iran petroleum issue no.8, december 2012

Iran Petroleum Issue No.8, December 2012

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Refining Experts More Competent Than Expected Iran’s Petroleum Minister Rostam Qasemi has said Iranian refining experts are more qualified than previously thought.

Iran Drilling Industry turns 110Drilling activities started in Iran 110 years ago. It has a his-tory marked with twists and turns.

Iran Moves to Boost Domestic Manufacturers’ PotentialityDeputy Minister of Petroleum for Research and Tech-nology Mohammad-Reza Moqaddam says upgrading domestic capabilities by removing hurdles to production and blunting the impact of sanctions would help Iran to indigenize technical knowhow for manufacturing.

No. 8

1July 2012 /

Managing Editor: Es’haq Royvar

A SuCCeSS ShAred by All IrAnIAnS IRaN dRIllINg INdustRy tuRNs 110

drilling activi-ties started in Iran 110 years ago. It has a

history marked with twists and turns. Eight years after the beginning of drilling industry in Iran, the first oil well was spudded in Masjed soleyman. For seven decades after, Iran’s oil industry was monopo-lized by foreign companies. But 1979 was a significant year for Iranians. at that time, the country’s drilling sector was run by nearly 32 foreign companies. On december 21, the late revolutionary leader ayatol-lah Rouhollah Khomeini ordered the establishment of National Iranian drilling Company (NIdC), which in turn laid the groundwork for the real nationalization of oil industry. Iranian drill-ers moved to indigenize the drilling industry and have so far managed to regis-ter breakthroughs for the country. Honorable activi-

ties like oil and gas drilling, providing technical and engineering services, hori-zontal and slanting drilling, logging, underbalanced drilling, blowout prevention and supporting domestic manufacturers are among the achievements.some Western experts used to argue that Iran could not even operate a drilling rig, demanding that everything remain in the hands of for-eigners. However, the turn of time has disproved all these allegations and proved that the firm determination of Iranians coupled with their knowledge and en-deavors facilitated even the most complicated drilling operations. today, NIdC tops drilling companies in the Middle East and can challenge the most experi-enced Western companies.Over the past three decades, Iranian oil staff, includ-ing drilling personnel, has stood by people. When the country was repelling the

imposed invasion from 1980-1989, some oil-rich regions were at the receiv-ing end of air raids. But Iran’s oil staff developed oil and gas wells to serve the country’s industrial sector. Even after the end of the war, they contributed to the country’s reconstruction by completing oil and gas wells. as a result, Iran’s crude oil production was enhanced and subsequently, the necessary budget for in-dustrial reconstruction was provided from petrodollars.By quantitative and qualita-tive improvement in its fleet, Iran’s drilling industry has played significant roles in national development projects like in south Pars, soroush & Norouz, azar and Darkhoein fields.NIdC is now celebrat-ing 33th anniversary of its establishment. Its break-throughs belong to all Ira-nians who benefit from the services of this sector in the oil and gas production.

No. 8

Iran Petroleum

Monthly Publisher:

Ministry of Petroleum of the Islamic Republic of Iran

Translation, Graphic Design and Printing:

Asia Financial NewsGraphic Designer: Ali Shams Amiri

Translator: Kianouche Amiri

Email: [email protected]

* The opinions expressed in this magazine do not

necessarily reflect the official posi-tions of Petroleum

Ministry of the Islamic Republic of Iran.

Cover Photo: Eshaq Rahdari

Managing Editor: Es’haq Royvar, Public Relations Manager, Ministry of Petroleum

Deputy Managing Editor: abolhassan darvishi

Chief Editor: articas Zerehgar

Editorial Board: Mostafa Jalali, amir Hossein

hashemi Javid, Raheleh Khaleqi Javad asghari

Mohammad afshinsetak Kakoei

arash Haji khalili

Chief Photographer: Hassan Hosseini

Coordinator: sara yekrangi

Refining Experts More Competent Than Expected... 4

Iran’s Petroleum Minister Rostam Qasemi has said Iranian refining experts are more qualified than

previously thought.

Iran Moves to Boost Domestic Manufacturers’ Potentiality ...12

deputy Minister of Petroleum for Research and technology Mohammad-

Reza Moqaddam says upgrading domestic capabilities by removing hurdles to production and blunting the impact of sanctions would help Iran to indigenize technical knowhow for manufacturing.

