Fruits of Energy Diplomacy and Smile in Gas Capital of Iran

Nov 2013 was a date in which foreign affairs minister of Iran and 5+1 members hugged each other to show the world that diplomacy is still the power to solve many problems. The initial step to reach JCPOA and consequently sanction removals was taken at this date and thereafter the ways for economic developments in many reals especially oil were paved.

News ID: 76555

Date: 27 September 2017 - 09:59

In fact Hasan Rohani as the 11th president of Islamic Republic of Iran appointed Mr. Zarif as the minister of foreign affairs and Zanganeh as managing director of oil ministry, activated diplomacy and the role of Iran in International equations. This was materialized in the 11th government and part of the sanctions was removed while returning energy diplomacy to Iran, more activities and reconnecting to international markets. In other words, Iran has followed specific targets in the realm of energy since 2013 and appointing Bijan Zanganeh for retaking control of the ministry of oil was the first step to do so. Zanganh who is a well-known character in the field of energy, managed to place Iran within the key and effective countries in the world of energy immediately after nuclear agreement between Iran and 5+1 countries. He prioritized that plans in the early days he stepped in the oil ministry and prioritized the projects that Iran could not complete due to not being able to take the foreign currencies in the borders and hence, the projects faced lack of budget. Prioritizing gave the projects with rapid development the opportunity to move forward sooner than other projects.

Prioritizing was done and developing different phases of South Pars gas field were placed within the top antecedenees in the oil ministry and that is how we witnessed 11 phases to be complete in past three years and half in the biggest shared gas field in the world. In the first place, phase 12 became operational in March 2013 and phases 15 and 16 stepped into operation afterwards. Finally, six phases were utilized and came into operation along with extraction of oil from the oil layer of South Pars oil field which was accomplished on 17 May 2017. In parallel with these phases, four refineries came into operation after sanctions removals and that is how the message of power of Iran in post sanction era was released all over the world. Accomplishing six phases of South Pars was a big achievement of oil industry in Iran and if ministry of foreign affairs could not manage facilitating the process of oil sale and receiving money out of oil from beyond the borders and granting permission for required facilities to enter Iran could not stop gas flow to Qatar territory in South Pars field. Accomplishment of six phases in South Pars (17, 18, 19, 20 21) is remarked as the biggest inauguration in the history of oil in Iran which lets Iran to extract gas as much as Qatar does.

In fact, the development of the phases of South Pars dates back to 10th government in Iran which had planned to complete the phases in 35 months but unfortunately faced the sanctions and consequently were halted to move forward and develop. In the 11th government, through reaching the agreement between Iran and 5+1 (called CPOA), accomplishment of the phases again revived and moved forward with more pace and at the end of 11th government they came into operation. Oil ministry’s managing director regarding the sanctions removals and the impact of it on the gas project developments believes that the facilitated financial transactions and available letter of credits (LC) along with reapplying compressors and importing valves and other necessary supplementaries played a big role in developments. In fact, after JCPOA, the first foreign trade group who stepped into Iran were Germans.

The blocked facilities including 10 Off-Gas compressor and six refrigerant compressors were freed and delivered from Siemens to Iran through the continued negotiations with this team. The above-mentioned facilities consequently were applied in the 12th phase of South Pars. Meanwhile,six more compressors made by Siemens were delivered to be applied in 17 and 18 South Pars phases in March 2016. At the end of first quarter, Phase 17 and 18 along with 20 and 21 enjoyed pipes, jointures and faucets made by well-known European companies. Phases 20 and 21 also took advantage of Europeanmade air blower in sulfur making section. Furthermore, turbo expanders for ethane recovery were other facilities which were ordered to be applied in the phases 19, 20 and 21 that could not be accomplished out of JCPOA. However,the sanctions were not the only reason for the plans not to be accomplished. Pars Oil and gas company’s managing director who is the head in the projects of South Pars’ development phases called completion of the pending projects a hard task and name the situation as “industrial chaos”. In fact, allocating budget to the projects faced problems and we suffered from lack of facilities and machines. In the meanwhile, the projects fell shot to be accomplished under the negative effect of anarchy in working on the national projects in the recent era and especially in South Pars field.

