- National Iranian Oil Company (NIOC)
- National Iranian Gas Company (NIGC)
- National Petrochemical Company (NPC)
- National Iranian Tanker Company (NITC)
- National Iranian Oil Procurement & Distribution Centre (NIOPDC)
- Exploration
- Production
- Heavy Oil
- Reservoir Engineering
- Refinery Upgrading
- NIOC, Offshore Production Co.
I. STATE-OWNED OIL INDUSTRY IN IRAN
As much as or more than any other state-owned enterprise in the world, Iran's
petroleum industry works as an extension of the government.
Minister of Petroleum Gholamreza Aghazadeh serves as chairman of the three main
companies: National Iranian Oil Co. (NIOC), National Iranian Gas Co.
(NIGC), and National Petrochemical Co. (NPC).
He also is managing director of NIOC, NIGC and NPC have
separate managing directors.
There is no real separation of authority between the petroleum ministry and the
companies; Aghazadeh is the boss. Company budgets are parts of the national
budget.
NIOC handles oil and gas exploration and production, refining, and oil
transportation. NIGC manages gathering, treatment and processing,
transmission, distribution, and exports of gas and gas liquids. NPC
handles petrochemical production, distribution, and exports.
The reorganization, which the government has approved, will create National
Iranian Distribution & Refining Co. (NIRDC) as a subsidiary of
NIOC. The move will separate oil and gas upstream activities from
downstream oil operations.
An apparent motivation for the reorganization is a government plan to partly
privatize the refining industry.
NIOC will retain management of upstream oil and gas operations and
remain
wholly-owned by the government. It has other subsidiaries to handle specific
functions, such as: National Iranian Tanker Company (NITC) and National
Iranian Oil Procurement & Distribution Centre (NIOPDC).
National Iranian Oil Company (NIOC)
With undertaking all operations related to the exploration, production,
transportation, refining, sales and distribution of oil and gas in Iran, the
National Iranian Oil Company (NIOC) was entrusted through the Oil
Nationalization in 1951.
The majority of the producing oilfields are concentrated in southwest Iran,
producing 90 percent of Iran's total production of crude oil. The most
important oilfields are as follows:
Onshore
The southwest fields are Agha Jari, Gachsaran, Ahwaz, Bibi Hakimeh, Ragge Sefid
and Marun. Some minor producing oil fields exist in west, south, northeast and
central Iran as well.
Offshore
Bahregan, Doroud, Salman, Forouzan, Abuzar, Kharg, Lavan and Siri in Persian
Gulf and a few recently explored in the Caspian sea.
Major onshore and offshore gas fields such as North and South Pars,
Khangiran, Nar and Kangan, Aghar Dallan and Sarkhoon ranks Iran second in the
world gas reserves.
National Iranian Gas Company (NIGC)
With over 20 trillion cubic meters of gas reserves Iran is the second richest
country in term of gas reserves in the world. Production of natural gas in
Iran has increased from 12.2 billion cubic meters in 1989 to 29.5 billion cubic
meters in 1993.
Projects
The most important project in this sector, after production of gas in north and
south Pars gas fields in the Persian Gulf, is the 1000 km onshore and 1200 km
offshore Iran-India gas pipeline. USD 15 million is estimated for the
feasibility study which has already started early 1995 and over USD 10 billion
for the construction. Other in hand projects are as follows:
1. Kangan and Nar Natural Gas Refinery, refining and delivering of 80 million
cubic meters of gas per day to the second Trans Iranian pipelines as well as
fixation and extraction of 55,000 barrels of liquid gas for domestic use and
exports.
2. Second Trans Iranian Pipeline Project, 1,365 km of 56" pipeline and the
relevant pressure relay posts.
3. Sarkhun liquid gas project.
4. Gas separation centre of Sarakhs-Neka development project.
5. 380 km 30" pipeline along the Caspian Sea coast.
6. 550 km 30" pipeline northwest of the country.