Drilling, Most Strategic Industry in Iran’s Economy ...18

Development of oil and gas industries is dependent on the drilling industry more than

previously thought.

4

Iran Petroleum Monthly No. 8

Refining experts More Competent Than expected

PHOtO: MOHaMMad REZa taEB

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Q: What has so far been done to integrate the procurement of commodity for the oil industry in Iran?a: One of the objectives the Petroleum Ministry department for supervising Oil Industry Projects is following up through publishing upstream and downstream documents is to define technical standards for the commodities. We also intend to identify and categorize the main suppliers of commodities. It is necessary to establish a

e-Procurement under Way in Oil Industry Iran’s oil industry is more than 100 years old. Over these years, millions of commodities and equipment have been purchased from a variety of foreign companies and installed in Iran’s oil and gas facilities. Up to 30 years ago, that posed no challenge because foreign companies supplied the required products to Iran. But after the 1979 Islamic revolution, sanctions have been hampering supply of equipment and commodities to Iran’s oil sector. In the face of these problems, Iran has decided to indigenize the manufacture of strategic commodities. A variety of questions still remain unanswered, to that effect. Should Iran indigenize even the commodities manufactured with old technology? Due to the oil industry’s growing need for commodities to be used in major oil and gas projects, Iran’s Petroleum Ministry is determined to launch an electronic system of commodity procurement. To get further information about this project, Iran Petroleum has interviewed Majid Parsania, deputy petroleum minister for supervising oil industry projects.

Mohammad afshin

Q: Iran Code is another project under way by this department. What’s the main idea behind it?a: In the oil industry, different codes are attributed to a specific commodity. Iran Code system would identify identical commodities so that they would receive a single code. all purchased

commodities need to have Iran Code, which serves as a common language between suppliers, producers and consumers. another objective of this project is to unify Material and Equipment standards and Code (MEsC) in the oil industry.MEsC is a tool of the materials department

for standardization and handling of materials used in business. It was created in 1932 for internal use by shell, but later on licensed to every company that wished to pay for it.the system is a catalogue of specifications in the English language, to allow buyers to purchase standardized materials all

over the world.the system has a numerical “coding schedule” of 10 digits to code the materials. It consists of groups, sub-en sub-sub-groups of 2 digits each and a “Buying description” of 3 digits. local coding is allowed for every company. the last digit for central coded materials

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deputy Minister of Petroleum ali-Reza Zeighami says

Iranian manufacturers plan to supply 80 percent of the requirements of refineries.“Indigenization of technical knowledge for refineries, increasing the share of Iranian commodities in the construction of refineries and self-sufficiency in engineering are examples of progress by Iranian engineers and specialists,” he said. Zeighami said 40 trillion rials have been spent on the development of Imam Khomeini Refinery in central Iran. “For the first time, an Iranian consortium steered this megaproject to the end.”“after implementation of this project, the refining capacity of the refinery would increase from 170,000 b/d to 250,000 b/d, while its fuel oil production would drop to 15,000 b/d from a current 38,000 b/d. Moreover, converting fuel oil to gasoline is one of the most important goals of the development project of the refinery.”Zeighami, who is also managing director of National Iranian Oil Refining and Distribution Company (NIORdC), said Iranian manufacturers have accelerated their

manufacturing as sanctions were tightened against Iran.“We will use exclusively Iranian knowhow for the development of abadan, Isfahan and Bandar abbas refineries, and also for the construction of Persian gulf Star Refinery,” he said.Noting that Iran’s refineries meet international standards, Zeighami said “the standards for building the refineries require endorsement of foreign companies. In order to get around enemies’ sanctions, we have to reach self-sufficiency in standardization, too.”He said the gasoline production unit of Imam Khomeini Refinery was a successful example of benefiting from Iranian specialists and researchers, adding: “this national project is the result of joint efforts made by the Research Institute of Petroleum Industry (RIPI) and Imam Khomeini Refinery engineers which was conducted four years.”

