Bob Tippee
Managing Editor--Economics and Exploration
Iran has turned away from stern isolationism this year in order to rebuild a war-ravaged petroleum industry and stimulate its economy.
The reconstruction effort includes participation, under terms still not well defined, by non-Iranian companies in upstream oil and gas operations.
First announcement of an exploration-development deal came in June, when a unit of Total-Cie. Francaise des Petroles said it signed a preliminary agreement with National Iranian Oil Co. (NIOC) to participate in off-|shore development drilling.
The deal followed a meeting in Iran of oil company representatives and oil ministers from producing countries on the subject of producer-consumer cooperation. The meeting provided a clear signal that Iran wants to conduct business with outsiders again and to regain influence in petroleum markets and the Middle East.
But the Iranian bid for foreign financial and technical assistance has been slow to show results. Government officials say they're negotiating development drilling deals with a number of international companies.
In September, NIOC signed a letter of intent with Japan Petroleum Exploration Co. covering two drilled structures and three exploration prospects in the Strait of Hormuz. Japex agreed to spend $100 million for exploration, beginning in 1992. Outlays might reach $1.6 billion if results warrant development.
Japex apparently will earn a return on exploration and development based on payments in crude oil or condensate. NIOC would become operator of any commercial production once Japex completes development.
For international companies, the attractions of Iranian upstream projects are obvious: oil reserves estimated by the government at 93 billion bbl and natural gas reserves at 700 tcf-second only to gas reserves of the Soviet republics.
But companies privately cite two problems. One is Iran's reluctance to allow foreign equity participation in upstream ventures. The other is political instability. Isolationist pressures remain in evidence inside Iran but are confined politically to the Majlis (parliament).
OIL AND GROWTH
Ultimately, stakes may be higher for the country than for companies, which can find upstream opportunities at attractive terms elsewhere in the world.
Iran, however, faces immediate economic pressures. Among them is the need to rebuild after a costly, 8 year war with Iraq. The country also has a rapidly growing population of 60 million, much of it displaced by the war from coastal towns to Tehran and other crowded, inland cities.
The economic lift that oil and gas development can provide is, therefore, critical.
Iran's Ministry of Petroleum has a 1990-94 development plan calling for foreign currency investments totaling $14.5 billion in development of oil and gas reserves. The ministry says it has no restraints on the amount of foreign investment it can employ to raise production capacity.
According to Kambiz Manafi, head of NIOC's international assessment department, Iran's sustainable production capacity is 3.5 million b/d--about current production. The ministry wants to boost capacity to 5 million b/d by 1994.
Gas production is 35 million cu m/day, about capacity. Manafi says NIOC could push gas production capacity to 60 million cu m/day at any time.
The company is conducting seismic surveys in southwestern Iran, where it recently had two crews at work, and in the Caspain Sea and Persian Gulf, a crew each. It was drilling three exploratory wells in the southwestern area and one in the Persian Gulf.
Manafi says recent discoveries have been mainly gas from lower cretaceous Khame and Permian formations in the southwest. Efforts to increase production from existing reserves concentrate in the same area, mainly gas injection in supergiant Paris, Karanj, Agha Jari, and Ahwaz Asmari fields.
GAS PUSH
A central objective of the petroleum ministry's 5 year plan is increased development and use of Iran's huge gas resource for both export and domestic consumption.
Iran now exports about 3 billion cu m/year of gas to the Soviet Union and is looking for new markets. National Iranian Gas Co. (NIGC) has been studying ways to export gas to Europe via pipeline or LNG shipments. In October, Iran and Romania announced an agreement in principle to lay a pipeline to Europe via Turkey, with Romania taking as much as 12 billion cu m/year of gas.
Inside Iran, a push is under way to expand gas use and distribution.
The 5 year plan envisions total domestic gas consumption of 29.5 billion cu m in 1994-23% in the residential/commercial market, 30% industrial, and 47% power generation.
That would amount to slightly less than a 9.5 billion cu m gain from consumption in 1990, when 22% went to residential/commercial use, 23% to industrial, 45% to power generation, and 10% to exports.
At the beginning of the Iranian revolution in 1979, Iranian gas consumption totaled only 5.6 billion cu m.
By the end of 1994, Iran plans to have 700 large and medium scale industrial plants, 24 power generating plants, and 22,000 vehicles in Tehran and Mashad using gas as fuel. It plans to have gas service in 2.87 million dwellings in 207 cities.
Last year, 940,000 residential and commercial, 900 industrial facilities of all sizes, and 15 power plants used gas as primary energy.
PIPELINE PROJECTS
To expand gas use, NIGC during the planning period is adding 3,000 km of high pressure transmission pipeline and 17,000 km of low pressure distribution line. Last year's totals were 5,800 km of transmission lines and 22,000 km of distribution lines.
Among the major pipeline construction projects planned or under way is the IGAT 11 pipeline from fields in the south, starting at Kangan, to Astara in the North. About 600 km of 56 in. pipeline has been laid between Kangan and Isfahan.
Another 700 km of IGAT 11 is in various stages of completion. A segment from Isfahan to Tehran, with 56 in. pipe, is under construction. Another segment of 56 in. pipe will be laid from Tehran to Ghazvin, and a 48 in. segment will be laid to Rasht.
Much of IGAT II parallels the 1,106 km, 40 and 42 in. IGAT I pipeline, formerly the main export line, which begins at Bidboland.
NIGC is considering addition of two 100,000 hp compressor stations on the IGAT II line.
Also under construction is a 380 km, 30 in. line between Rasht and Neka, which will supply fuels to northern cities and connect southern and northeastern fields. It's an extension of the 800 km, 30 and 36 in. Sarakhs-Neka pipeline.