National Petrochemical Company (NPC)
One year after operation of Shiraz Fertilizer Complex, in 1965, the National
Petrochemical Company (NPC) was established with the aim of expanding the
petrochemical industry in Iran. Iran presently is producing 6 percent of total
production in the Middle East and will reach to over 12.5 by end of 1999.
The National Petrochemical Company's Second Plan comprises five major
development and expansion projects for existing plants, to be handled entirely
by the NPC.
All projects in the Second Plan are open for offers from experienced companies
in such fields as licensing, design, engineering and financing. A number of
downstream, secondary projects will be handed over to the private sector for
implementation. Attached please see tables 3.1 and 3.2 for details on these
projects.
National Iranian Drilling Company (NIDC)
A subsidiary of National Iranian Oil Company (NIOC), owning 40 rigs
including 38 onshore and two offshore rigs, essentially is a drilling
contractor. NIDC is responsible for exploration, development and
delineation drilling of all oil and gas wells in the country.
NIDC benefits of having the equipment and very skilled manpower and
expertise. Recently NIDC has been trying to export its services to the
world market.
NIDC is also willing to cooperate with the Canadian firms in the CIS
countries.
II. OIL IN IRAN Oil Capacity Plans National Iranian Oil Co. claims production capacities of 3.8 million b/d
of crude oil and 66 billion cu m/year of natural gas. It estimates Iran's
crude oil reserves at 92 billion bbl.
Crude oil production capacity amounts to 3.8 million b/d onshore and 400,000
b/d offshore. The government's goal is to restore production capacity to 5
million b/d, 4.5 billion b/d sustainable, and keeping it at that level for five
years.
The next five-year plan calls for the government to spend $16.6 billion from
its general resources and $9 billion from foreign credit on oil and $3.8
billion on natural gas.
At present, National Petroleum Company (NPC) has nine major projects as an area
of possible interest to Canadian companies. Economy Consul has recently
approved a budget for these projects to be completed during the Second
Five-Year Plan. These projects and their budgets are as follows:
Offshore fields targeted for development include Abuzar, Sorush, Hendijan,
Bahregansar, Nowruz, Resalat, Reshadat, Balal, and Sirri.
The Iranian government continues to hold discussions with non-Iranian
companies, which under Iran's constitution cannot hold equity positions in
production but can work under service contracts. NIOC has offered to
negotiate contracts for work in South and North Pars, Balal, Sirri E and A, and
Hengam fields, all offshore. Contract for Sirri after U.S. embargo and
cancellation by CONOCO, the same has been signed with TOTAL of France in the
summer of 1995.
Oil revenue during the five-year plan starting March 21, 1994 is projected at
$64 billion, according to Oil Minister Gholamreza Aqazadeh. The figure is
$13.6 billion lower than earlier reports had suggested, but the minister did
not explain the discrepancy.
The projection is based on oil prices of $14 a barrel, in the early years of
the plan, rising later to USD 16.
III.GAS IN IRAN General Outlook
Questions about oil production capacity in Iran tend to mask the country's huge
potential as a producer of natural gas.
Iran is second only to Russia in gas reserves, which National Iranian Gas
Co. estimates at 29.7 trillion cu m. At current rates of production,
that's a 300 year supply, five times the national life of gas reserves
worldwide.
Among hurdles to Iran's making greater use of its rich endowment of natural gas
are where and how to sell gas not used inside the country. The marketing
logistics problem is common to other Middle East holders of gas reserves and a
reason behind the recent proliferation of proposals for pipeline and liquefied
natural gas schemes targeting Europe and India.
The country's huge gas reserves, strategic location, and existing transport
infrastructure give it the potential to be a major gas trader.
Despite budget troubles, work on the Iranian gas system has progressed steadily
in recent years, in part to restore oil production capacity that is heavily
dependent on gas lift.
But Iranian officials are discussing schemes for exporting gas, one of them
taking advantage of Iran's existing pipelines.
