Iran, Oil Products Exporter

Iran’s daily growing need for fuel in the household, industrial and transport sectors underscores the need for self-sufficiency in fuel production in the country which holds the title of top holder of crude oil and natural gas reserves. To that effect, refining industry has become a vital one at Iran’s Ministry of Petroleum, given its contribution to the distribution of petroleum products. 

During years of international sanctions on Iran, the refining industry tried its best to take advantage of the sanctions for acquiring technical know-how. Construction and startup of advanced refining units in refinery development projects and the manufacturing refinery equipment and some catalysts required in the refining industry are examples of this success.

After Iran’s nuclear agreement with six world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA), took effect for the sanctions to be lifted, Iran’s petroleum industry is waiting for investment under new contracts so that the country’s refining sector would experience prosperity.

Growth in Oil Products Exports

Imposition of sanctions on the trade of Iran’s oil products resulted in the loss of many opportunities for investment in Iran. Today, with the development of gas industry and replacement of gas with oil products in household and industrial sectors the freed-up capacities of oil products could be used for boosting exports.

Guaranteeing domestic energy supply security and sustainable presence in regional and international markets, increasing value-added through completing value chain and raising the level of oil products’ exports, diversifying methods of selling, achieving a standing at the same level of top refining companies in the world for the purpose of sustained presence in regional and international markets, participation of the private sector, development of bunkering industry and enforcing “quality” as a requirement in fuel supply to vessels and convergence with energy producers and consumers with a view to creating effective and constructive interaction for the resumption of swap of oil products (gasoil, fuel oil and liquefied petroleum gas) from northern neighbors to Iraq and Afghanistan, expansion of gas supply network for power plants and remote areas in Iran and the possibility of more export of liquid petroleum products are among plans pursued by Iran’s refining industry for enhancing oil products’ exports.

With an increase in the surplus capacity of fuel oil, liquefied petroleum gas and gasoil production, the volume of export of petroleum products has seen a significant increase since March. Iran has been exporting 400,000 b/d of oil products including gasoil, fuel oil, liquefied petroleum gas and other types of fuel oil to the world markets.

Since the start of the current Iranian calendar year (21 March 2016), the volume of Iran’s gasoil exports has increased from 3.5 ml/d last calendar year to 13 ml/d, showing more than 430% growth.

Given oil products consumption management plans in Iran and implementation of survey-based gasoil distribution scheme, the decline in consumption of this product is widely expected to continue. In case of materialization of plans under way, there is potential in Iran for exporting 20 ml/d of gasoil.

Iran has also turned into one of the leading exporters of fuel oil in the world. Official figures show that Iran is exporting some 50 ml/d of this product to regional and global markets.

Meantime, an increase in the surplus capacity of fuel oil production and allocation of the bulk of this fuel to bunkering centers in Iran, in the Persian Gulf region, can earn Iran big revenues in foreign currency and expand the market for supplying fuel to ships and vessels passing through the strategic shipment lane Strait of Hormuz which connects the Persian Gulf to the Sea of Oman. In addition to economic benefits, it would bring international and sovereignty advantages for the Islamic Republic of Iran.

Liquefied petroleum gas is another product exported from oil refineries in Iran. With the expansion of rural and urban gas distribution networks in Iran, a new capacity has been created for the export of this product which is highly demanded in the market.

Since the start of the current calendar year, 640 tons of liquefied petroleum gas a day has been exported to neighboring countries and world markets from Iran through both land and sea routes.

This big achievement has been made under the 11th administration and thanks to logical policies pursued by the Iranian petroleum ministry. After 110 years, Iran has become an exporter of oil products. Iran was importing petroleum products in 2014 and early 2015.

Gasoil Exports Record Smashed

Iran joined the exporters of petroleum products after starting to export diverse oil products including gasoil, liquefied petroleum gas and fuel oil.

A review of data on the consumption of oil products this year shows that the consumption of the main four oil products – gasoil, liquefied petroleum gas, kerosene and fuel oil – has been on the decline in the country. Liquefied petroleum gas consumption has on average declined 1.5% a day to reach 5,290 tons.

Gasoil average daily consumption has dropped more than 9% to 72.5 million liters, down 7 million liters a day year-on-year.

Over the same period of time, kerosene consumption fell 7.5% to 3.5 ml/d, while fuel oil has registered a 65.4% decline to 9.1 ml/d.

Iran used to import gasoil. But thanks to reasonable policies adopted by the petroleum ministry and changes in the fuel supply system like switching from liquid fuel to natural gas, Iran has become an exporter of oil products. That breakthrough has been registered under the administration of President Hassan Rouhani. 

Countdown for Persian Gulf Star Refinery 

A countdown has been launched for the startup of Persian Gulf Star Refinery, the largest gas condensate refinery under construction in the Middle East. This treatment facility would put an end Iran’s need for importing gasoline. 