Iranian Commodities to Make 80% of Refineries Equipment

Iran’s deputy minister of petroleum for petrochemical affairs abdol-Hossein

Bayat says the country’s petrochemical sector seeks to develop domestic brands, export technical and engineering services and enter into competition on the global scale.He said indigenization is essential in the petrochemical sector. “the petrochemical industry’s priority is to use domestic capabilities. to that effect, we do not allow import of commodities which can be manufactured in the country.”Noting that Iran launched its self-sufficiency campaign in the petrochemical sector in 1996, Bayat said Iran’s dependence on foreign

technology has dropped sharply, thanks to new progress in the petrochemical sector.The official said the oil industry is determined to invest 300 billion dollars up to 2015 when the country’s third Five-year Economic development Plan ends.

Sales under Control

Bayat, who is also managing director of National Petrochemical Company (NPC), said supervisory bodies are closely monitoring the supply of petrochemical products on the market.“the petrochemical industry plays a valuable role in the country’s economy and all administrators in supervisory organs should exercise

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Iran Petroleum Monthly

3December 2012

No. 8

Self-Sufficiency in Onshore Drilling Rig Construction ...8

Managing director of National Iranian Oil Company (NIOC) ahmad Qalebani says Iran has

become self-sufficient in constructing onshore drilling rigs.

Iran’s Petchem Sector Ready to Export Technical Services ... 10

Iran’s deputy minister of petroleum for petrochemical affairs abdol-Hossein Bayat says the country’s petrochemical sector seeks to develop

domestic brands, export technical and engineering services and enter into competition on the global scale.

Iran’s Petroleum Ministry PR Awarded...14

the second Congress of Muslim Public Relations Practitioners awarded its special international

prize to the director of Public Relations department of Iran’s Petroleum Ministry Es’haq Royvar.

E-Procurement under Way in Oil Industry ...16

Iran’s oil industry is more than 100 years old. Over these years, millions of commodities and equipment have

been purchased from a variety of foreign companies and installed in Iran’s oil and gas facilities.

Petroleum Ministry, MRC Study North Pars Environment....26

Mousa Ahmadi, first secretary of Iran’s Majlis (parliament) Energy Committee is a native

of an oil- and gas-rich region in southern Iran.


Deputy Minister of Petroleum for Research and Technology

Mohammad-Reza Moqaddam says upgrading

domestic capabilities by removing hurdles to production and blunting the impact of sanctions would help Iran to indigenize technical knowhow for manufacturing.“Currently, the petroleum

industry is concentrating on acquiring technological savvy notably in the upstream oil and gas industries. To that effect, it is cooperating with universities and other scientific and research

centers,” Moqaddam said recently.“Exporting technical knowledge is three times more valuable than exporting natural resources. The countries possessing technological savvy can earn

Iran Moves to Boost Domestic Manufacturers’ Potentiality

12 PHOtO: MOJtaBa MOHsENI

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Towards Self-Reliance

Heydar Bahmani, NIDC Managing-Director

“drilling is the key to conquering oil and gas reservoirs and it is active in the oil industry from beginning to end. after conducting preliminary studies on the reservoir, exploration wells are spudded to show whether a reservoir has recoverable oil or not. then, appraisal wells are drilled to provide supplementary information about the reservoir and its fluids like the crude oil’s aPI. this data is transmitted to the reservoir engineering section to study the economic aspects of the reservoir. If the project is proven to be cost-effective,

drilling operations are planned.Currently, most reservoirs in the county are in the second half of their life span; however, enhanced recovery projects could be conducted on them. drilling new production and injection wells would guarantee long-term recovery from the reservoirs. a reservoir will see its recovery rate increase if drilling is conducted properly. this issue indicates the instrumental role of drilling in enhanced oil and gas recovery.drilling industry plays a vital role in oil and gas exploration. so far, more than 120

exploration wells have been spudded across the country, resulting in new discoveries which would enhance the country’s energy reserves.drilling makes up more than 40 percent of fund spent on the development of reservoirs. It influences the position of oil companies in the world. all oil-related industries can be assured of the durability of their activities when their drilling is acceptable. drilling experts have well–paid jobs, due to the significance of drilling industry.In 1985, NIdC drafted a 20-year development program which has been

implemented properly. Industriousness and sacrifice have become inseparable elements of NIdC and I believe that these two factors are the most important in advancing the drilling and oil industries. We have managed to succeed in all our measures. Over the past three decades, we have carried out drilling three times the drilling conducted over 70 years. this breakthrough could not

have been achieved without establishment of NIdC, which has already conducted more than 6.5 million meters of drilling. NIdC experts’ high technical knowledge has dispensed with the need for foreign experts.