There have been numerous reports about progress in negotiations for part of
that scheme, a pipeline from Iran to India. And the government has agreed with
Turkmenistan on the route of a pipeline across Iran to carry as much as 1,085
tcf/year of Turkmen gas to Europe and Turkey.
Gas Development
Iran consumes 29 billion cu m/year of gas internally, uses 20 billion cu m/year
for reinjection programs, and exports 500 million cu m/year. Gas losses and
flaring account for the balance against production of 60 billion cu m/year.
Most associated gas production comes from oilfields in the Khozestan area,
averaging 29.6 million cu m/day according to National Iranian Gas Co.
(NIGC) Other gas production, most non-associated, is 21.5 million of m/day
from the Kangan area, 17.4 million cu m/day from Sarakhs, and million cu m/day
from Hormozgan.
In related work, NIGC plans the year to commission a processing plant at
Sarkhon in southern Iran, with capacity of 15 million cu m/day. The plant will
handle production from Sarkhon field and fields on the island of Qeshm.
Other gas plants and their capacities are Bidboland 23 million m/day, Khangiran
21 million m/day (eventually to increase to million cu m/day), and Kangan
million cu m/day (eventually increase to 80 million cu m/day).
Iranian gas proceeding capacity is to reach 178 million m/day by the end of the
second five-year plan in 1998-99, including planned expansions and first phase
development of South Pars field.
The extension of gas network for domestic consumption will increase under the
Second Plan by extending gas links to 750,000 new subscribers. Thus 1,800 new
households will have the benefit of gas consumption. In addition, the gas
refining capacity will increase from 126 million cubic meters a day to 174
million cubic meters a day, under the Second Development Plan. New gas
projects include the construction of the third gas pipeline from Kangan
Refinery to the north of the country; construction of at least four
pressure-boosting stations along the pipeline network, completion and
utilization of Sarkhoun and Bid-boland refineries, and construction of an
underground gas reservoir.
Gas Injection
Gas injection in Iran's oilfields is scheduled to nearly double in the next
five-year plan.
Installed injection capacity totals 2.2 billion scfd in Gachsaran, Rageh Sefid,
Marun, and Karanj oilfields. All the fields with gas injection are onshore.
Iran also has installed 11 NGL units to handle associated gas, with related gas
gathering and booster stations having combined capacities of 11 MMcfd.
A late 1993 NIOC report listed these gas projects, and their capacities, as
under way:
o Karanj gas injection, second phase, 230 MMscfd.
o Parsi gas injection, 400 MMscfd.
o Ramshir gas injection, 76 MMscfd.
o Bibi Hakimeh gas injection, 285 MMscfd.
o Kupal gas injection, 150 MMscfd.
o Gachsaran gas injection, fifth phase, 750 MMscfd (apparently the field
total).
o Pazanan gas recycling, 750 MMscfd.
o Binak gas gathering, 130 MMscfd.
o Abe-Taimouir associated gas gathering, 25 MMscfd.
o Mansuri associated gas gathering, 88 MMscfd.
o Ahwaz Bangestan associated gas gathering, 60 MMscfd.
o Agar and Dalan gas field development, 1.2 MMscfd.
o Parsi field development, 4.2 billion scfd.
o Liquids production units at nine locations, 120,000 b/d.
The planned projects would add about 2.4 billion cfd to total gas injection
capacity at Marun, Gachsaran, Karanj, Parsi, and other oilfields by 1998-99.
Iran's second five-year plan, presented to the parliament last December, calls
for the volume of gas delivered to NIGC for domestic use to increase
from 29.2 billion cu m/year in 1993-94 to 50.9 billion cu m/year in 1995-99
(Second Five-Year Plan). The gas share of total hydrocarbon primary fuel use
in Iran will increase to 41.5 % from 33% during the period.
During the Second Plan period, gas injections will rise to 130 million cubic
meters a day, registering a 40 percent increase. In order to achieve this
target, gas injections to five oil fields, will be undertaken. In addition,
reconstruction and renovation relating to 14 oil fields, development of Sarakhs
and South Pars gas fields, completion of Acharo-dalan project and gas
collection schemes relating to Bangestan and development of four new offshore
oil fields are planned.