NIGC plans to extend the 275 km, 30 in. Northwest pipeline, now serving Astara and Ardabil, to Tabriz and Oroumieh.
In another extension project, NIGC will continue the 276 km, 30 in. West pipeline carrying gas to Arak and Hamadan to other provinces in Iran's cold region.
Early this year, NIGC commissioned 93 km of a planned 210 km, 16 in. pipeline from near Tehran to Semnan. The rest is to be finished by 1993.
A 370 km pipeline from west of Isfahan to Yazd is to be laid by 1994. Nominal diameters will be 30 in. to a steel plant at Mubarakeh, 24 in. to Isfahan, and 20 in. to Yazd.
Near the Strait of Hormuz in southern Iran, NIGC is laying a 390 km, 24 in. pipeline to carry gas from Sarkhoon and Qeshm Island fields to a copper plant at Sar Cheshmeh and cities in Kerman Province.
PLANT CONSTRUCTION
Sarkhoon, near Bandar Abbas, is site of one of several gas plants planned or under construction in Iran. The field currently produces 5 million cu m/day for a Bandar Abbas power plant.
A dehydration plant with a capacity of 14 million cu m/day is to be completed in 1993. An existing dehydration plant on Qeshm Island delivers 2 million cu m/day to the Bandar Abbas power plant.
Also in the South, NIGC is completing construction of the Kangan gas treatment plant, which handles nonassociated gas from Kangan and Nar fields. The plant, which will have a capacity of 79 million cu m/day when complete in 1993, delivered 34 million cu/day to the IGAT II pipeline last year.
The Bidboland gas plant in the southwestern oil producing area, rebuilt after being damaged during the Iran/Iraq war, handles as much as 34 million cu m/day of associated sour gas from Agha Jari field. It also dehydrates sweet gas from Marun and Ahwaz fields and can deliver nearly 46 million cu m/day of lean gas to the IGAT I pipeline and 16 in. Shiraz spur line.
In the Khangiran basin of northeastern Iran, the Shahid Hashemi Nejad gas plant, treating 21 million cu m/day of nonassociated sour gas from Mozduran field, is being expanded to handle 28 million cu m/day. Capacity could be increased to 35 million cu m/day if needed.
NIGC is building a dehydration plant with capacity of 6 million cu m/day to handle sweet gas from nearby Gonbadli field. Another field in the area, Shoorijeh, produces 2 million cu m/d of sweet gas for delivery to Mashad.
THE REFINING INDUSTRY
NIOC is rebuilding the huge Abadan refinery and has ambitious refining industry expansion plans. Actual refining capacity currently totals 1.03 million b/sd.
Iraq damaged an estimated 60% of the Abadan plant, which had a prewar capacity of 630,000 b/d, and several times threatened to overtake the site on the contested Shatt al Arab waterway.
Operations restarted at the rate of 130,000 b/d in April 1989, just 7 months after the ceasefire. According to NIOC's Manafi, Abadan now is processing about 280,000 b/d.
Iran's other refineries include two plants in Tehran: Tehran I with capacity of 125,000 b/d and Tehran 11,115,000 b/d. There's also a 4,000 b/d lube oil plant in Tehran.
The Isfahan refining complex has two plants, each with a capacity of 150,000 b/d. NIOC recently has operated its refinery at Tabriz at 120,000 b/d.
Iran's smaller plants, and their actual capacities, are Bakhtaran 25,000 b/d, Shiraz 45,000 b/d, and the Lavan topping plant 20,000 b/d.
NIOC is building a 4,300 b/d lube oil plant at Isfahan and has started work on a 150,000 b/d refinery at Arak. Completion is targeted for April 1993.
NIOC has finished basic design and started construction on a 230,000 b/d export refinery at Bandar Abbas. Start-up is planned for 1994.
The company also plans a 70,000 b/d condensate refinery at Taheri, with start-up targeted for 1995.
PETROCHEMICALS
Iran's National Petrochemical Co., with non-Iranian contractors, is building several plants and adding plastics and synthetic rubbers to a product slate now oriented to fertilizers.
According to A. Rahgozar, president of the company, plans call for an increase in petrochemical output from 3.5 million tons/year in 1988 to 9 million tons/year in 1993.
Counting units that have come on stream since the beginning of the planning period, total petrochemical production capacity now exceeds 6 million tons/year.
Shipments of LPG began this year from the huge Bandar Imam petrochemical complex which Iran had nearly completed in partnership with a Japanese consortium when the revolution halted work.
The plant received heavy damage during the war with Iraq.
Clean-up and reconstruction are well under way, with European contractors handling much of the work. When finished--in 1993 if construction progresses according to plan--the plant will be able to produce 1 00,000 tons/year of low density polyethylene, 60,000 tons/year of high density polyethylene, 100,000 tons/year of polypropylene (50,000 of it surplus), 40,000 tons/year of butadiene rubber, 260,000 tons/year of caustic soda, 150,000 tons/year of polyvinyl chloride, and other chemicals.
In addition, it will have production capacity of 1.9 million tons/year of LPG and 62,000 tons/year of gasoline.
Another major project due on stream in 1993 is at Arak. Products will include as much as 60,000 tons/year each of high density and linear low density polyethylene and 50,000 tons/year of polypropylene.
A second phase will add capacities of 45,000 tons/year of 2-ethyl-hexanol, 105,000 tons/year of ethylene glycol, and others.
Under construction at Tabriz is a plant with capacities including 100,000 tons/year of high density polyethylene, 80,000 tons/year of polystyrene, 30,000 tons/year of phenol, and 15,000 tons/year each of styrene butadiene and SB latex. Completion is due in 1993.
Among other projects, the petrochemical company plans a large fertilizer complex at Khorassan and is building a 160,000 aromatics plant at Isfahan.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