Drilling, Most Strategic Industry in Iran’s Economy

By Forough Gashtasbi

development of oil and gas industries is dependent on the drilling industry more than previously thought. drilling is recognized as the main strategy for recovery from hydrocarbon reservoirs. to

acquire oil and gas, exploration groups should first conduct geological and petrophysical studies to see if there are oil layers. then drilling can start.drilling oil and gas wells is one of the most exciting chapters of the story of petroleum. It recounts the story of mankind who battled the violent nature and its hidden forces in order to upgrade his life through tapping underground treasures.since 1979 when Iran’s late revolutionary leader Imam Khomeini ordered the establishment of National Iranian drilling Company (NIdC), Iran’s drilling industry has

maintained its status as a strategic and upstream industry in the oil production, and has put on display its capabilities and merits. up to the 1979 Islamic revolution, Iran highly depended on foreign companies and their employees for all drilling operations, and it had to spend huge sums on drilling. But today, Iran’s drilling experts are handling all tasks without any problem.the establishment of NIdC was a turning point in Iran’s oil industry growth and development. Many consider Imam Khomeini’s order as the nationalization of drilling industry in Iran. directors of Iranian drilling companies positively evaluate the capacities of this industry and the trend of its development throughout the past three decades.

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Iran’s Petroleum Ministry PR Awarded

the second Congress of Muslim Public Relations Practitioners awarded its special international prize to the director of Public Relations department of Iran’s Petroleum Ministry Es’haq Royvar.the congress which was held in tehran on december 8-9 also awarded abbas Kazemi, director of public relations department of Iran Petrochemical Commercial Company (PCC) for implementing a project against sanctions.the congress, whose main theme was Islamic public relations, discussed different issues related to the Muslim world within the framework of public relations and Muslims’ expectations of public relations practitioners.

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A Millennia-Old City ...62

We had still one day during our trip to Khuzestan province to visit Ahwaz for one full day.

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Refining experts More Competent Than expected


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5december 2012

No. 8

Iran’s Petroleum Minister Rostam Qasemi has said Iranian refining experts are more qualified than

previously thought.during a visit to Imam Khomeini Refinery in the central city of shazand, the minister said the treatment facility is among the best in the world.“the development of Imam Khomeini Refinery is a big project which has gone ahead to the consternation of Western governments. In terms of the size and volume of the project it could be called the second refinery in the region.”“Development of refineries in the country would enhance the annual gasoline production and improve the quality of other refined products across the country,” Qasemi said.Expressing content with the level of expertise applied to the development of Imam Khomeini Refinery, the minister said high quality is the main specification of refinery products like gasoline and jet fuel.“Fortunately, most of the equipment used in this project has been manufactured by our own experts, and more than 70 percent of them have been manufactured by local factories” in the province where the refinery is located, Qasemi stated.the project for raising Imam Khomeini Refinery’s capacity is one of the main national projects which would come on-stream by March 2013. The refinery is currently producing more than 8 ml/d of gasoline which would more than double after its

RCd and RFCC would become operational.

Oil Bond Forwards Envisaged

Qasemi said Iran’s Petroleum Ministry would begin selling oil bond forwards in the near future, adding that National Iranian Oil Company (NIOC) would guarantee their profitability.He expressed hope that people would welcome the bonds which would be

offered exclusively for the oil fields shared with neighbors.a forward bond purchase agreement is a contract between two private parties that establishes a transaction in the future at a predetermined price. as a result, the interest rate, as well as the price of the bond is set prior to the actual transaction. although forward contracts can be used in the bond market, they are mainly used in the commodities and foreign exchange market.Forward contracts were created so that farmers can get their future agricultural needs at a locked-in rate.

Now, forward agreements play a major role in the foreign exchange market and are even used to purchase bonds.When someone purchases a forward bond agreement, he is agreeing to buy a bond in the future at a set price. Investors do this if they believe the value of the bond will increase in the future to a price greater than the forward contract stipulates.Banks are usually the main sellers in the forward contract market. Banks earn

money on contracts through the bid/ask spread.the forward contract market is completely private. as a result, there is no major trading exchange for forward contracts. this makes it difficult for the government to regulate contracts.a forward contract can be any size and for any length of time. Most contracts mature in less than a year but are not required to do so. However, the contract must mature before the maturity date of the bond.NIOC has already announced that the bonds could be sold either in rials or dollars. If each barrel of oil sells at 140

dollars, the annual margin would be 10 percent up to four years. In case the price hits 160 dollars, the margin climbs to 15 percent.

