Iran can develop energy sector by offering better terms

Business Materials 26 January 2016 20:59 (UTC +04:00)

Baku, Azerbaijan, Jan. 26

By Dalga Khatinoglu - Trend:

Iran can develop both upstream and downstream oil and gas sector, but it depends on the details of the new fiscal terms, the new designed Iran Petroleum Contract, said Wood Mackenzie's senior experts.

Iran says it needs $185 billion investment in oil and gas sector by 2025.

The country introduced a new designed agreement, called Iran Petroleum Contract in November, and proposed 49 oil and gas projects to foreigners.

Homayoun Falakshahi, Middle East upstream research analyst at Wood Mackenzie, told Trend on Jan. 26 that the need for capital investment in Iran's upstream sector is high, not only in new developments but also on the older fields.

"In order to keep producing at a high level, mature fields like Ahvaz, Gachsaran or Marun, will need important capital investment to upgrade current facilities and build new capabilities," said Falakshahi. "Offshore projects are typically more capital-intensive, especially if Iran decides to go ahead with the development of the deepwater Sardar-e-Jangal field in the Caspian."

Falakshahi added that whether Iran will be able to attract enough investment will depend on the details of the new fiscal terms, the Iran Petroleum Contract.

Tehran is yet to unveil the exact mechanism of the cost recovery and remuneration fee, noted the expert.

"In a low oil price environment, companies are more capital-stretched, and some will be scrutinizing the IPC and other political and business issues before deciding to enter Iran," he noted.

He also said that considering the list of 49 oil and gas developments on offer, the National Iranian Oil Company is looking to attract around $70 billion of foreign direct investment (FDI) in its upstream oil and gas sector by 2025.

"Such investment could help the country increase its crude oil production above 5 million barrels per day from 2.8 million barrels per day in 2015. But the fiscal terms remain the key for Tehran to reach this number," he said.

Iran also has to offer tens of projects in downstream sector to foreigners, including $70 billion investment plans in petrochemical sector.

Johnny Stewart, senior downstream research analyst at Wood Mackenzie, told Trend that Iran is actively investing in upgrading its domestic refining operations over the next decade - a number of projects to existing plants are underway, including a gasoline production improvement project at Bandar Abbas, and a new refinery train project at Abadan refinery.

"We expect both projects to be on-stream before 2022 and improve the quality of oil products produced," he noted.

He added that beyond upgrades, Iran is expanding its refining capacity with a focus on monetizing domestic condensate barrels.

"The Persian Gulf condensate refinery, with processing capacity of 360 kb/d, is expected to complete mid-2017. The project, built in three 120 kb/d phases, will help move Iran to a balanced gasoline position and alleviate the use of petrochemical, or ersatz, gasoline".

Stewart added that the second project, SIRAF condensate refining park, is planned for later in the decade.

"Eight modular refineries, with 60 kb/d capacity each, are due for construction and will be funded by eight private local Iranian firms. Each company will be responsible for marketing their own oil products production," he said.

Below is the list of major investment opportunities in Iran's oil refining sector.




Persian Gulf Star refinery

360,000 barrels of condensate

800 million euros

Pars refinery

120,000 barrels of condensate

$1.8 billion

Anahita refinery

150,000 barrels of heavy crude

3.1 billion euros

SIRAF refining complex

480,000 barrels of condensate

$2.4 billion

Jask refinery

300,000 barrels of heavy crude

$7.5 billion

Revamping Isfahan refinery

120,000-barrel distillation unit

Three billion euros

Revamping Abadan refinery

120,000-barrel distillation unit

$3.4 billion

Reducing Bandar Abbas refinery's fuel oil production

57,000-barrel unit

$1.2 billion

Reducing Abadan refinery's fuel oil production

60,000-barrel unit

$1.5 billion

Six oil transfer pipelines

One million barrels

Seven billion euros plus 23 trillion rials (about 703 million euros)

Oil transfer terminals

10 oil transfer centers and terminals

1.8 trillion rials (about $50 million)