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    Greater Caspian Weekly Overview - November 6th



Weekly report on gas matters concerning the Caspian littoral states.

by: Ilham

Posted in:

Weekly Overviews, TAPI, Trans-Anatolian Gas Pipeline (TANAP) , Azerbaijan, Germany, Russia, Turkey, Turkmenistan, Iran, Caspian Focus

Greater Caspian Weekly Overview - November 6th

Iran’s petrochemical production to hit 47M tons

Iran’s petrochemical production is forecast to reach 47 million tons by the end of the current Iranian fiscal year (March 2016). 

The new capacity will be materialized by supplying ethane from phases 15 and 16 of the South Pars gas field to petrochemical units, Shana news agency quoted Ali-Mohammad Bassaqzadeh, the control manager of Iran’s National Petrochemical Company (NPC), on November 3rd. 

Over the past three months, these phases supplied 10 tons of ethane per hour to petrochemical complexes, he said, adding that the volume will be increased to 70 tons per hour. 

The NPC director said that overhauling operations at petrochemical complexes are complete by 70 percent.

In addition, there is the expectation that by the end of the current Iranian year, petrochemical complexes would reach 81 percent of their nominal capacity, up 9 percent year-on-year.

The country produced 44.5 million tons of petrochemicals in the past Iranian calendar year, with over 10 percent rise from 40.5 million tons in its preceding year. 

Once the semi-finished petrochemical projects are completed and a number of planned petrochemical units come on stream, the country’s petrochemical output will be increased to 180 million tons per year.  

Germany, Turkey to partake in building petrochem units in Iran’s Maku Free Zone

German and Turkish companies have announced readiness to invest in building petrochemical units in Iran’s Maku Free Zone.

Maku Free Zone Organization’s managing director Hossein Forouzan said a German delegation will travel to Iran in the upcoming weeks. Moreover, Turkish firms have voiced readiness to invest in the free zone’s project, and the establishment of petrochemical units will be of high priority, Shana news agency reported on November 3rd.

Thanks to its suitable infrastructures, Maku Free Zone can attract new investments for building petrochemical complexes, he added.

Javad Rajabzadeh, deputy managing director of Maku Free Zone Organization said in August that a large petrochemical complex will be established in a joint venture by Iranian and foreign investors in the free zone at a cost of $800 million plus 13 trillion rials (about $370 million).

Some 165 hectares area of land has been allocated to the project. The complex will be built over the course of three years.

The project will create one thousand direct jobs and four thousand indirect jobs, he noted.

The complex will produce 519,000 tons of propylene, 143,000 tons of unrefined gasoline, and 54,000 tons of LPG per year.

Maku Free Zone, measuring 500,000 hectares in area, is the largest free trade and industrial zone in Iran, located in the northwestern West Azarbaijan province.

Iran hopes to find new gas reserves in Caspian Sea

Ali Osouli, the managing director of Iran’s Khazar Oil Company, says gas exploration operations will start in the near future in Golestan province, neighboring the Caspian Sea.

“Over the past years, exploration operations were conducted in northern part of the country, but were unfortunately unsuccessful. For example, three wells were dug in the 1990s,” Shana news agency quoted Osouli as saying on November 3rd.

“As exploration operations are complicated, a consortium comprising Shell and some other companies and Khazar Oil Company, conducted studies and identified 46 blocks in this field.”

“In 2010, exploration drilling started in one of the blocks, however, due to the sanctions we could not reach the oil layer, which is known as Sardar-e Jangal field,” he explained.

An exploratory well is projected to drill down 2200-2400 meters depth, he said, expressing hope that the drilling operations would be implemented by the end of the current Iranian fiscal year (March 2016).

Six potential blocks have been identified for drilling, Osouli said, adding that the blocks were selected considering limitations in resources and the probability of being associated with Turkmenistan.

Iran moves toward developing PVM technology

Iran is working on the development of the Propylene via Methanol (PVM) technology, which is used for converting methanol into propylene. 

Mohammad Hassan Peyvandi, the deputy head of the National Petrochemical Company (NPC) of Iran, said “we have focused for two years on acquiring the PVM technology. In this line, the Petrochemical Research and Technology Company managed to gain the technology,” Shana news agency reported on November 1st.

The company has successfully launched a demonstration plant using this technology in Mahshahr, he said, adding that the plant is producing propylene polymer grade from methanol.

NPC has developed an engineering process for producing 120,000 tons of propylene from methanol, he noted.

“Using foreign finance, we will try to start detailed engineering and executive operations of the propylene production unit utilizing one hundred percent Iranian technology.”

Some 5.5 million tons of ethylene will be produced by the next Iranian fiscal year, which will begin on March 21, 2016, while less than one million tons of propylene is being produced, while downstream industries are thirsty of the substance, he explained.

Statistics say some 5 million tons of methanol is produced in the country annually, which will rise to 24 million tons by the next five years.

Iran to allocate 14.5% of gas revenues to NIOC

Iran will allocate 14.5 percent of revenues through selling natural gas to the National Iranian Oil Company (NIOC).

