to reports, plans are in place to raise $14 billion to refurbish some of the aging Iranian refineries, mostly in collaboration with Southeast Asian countries.

Asl-Arabi noted that compressors make up around 5% of all equipment in Iran's oil industry, "but they constitute 25% of equipment in terms of value" or roughly $100 billion.