Persian Gulf Star Refinery has the capacity to produce 36 ml/d of gasoline and 14 ml/d of gasoline in compliance with euro-4 standards. Besides these two strategic oil products, the refinery would also produce 2,000 tons a day of liquefied petroleum gas, 3 ml/d of aviation fuel (ATK and JP4) and 13 tons a day of sulfur. 

At present, the physical progress of construction of the refinery has reached 86%, while the first phase of this giant refining project in Iran is more than 90% complete.

According to timeframe set for this refinery, the distillation unit of this facility is expected to become operational this year. Other processing units are expected to come online next year. In the first phase, the refinery would be producing 12 ml/d of euro-4 gasoline.

Euro-4 Gasoline Trial Run in 7 Cities

Distribution of euro-4 gasoline has started in seven new cities. A total of 22 million liters of euro-4 gasoline is being distributed in eight big cities now.

Shahrokh Khosravani, a senior refining and distribution manager, says the Rouhani administration has made plans over the past three years for maximum distribution of euro-4 gasoline. 

“On this basis, we are already distributing euro-4 gasoline in eight big cities,” he said.

Noting that Iran’s euro-4 gasoline production capacity has reached 26.3 ml/d, Khosravani said: “Currently, 22 ml/d of euro-4 gasoline is being distributed in eight big cities in the country.”

He announced plans for the distribution of euro-4 gasoline in seven other cities in Iran, saying: “At present, euro-4 gasoline is being distributed in several other cities on a trial basis. After stabilization, the possibility of distribution in these cities will be provided.”

Priorities in Refining and Distribution

Shahaboddin Metaji, director for incorporate planning at National Iranian Oil Refining and Distribution Company (NIORDC), said a priority for NIORDC following the implementation of JCPOA last January is to turn Jask area into an energy-based industrial zone.

“Our first plan is to construct a crude oil storage tank which would be financed by the private sector. In the first stage, 10 million barrels of crude oil will be stored to be exported,” he said. “We are waiting for attraction of investment in this sector.”

“Besides this project, a 1,000-kilometer pipeline, 42 inches in diameter, is under construction at a cost of $1.2 billion. The project is funded by the government and its conceptual design, and its fundamental design is in the stage of selecting a consultant. The oil storage tanks are estimated to cost $250 million. The next project will be to establish an industrial economic zone in Jask that will start with the construction of oil storage facilities and oil terminal,” said Metaji.

Construction of a refining facility and relocation of Bahman Ganou refinery from Bandar Abbas to Jask constitute another project which has so far won the approval of investor. The priority must be given to the development of existing refineries because they are potentially able to supply more oil products at lower costs and by using less amount of crude oil. Furthermore, products which are no longer used on the world could be avoided. That would be in compliance with a law on reduction of liquid fuel consumption at refineries.

The next priority, Metaji said, would be construction of new refineries. The current refineries must be used for the production of 300,000 b/d of final products. 

“At present, we have a nearly 500,000 b/d of fuel oil production that we can convert to products of high quality,” he added.

Refining Potential Up

According to a plan for the renovation and optimization of refining systems and equipment under Iran’s 5th Five-Year Economic Development Plan (2010-2015), aging equipment at Abadan oil refinery was supposed to be replaced with new ones. New systems would be also installed to supply products of high quality. This project would need around $3 billion and if this project is implemented this refinery would be producing euro-5 products and instead fuel oil production at the facility would decline. 

In the current Iranian calendar year, $650 million has been earmarked for this project. Therefore, the projects related to the optimization of products have already started. This budget allocation will first serve the quality of gasoil and then other units will be served.

At Bandar Abbas refinery too, a project is under way for improving the quality of products. Gasoline production, gasoil and kerosene desulfurization units are projected to come online by next March when the Iranian calendar year ends.

In case obstacles to the entry of equipment into the project are removed, commissioning will start. For the project to be profitable, foreign investment would be needed. Quality improvement at refineries requires between $2bn and $3bn, which applies to all refineries.

Iran Refining Industry to Cross Frontiers

In short, one can say that in light of positive conditions currently available, the country’s refining and distribution industry plans to sketch out a reliable and precise roadmap in a bid to open bright horizons to this industry for the final purpose of boosting presence in international markets and taking effective steps for the development of domestic and foreign investment in the expansion of existing refineries and building new facilities.

Expansion of energy interaction with energy-rich countries in the Caspian Sea, Persian Gulf and other regions in the world, construction of new refineries in the country with priority for private sector investment, construction of refinery in foreign countries or participation in refineries built abroad by supplying crude oil and gas condensate as feedstock, increasing gas condensate feedstock, upgrading refineries in order to produce products of higher value and reducing fuel oil production in compliance with Article 59 of the law on reforming consumption pattern, laying out pipelines for transmitting oil products to neighboring countries in order to reduce land and sea transport costs for transmission, establishing joint storage facilities for oil products in other countries by benefiting from the new refining capacities and presence in other markets through opening representative offices for the purpose of marketing petroleum products and following up on projects and bilateral cooperation are among objectives envisaged for Iran’s refining industry.

  

Courtesy of Iran Petroleum