Abdol-Mohammad Delparish, the director of consolidated planning at NIOC, said according to the law, 14.5 percent of gas income (based on volume and base price) will be allocated to NIOC as of the next Iranian fiscal year (March 21, 2016), Shana news agency reported on November 1st.

For the time being, NIOC has a small share of gas revenues, he said, adding that allocating such a share of income will be helpful in financing development projects, considering the fall in oil price and the decrease in NIOC’s budget.

Iran produces 700 million cubic meters per day (mcm/d) of sour gas and 550 million cubic meters of sweetened gas per day. Base price of gas is 3 cent per cubic meter.

Overall, Iranian gas production (including flared and recycled gas) is expected to reach 1,000 to 1,100 mcm/d (365 to 400 bcm/y) by 2020. Currently, Iran has a capacity to produce 680 mcm/d (about 248 bcm/y) of gas (including flared and recycled gas), while its sweet gas output capacity is about 550 mcm/d (200 bcm/y). Around 300 mcm/d (109.5 bcm/y) of Iran's total sweet gas production came from South Pars and this volume is expected to double by 2020.

Daily gas consumption hits a record 565MCM in Iran

Gas consumption in Iran hit the record high of 565 million cubic meters per day, said Majid Bojarzadeh, the spokesman of the National Iranian Gas Company. 

Referring to the entrance of a new cold wave to the country, he said that the recent sharp plunge of temperature and heavy precipitations have caused a surge in gas consumption by households, as well as industrial and commercial users, Mehr news agency reported on November 3rd.

Gas consumption, including exports to Turkey, amounted to 565mcm on November 2, he said, adding that some 140mcm of gas is being supplied to power plants per day.

Moreover, 95mcm of gas is being supplied to industrial units and petrochemical complexes per day, while the consumption by households has increased by 50mcm.

He went on to say that the export of gas to Turkey is underway normally.

Iran exports about 9.7 bcm/y of gas to Turkey. He also put gas consumption by power plants since the beginning of the current Iranian fiscal year at 42.5 billion cubic meters, compared to 36.5bcm for the same period in the past year.

Gas consumption in Iran amounted to 416mcm, 422.1mcm, and 471.4mcm per day on average in Iranian fiscal year 1391 (March 2012-March 2013), 1392 (March 2013-March 2014), and 1393 (March 2014-March 2015), according to National Iranian Gas Company.

Ahmad Tavakkoli, an official with the Iranian Energy Ministry, has said that residential, commercial, and administrative buildings account for 50 percent of gas consumption in the country.

The country increased gas supply to power plants by 33.6 percent to about 49 billion cubic meters per annum (bcm/a) and decreased fuel oil and gasoline consumption by 32.6 percent to 28.1 million liters per day and 24.2 percent to 25.3 million liters per day in last fiscal year.

Iran is to increase natural gas delivery to power plants to 57 bcm in current year. 

Shell ready to establish LNG plant in Iran

Royal Dutch Shell is ready to establish a new liquefied natural gas (LNG) plant in Iran once sanctions on the country are lifted.

Amir Hossein Zamaninia, the Iranian deputy oil minister for international and commercial affairs, said British companies are very willing to work with Iran in various sectors of the oil industry.

He referred to the presence of Shell officials in the planned conference for introducing Iran’s new model of oil contracts in Tehran, adding that negotiations for collecting oil dues of Shell are underway, Shana news agency reported on November 3.

Rokneddin Javadi, the head of the National Iranian Oil Company (NIOC) sees Iran joining the elite club of LNG exporters in the next two years.

The first Iranian LNG unit has yet to come on stream. The project is being implemented with 60 percent physical progress, pending the removal of sanctions to import necessary equipment and structures.

This plant’s capacity is projected to be 10.5 million tons per year, earning the country more than $7 billion annually.

Iran LNG Company filed a lawsuit with an international tribunal against EU in March 2014 for its ban on selling LNG plant equipments to Iran.

Marzieh Shahdaee, the director of projects at the National Petrochemical Company of Iran, said November 2 that Italian and German firms began releasing blocked petrochemical equipment destined for Iran in recent months. “The companies are cooperating and, so far, some blocked equipment has been handed over to Iran,” Shahdaee said.

She further noted that after the sanctions imposed upon the Islamic Republic intensified, some of the equipment purchased for petrochemical projects in Iran was seized, after which sellers refrained from delivering equipment to Tehran.

Following the recently signed nuclear agreement, the companies started releasing the detained equipment, she added.

Iran signed an agreement a decade ago with Linde AG a decade ago. However the company refused to complete the plant and deliver equipment due to international sanctions.

Iran willing to sell Europe gas, even ‘with no economic justification’

A top Iranian official says the country is willing to sell gas to Europe, even if doing so has no economic justification.

“That is due to the fact that we want to use economic relations to create some political cohesion,” Deputy Oil Minister in International Affairs Amir Hossein Zamaninia said, Iran’s official IRAN newspaper reported November 4.

Currently, Japan, China, and the countries south of the Persian Gulf, except for Qatar, are seeking Iranian gas, he said.

European countries, too, always display interest in buying gas from Iran, he said

“This is while, according to our calculations, Europe is importing more gas than it needs, therefore the price of gas on the continent is lower,” noted Zamaninia.

