$311m Loan to Complete Iran's Largest Oil Refinery

The Persian Gulf Star Refinery is central to efforts to wean Iran from gasoline imports that stand at 15-20 million liters per day
PGSR and the nearby Bandar Abbas Oil Refinery account for half of Iran's gasoline output.PGSR and the nearby Bandar Abbas Oil Refinery account for half of Iran's gasoline output.

The government has approved a fund-raising plan to complete the construction of Iran's largest oil refinery in the southern city of Bandar Abbas, Hormozgan Province.

Alireza Sadeqabadi, chief executive officer of the National Iranian Oil Refining and Distribution Company, noted that the government has approved a loan worth €260 million ($311 million) from the sovereign wealth fund National Development Fund of Iran to complete the remaining phases of the refinery, Shana reported on Monday.

"One-third of the refinery's production capacity is online … It should be completed by the end of the present [fiscal] year [in March]," Sadeqabadi said.

Persian Gulf Star Refinery is being developed in three phases with a combined processing capacity of 360,000 barrels per day of condensate, a type of ultra light crude extracted from the giant South Pars Gas Field in the Persian Gulf.

Once fully operational, the refinery will produce 36 million liters of high-octane gasoline as part of efforts to wean Iran from the imports of the fuel product.

Currently, one phase of PGSR is operational but production is reportedly below the designated capacity of 12 million liters a day.

Iranian plants produce nearly 60 million liters of gasoline daily, but the country has to import 15-20 million liters a day to meet domestic demand.

Sadeqabadi further said PGSR and the nearby Bandar Abbas Oil Refinery, both a few kilometers off the Persian Gulf coast, account for half of Iran's gasoline output.

"No budget has been allocated [in the budget bill for the fiscal 2018-19] for gasoline imports. We must become a gasoline exporter as soon as possible," he said.

Morteza Emami, a former CEO of PGSR, said in September that around $1 billion in investments were required for the completion of the mega project.

"The refinery had been intended to be up and running at a cost of $1.4 billion, but over $4.2 billion have been spent and more investments are required," he added.

The first phase of PGSR was launched in April by President Hassan Rouhani, more than a decade after construction began.

Officials have explored investment strategies for the PGSR, such as tapping into NDFI, increasing the number of shareholders and using foreign finance.

PGSR is owned by Tamin Petroleum and Petrochemical Investment Company (49%), Oil Industry Pension Fund Investment Company (33.1%) and National Iranian Oil Refining and Distribution Company (17.9%).  

"Different options are on the table for financing and developing the second and third phases of the Persian Gulf Star Refinery, including a tender that may include foreign companies," said Eslam Khosravi, a member of the board of Tamin group, in September.

Khosravi left the door open for an arrangement similar to that of French oil and gas company Total with Tehran to develop a major offshore gas venture.

"Another alternative is [direct] negotiation with foreign investors" outside the tendering process, he said.

Total sealed a $5 billion deal in July to develop Phase 11 of South Pars.

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