Iranians Operate South Pars Projects

the Iranian minister heaped praise on Iranian contractors for their handling of south Pars gas field development projects.“the contractors involved in all south Pars phases [except for Phase 1] are Iranian

and contracting industry is taking shape in the country. I predict a bright future for this industry,” he said.“south Pars projects are huge and every two of them cost 6 billion dollars. such projects are considered megaprojects in the world,” he added. Qasemi said Iran holds one-third of south Pars gas Ffield, shared with Qatar, adding that the Islamic Republic is planning to bring its recovery up to equal Qatar’s.“despite restrictions, huge efforts are under way for the oil industry to reach global standards in terms of quality and structure.”

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Sanctions Undone

Qasemi boasted that Iranian contractors have managed to blunt the impact of Western sanctions on Iran’s energy sector by building refineries.“Construction of onshore refineries has progressed 70 percent in 28 months. that’s a record in refinery building under sanctions,” he said. the minister added that offshore drilling will pick up speed this year as new drilling rigs become operational.“upstream drilling used to be carried out by foreigners, but today Iranian companies handle it. since the drilling equipment is sophisticated and expensive, domestic factories were asked to manufacture them. In this way, the foreign companies’ monopoly on the upstream oil sector was broken in south Pars.”

Petchem Privatization Revenues to Serve Development

Qasemi welcomed a proposal by the managing director of National Petrochemical Company (NPC) abdol-Hossein Bayat for granting 50 percent of revenues from petrochemical sales in loans to the private sector.“the grounds are prepared for the development of the petrochemical industry, notably in the downstream sector,” the minister said. “We can provide the necessary feedstock for petrochemical plants by proper planning.” “development of this industry would create jobs and value-added for the country,” Qasemi said.“the necessary measures have been adopted for

neutralizing the impact of sanctions and our production has reached a satisfactory level in south Pars,” he added.Iran is currently converting 1.8 mb/d of crude oil into products, the minister said, calling for better planning for gasoil production to be sold in neighboring states.Qasemi said the outcome of foreign companies’ refusal to cooperate in Iran’s oil, gas and petrochemical projects was further reliance on domestic contractors to complete south Pars development. He added that south Pars would earn the country $ 400 billion after all its phases have been developed. “We currently share 27 fields with neighbors. We are active in 24 of them,” he said.

Domestic Manufacturing Fund

Qasemi voiced Petroleum Ministry’s readiness to set up a fund to support domestic manufacturers and contractors for commercialization of modern oil industry technologies.He said the ministry would submit a motion to the Parliament for the establishment of the planned fund which would include any financial and technical assistance to domestic manufacturers and contractors of the oil industry.Noting that raw materials account for 70 to 80 percent of the costs of a commodity, Qasemi said: “When we pay only 10 percent in advance to a manufacturer, he would have to resort to banks and financial institutes for the rest and he would

be charged interest rates, too. Consequently, their products would not be good enough to compete with foreign ones. due to financial shortcomings, some contractors do not live up to their promises. But foreign companies benefit from their countries’ resources in the form of grants.”“When a project is defined, its finance should be also elucidated. In case we manage to pay 50 to 70 percent of the project’s cost in advance to contractors, most problems would be resolved,” the minister said.Qasemi highlighted the ministry’s ban on imports of commodities whose domestic manufacture is possible.He singled out downhole pumps required for enhanced oil recovery projects in the oil and gas reservoirs, currently in the second half of their life. Qasemi said the Research Institute of Petroleum Industry (RIPI) and a reference laboratory would monitor the issuance of quality certificates for pumps.He underlined the growing need for downhole pumps in the oil industry and said more companies could still become active in this sector.