170m2 Increase in Oil and Gas Extraction in South Pars Field

It was the result of interest and love paired with logics and not through money solely,thatIran’s oil minister has been asserted. Love, interest and rationalism resulted phases 17 and 18 to start to produce products after 10 years of getting operational. The development contract of these two phases was signed in 2006 and it was estimated that it will start production after 52 months. However, the project took 10 years to flow gas into the pipes and distribute it all over the country. Also, the development policies hanged with the start of the 11th government and the work in phase 19 (equal with 2standard phases) moved forward rapidly.Policies taken by the 11th government to prioritize the projects and allocate the budgets to prioritized projects in post-sanction era played major role in producing 56.6 m2 in the phase 19. No doubt, phase 19 is the pioneer phase which proved a new and unique record through which three refinery phases started to be operational in less than six months and that is how the phase became pioneer. Phases 20 and 21also started to be operational in a way that enriched sour gas produced through these phases is calculated to be 56m2 per day. In addition, manipulating 6 standard phases resulted in 170m2 increases in gas extraction in South Pars gas field which consequently resulted in retaking Iran’s share in gas fields from its southern neighbor and finally the ability of Iran to export gas to neighboring countries including Iraq, Oman and Afghanistan in the next step. The increase in gas extraction from 285 m2 to 520 m2 in South Pars gas field in Iran in 2013 made what Qatar extracts equal with Iran after 12 years. According to the international laws, both Iran and Qatar are allowed to extract gas as much as they can and due to the sanctions and mismanagements, Qatar was ahead of Iran in this case. Iran and Qatar extracted the same amount of gas in the shared gas field in 2005 and now in 2017 the extraction of gas between these two countries became equal again. Qatar has extracted total 1771 bm2 during these years while Iran managed to extract 1060 bm2 . The extraction of gas from this gas field has created $191 billion for Iran. The other point is that getting phases into operational stage was all accomplished by Iranian contractors who played less strategic role since 1997 when South Pars gas field started to develop. Qolamreza Manuchehri, the deputy of oil and gas ministry of Iran, in regards with empowerment of these Iranian contractors in the development and engineering of South Pars projects stated that the Iranian contractors were trained in South Pars gas field which enabled them to become international. Therefore, oil ministry is to empower Iranian contractors to pave the way for them to take roles in extraction and production in oil industry.

Black Gold Extraction from Gas Capital of Iran

Although South Pars is known as the gas capital of Iran, there is a layer of oil in this field which has been extracted only by Qatar so far. However, the oil layer was exploited by Iran since March 2017 and now Iran extracts 25,000 bpd from this oil layer. To expedite the process of extracting oil in this oil layer, a separate team was formed in 2014 to mount the oil extraction as much as 35,000 bpd. Oil minister of Iran announced that Iran aims to increase oil extraction from this field to 100,000 bpd. Since Iran was behind Qatar in the realm of extraction of oil from the above-mentioned oil layer, it was decided to take advantage of floating oil refinery for the first time in the country. This is when JCPOA helped Iran to place an order for building the floating oil refinery when it was struggling with political and trading restrictions in 2013. After JCPOA, Iran could prioritize the projects through better political and trading atmosphere and one of the best decisions was to change Asian yard for building the floating refinery into Iranian shipbuilding yard. In the meanwhile, contracts to observe and improve the quality of the floating refinery and issuing licenses with European classification societies and related companies would intensify the implementation of projects’ qualities. Higher extraction of oil from this layer helps Iran increase its total oil extraction which has been the subject of many international negotiations. In fact, a country that manages to take a leading role in oil market is the one which produces bigger amount of oil. That is why Zanganeh, the oil and gas minister of Iran, in OPEC conference stated that today oil barrels are the leading characters.

Completion of Value Chain through Taking Advantage of Petrochemical Industry

Apart from the projects and plans mentioned earlier, four petrochemical projects called Kavian2, Takhte Jamshid, Morvarid and Entekhab became operational to materialize the Iranian slogan of completion the value chain for oil and gas in Iran. Iran took the above-mentioned steps in oil and gas projects to develop exploiting hydrocarbon sources along with playing a role in the international markets and createing more revenue through petrochemical industry. In fact, petrochemical industry had proved to be able to take a bigger role in making revenue. During the sanctions, petrochemical products were the ones to improve the statistics related to non-oil exports in Iran and avoid the country’s economy to suffer more damage. Hasan Rohani, the president of Iran, in inauguration ceremony of 4 petrochemical complexes in Assaluyeh emphasized that petrochemical activities have been planned to place within export products and stated that: Iran’s power lies in exporting. The petrochemical industry which experienced its first jump 15 years ago, is preparing itself to experience another jump through taking advantage of capital and cutting edge technology. Oil ministry also has helped this industry by announcing competitive prices for this industry’s feed and consequently encourage whether Iranian or non-Iranian investors to step in. That is how taking South Pars phases into operation promises sustainable gas feed supply for the petrochemical refineries.