IV. PIPELINE PROJECTS Proposal for Exports
Beyond a number of relatively short and cheap export extensions from pipe
already in the ground, Iran's proposal quickly becomes more ambitious. It
requires major pipeline construction to complete the loop inside Iran and to
connect the network to distant markets.
The proposal includes a 600-700 km, 56 in. pipeline along the Persian Gulf
coast between Kangan and Bandar Abbas at the strait of Hormuz. The line could
receive gas from Aghar, Bandobast, Varavi, Lamand, Goshu, Namaki, and Sarkhun
fields onshore and North and South Parks fields offshore. The existing
pipeline from Salakah and Gavarzin fields on Qeshm Island also could feed the
long line.
A leg northward from near Bandar Abbas is under construction now and could
serve as part of an eastern, north-south segment of the loop. The 430km, 24
in. pipeline will be completed this year, runs from Sarkham to Sar Cheshmeh and
eventually will extend to Kerman.
A 1,100 km, 30 in. pipeline then would be needed to complete the eastern
segment and close the Iranian loop. Long export lines would branch off the
loop. There is a mention of the proposed export line to India, which starts at
Bandar Abbas and follows the coast, with a 56 in. pipeline running 1000 km to
the border with Pakistan and a 42-52 in. line continuing offshore into deep
waters of Oman Sea, along the Pakistan coast.
Further suggestions are pipeline links to the system from Oman and Qatar, both
of which are discussing export schemes for their natural gas. If completed,
the Iranian loop and export outlets could provide those and other Middle
Eastern countries as well as gas producers in Central Asia access to growing
markets both in Europe, by way of the CIS, and India.
The project's main hurdle is political uncertainty, which raises doubts about
financing, especially for the long export pipelines.
V. PETROCHEMICALS IN IRAN Needs
Ahmad Rahgozar, head of Iran's state-owned National Petrochemical Co.
(NPC), says the country needs foreign financing and expertise to develop
its petrochemical industry. Iran imports about $3 billion/year worth of
petrochemicals, even though it raised domestic output more than tenfold since
1989, to five million mt/year. Ten projects under construction will raise
output to 7.1 million mt/year. New projects for a second plan include olefins
plants in Isfahan and Bandar Khomeini, a polymers plant in Isfahan, and
expansion of facilities on Kharg Island.
Petrochemicals Plan
The government considers two operations for investing $4.6 billion in the
petrochemical industry during the second five-year plan. One option involves
an investment of $2,9 billion by foreign and local private investors, while the
other limits private investment to $800 million by local investors.
The investment plans were disclosed by National Petrochemical Company
(NPC) chairman Ahmad Rahgoza, to start in March 1995, a year behind
schedule.
In the first five-year plan, ended March 1994, petrochemical projects had been
set aside for the private sector, but these did not materialize because local
banks did not co-operate. The second plan calls for local private-sector
investment in 20 projects, and since local investors do not have the necessary
funds, foreign investment will be required.
Five Projects
The National Petrochemical Company (NPC) has listed five big plants as
priority projects during the second five-year plan starting March 1995. The
new facilities will require a government investment of $1,8 billion.
The five projects are a methyl tertiary butyl either (MTBE) plant in the south
to produce the additive to help produce 500,000 tonnes of unleaded gasoline a
year, the doubling of the annual capacity of the olefin unit of the Bandar Imam
petrochemical complex (BIPC) to 530,000 tonnes; a methanol unit on Kharg
island, with an annual capacity of 600,000 tonnes, and two plastic projects.
On existing projects, the first phase of the Khorsssan fertilizer complex and
the Tabriz petrochemical complex became operational in March 1995.
The Bandar Khomeini complex will start exporting 500,000 tonnes of liquefied
petroleum gas (LPG) a year to South Korea in 1995, Rahgozar said. The exports,
under a deal with the South Korean firm Daewoo, are worth $65 million a
year and could be doubled if the two sides agree.