“But we want to have relations, not only with the southern Persian Gulf littoral countries, but with Western countries, as well. When economic relations grow, political disagreements diminish and that reduces the chances of having the sanctions brought back,” he added.

Iran is studying possible ways to export gas to Europe, including through the Trans-Anatolian pipelines (TANAP), as well as their operational and economic conditions.

Iran has the long-term potential to become one of the world's top gas producers, thanks to its 34 trillion cubic meters of natural gas reserves, which is about 18 percent of the world's total.

Iran's current raw gas output stands at 660 million cubic meters per day (mcm/d), but it is planning to increase this figure to 1,100 mcm/d by 2019.


Azerbaijan considering development of Shah Deniz Stage 3

BP Company, operator of Azerbaijan's biggest gas field Shah Deniz is going to cooperate with Azerbaijan’s state oil company SOCAR on the third phase of development of this field, BP's vice president for Southern Gas Corridor, Joe Murphy said on November 4th.

“We wants to implement the third phase of Shah Deniz,” he said.

Shah Deniz's reserves are estimated at 1.2 trillion cubic meters of gas and the first phase of that was inaugurated in 2007 and produces 29.5 mcm/d or 10.8 bcm/y. Azerbaijan is preparing to inaugurate the second phase in 2019 to add 16 bcm/y of gas production to be deliver to Turkey and Europe.

The shareholders in the contract are: BP, operator (28.8 percent), AzSD (10 percent), SGC Upstream (6.7 percent), Petronas (15.5 percent), Lukoil (10 percent), NICO (10 percent) and TPAO (19 percent).

Turkish company receives new order from TANAP consortium

Turkey’s Borusan Mannesmann company has received an order from the consortium for constructing the Trans-Anatolian Pipeline (TANAP) for additional pipes valued at $80 million, said the company.

Thus the volume of TANAP consortium’s orders in Borusan Mannesmann totaled $500 million.

It was earlier reported that Turkish Borusan Mannesmann, Noksel Celik Boru and Erciyas Celik Boru companies will supply pipes for the TANAP project.

TANAP project envisages transportation of gas of Azerbaijan’s Shah Deniz field from Georgian-Turkish border to the western borders of Turkey. The project’s total cost is estimated at $10 billion.

The initial capacity of TANAP pipeline is expected to reach 16 billion cubic meters of gas per year. Around six billion cubic meters of this gas will be delivered to Turkey and the remaining volume will be supplied to Europe.

Turkey will get gas in 2018 and after completing the construction of Trans-Adriatic Pipeline (TAP), it will be delivered to Europe in early 2020.

BP became one of the shareholders of the pipeline in accordance with the agreement signed with the TANAP consortium in April.

Currently, the shareholders of TANAP are: the State Oil Company of Azerbaijan (SOCAR) – 58 percent, Botas – 30 percent and BP – 12 percent.

SOCAR names conditions for Russian gas supply to Azerbaijan

Russian gas supply to Azerbaijan depends on its price, a source in the State Oil Company of Azerbaijan told Trend on November 5th.

Earlier, Azerbaijan Methanol Company (AzMeCo) signed a contract with Russian Gazprom for gas supply to the methanol plant, but had to suspend it, since it was unprofitable, according to the source.

“For this reason and taking into account the ongoing processes on world markets, we are considering how will the Russian gas supply be beneficial for us,” said the source.

“If it is not beneficial, we won’t buy gas,” said the company’s representative. “Azerbaijan has sufficient gas reserve and we are ready to buy additional volumes of gas only at reasonable prices.”

The source said it is not about refusing from Russian gas, adding that the negotiations on this issue are underway.

AzMeCo was planning to purchase up to 2 billion cubic meters of gas per year from Russia’s Gazprom Export LLC, according to the earlier signed contract. The natural gas supply was supposed to ensure the guaranteed loading of 100 percent of facilities in Garadagh methanol plant.

Earlier, SOCAR’s president Rovnag Abdullayev said that the company and Gazprom will start implementing swap transactions on Russian gas supply to Azerbaijan soon.

“In total, we are talking about supplying around 2 billion cubic meters of gas per year,” he said.

Rovnag Abdullayev noted that in the future, this gas will be used for supplying Russia’s southern regions.


Turkmenistan is to build its part of TAPI pipeline

Preparatory work is underway in Turkmenistan to start construction of the part of the of the Turkmenistan-Afghanistan-Pakistan-India gas pipeline (TAPI), Turkmenistan Ministry of Oil and Gas Industry and Mineral Resources announced on November 5th.

Construction work will begin in December 2015, the statement said.

One of the main tasks to be performed is to measure the pipeline’s route. Currently, this work is being carried out by specialists from the Institute of Oil and Gas at the Turkmengaz state concern.

The total length of the gas pipeline running through Turkmenistan’s territory will exceed 200 kilometers.

The basic document for TAPI is the interstate agreement signed by the participating states in Ashgabat in 2010 on beginning the practical implementation of this project.

Its design capacity will allow for transporting up to 33 billion cubic meters of gas per year, and it is expected to cost approximately $10 billion to build.