Economy and Finance Minister Morteza Mohammadkhan has projected an unexpectedly
low figure of USD 460 million for hard currency needs during the second
five-year plan, starting March 1995.
VI. IRAN'S INVESTMENT PLANS $30 Billion Plan
The Oil Ministry is proposing to invest $30 billion, including $9 billion in
foreign credits, in the oil and gas industry over the next five years. Iran
wants to install sustainable crude production capacity of 4.5 million barrels a
day (b/d) and preserve that level during the five-year plan which started March
21, 1994.
National Iranian Oil Company (NIOC) wants $16,6 billion of government
funds and $9 billion in foreign credits to be invested in oil, and a further
$3,8 billion in government funds to be spent on the gas sector.
Iran is also seeking to reach service contracts in which foreign companies
would help explore and develop fields. Foreign participation will initially be
confined to offshore fields.
Foreign Investment
Iran is trying to encourage private foreign investment in new industrial
ventures. The Ministry of Finance has identified areas in which private
foreign investment will be favourably considered. The list includes investment
in petrochemical projects.
Iran permits foreign equity participation to a maximum of 49 percent. Once
approved, the investment is entitled to the protections and privileges
available under the Law Concerning the Attraction and Protection of Foreign
Investments in Iran.
The agency that sanctions foreign investment is the Organization for Foreign
Investment, Economic and Technical Assistance (OIETA), a division of the
Ministry of Economic Affairs and Finance. OIETA requires the following:
- a completed application in the prescribed form;
- a technical and financial feasibility study of the project;
- copies of the proposed shareholder's agreement between the foreign and the
local Iranian investor, in draft form;
- where foreign currency financing is involved, copies of the proposed
financing agreement in draft form, or letters of commitment setting out
financing terms;
- copies of proposed product purchase agreements in draft form, or letters of
commitment setting out the terms of product purchase arrangements, if any;
- copies of the proposed articles of association of the Iranian company in
draft form;
- copies of all other proposed agreements with the foreign investor in draft
form, including particularly those relating to transfer of technology and
provision of management and other services which the foreign investor
undertakes to provide; and
- the foreign investor's articles of association and accounts for the past
three years.
VII.OPPORTUNITIES FOR CANADIAN SUPPLIERS AND SERVICE COMPANIES Exploration National Iranian Oil Company (NIOC) is responsible for all exploration
activities in Iran. This will include expanded seismic and drilling activity,
which will provide both equipment supply and service opportunities.
NIOC will increasingly be interested in purchasing software, related
data interpretation and processing equipment and associated training.
Production
Refurbishment, reconditioning, replacement and upgrading of production
equipment are planned over the following five years to increase production
capacity.
Heavy Oil NIOC has identified two heavy oil fields (API 7 to 15 in the F-structure
and Mond field) which need to be developed. Total estimated reserves of these
fields are 40 billion barrels in a fractured limestone formation. Development
of these fields could be by private companies operating on a contract basis
with repayment by crude oil produced there or by other buy-back
arrangements.
Reservoir Engineering
As Iranian oilfields mature, maximization of production through reservoir
engineering will be increasingly important. NIOC is interested in
developing sophisticated reservoir engineering/modelling technology and will
require appropriate software programs and related equipment.
Refinery Upgrading
Although all NIOC refineries, with the exception of Abadan, are
operating above nominal capacity, dated control and related systems have
reduced efficiency. Replacement and upgrading of instrumentation and
distribution control systems are expected to occur over the next five years.
Other areas of interest range from the installation of naphtha conversion to
middle distillates and the introduction of hydro cracking technologies.
NIOC, OFFSHORE PRODUCTION CO.
The company is ready to absorb up to USD $6 billion foreign investments or
financed credits on the basis of buy back agreement which includes exploration
and production of oil and gas in Persian Gulf the Caspian Sea as well as
construction of new platforms.