Private Drilling Companies Supported

Qasemi stressed the need for the stronger presence of private contractors in procuring drilling rigs for oil and gas wells in the country, noting that Petroleum Ministry backs them.“Offshore drilling requires more sophisticated and more expensive equipment and technology, and the oil industry has managed

to undertake effective measures,” the minister said.He said drilling makes up a big share of oil and gas production costs. “as the wells get older, drilling costs increase. In the future, new wells need to be drilled while more modern equipment would be needed for better output.”Qasemi said more than 100 onshore drilling rigs are currently required in the oil sector, calling on the contractors to become more active to help the country raise its oil production to 5.2


7December 2012

No. 8

mb/d by 2015.“In the past, Iranian companies had done nothing for construction of offshore drilling rigs, while the onshore sector required fewer rigs due to the high level of output from wells,” he said. “until recently, National Iranian drilling Company (NIdC) provided the necessary onshore rigs, but now the grounds are prepared for the private sector to build drilling rigs.”the minister said the private companies’ construction of drilling rigs would create

a competitive ambiance. “Petroleum Ministry will support domestic constructors of drilling rigs. Even if the rigs are not used, the ministry will pay for their letting.”Qasemi said letting an offshore drilling rig costs 150,000 to 160,000 dollars a day and an onshore rig 40,000 dollars a day.Onshore drilling lasts currently above 100 days, while offshore drilling lasts longer, the minister added, calling for the reducing of the duration to 65 days.

“If production from a well is done one month ahead of schedule, its productivity would also rise,” he said.Qasemi referred to experienced manpower as a must for drilling operations, saying: “It is necessary to benefit from the experiences of foreign experts, while we are training our manpower here for drilling operations. We have to take advantage of knowledge.”Qasemi said private drilling companies currently own more than 20 drilling rigs. “until two years ago, private

companies possessed one or two drilling rigs. Now, we have 110 to 120 onshore and 35 to 40 offshore drilling rigs in the country.”the minister said shortage of drilling rigs was a bottleneck for enhanced recovery from the country’s oil fields. “Over the past two to three years, the number of drilling rigs has increased, but that’s not enough. We need more rigs to reach our objectives in developing [oil and gas] fields and enhancing recovery.”


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Managing director of National Iranian Oil Company (NIOC)

ahmad Qalebani says Iran has become self-sufficient in constructing onshore drilling rigs. He said Petroleum Ministry has commissioned defense Ministry and academic Jihad Center to build 14 onshore drilling rigs.“as far as the drilling industry is concerned, 120,000 necessary items have been indigenized and other items are planned to be manufactured domestically. In the near future, we would become an exporter of drilling services.”Qalebani said two percent of offshore and two percent of onshore oil and gas fields shared with neighbors have yet to be decided upon.Iran’s supreme leader ayatollah seyed ali Khamenei has ordered that 18 percent of national development resources budget be allocated to the implementation of upstream oil projects.Qalebani said Petroleum Ministry is determined to set up liquefied natural gas plants in the country. “West Ngl project is currently in its final stage and sirri Ngl project is ready to come on-stream.”The official stated that Iran is implementing gas liquid acquisition and associated gas gathering projects which would further help reduce gas burning as much as possible.In Kharg Island, 600 mcf/d of associated gas is planned to be gathered to feed Nlg unit there.

Upstream Projects Finance

Qalebani said the government’s share in financing upstream oil projects would be cut by 20

percent this year. He added that earlier all oil and gas fields’ development projects were financed by the government.“so far, 16 methods have been defined for financing oil industry projects. six of them have been executed,” the official said, citing the examples of National development Fund (NdF), bonds and sukuks.Qalebani said $ 22.5 billion were invested in the upstream oil sector last calendar year to March 2012. “the total budget the government earmarked for the oil industry was less than $10 billion.”the NIOC chief said the oil industry projects currently under way are valued at $ 150 billion, $ 68 billion of which in south Pars gas field.“last year, 2.1 billion barrels of oil and 847 bcm of gas were discovered in the country. according to the Fifth Five-year Economic development Plan (2010-2015), the country is expected to discover 700 million barrels of oil and 140 mcm of gas every year. so we were well ahead of the plan last year,” said Qalebani. “this year, we focus our attention on discovering new fields and developing those shared with neighbors.”He said Iran’s oil industry targets enhanced oil recovery in conformity with the country’s reserves. “Our economic, security and political power depends on our energy sector. If we manage to enhance our exports, other countries could no longer ignore us in the energy market.”“due to its geographical and strategic position in the Persian gulf and its huge oil and gas reserves, Iran can become an energy hub in the region,” the official stated.Qalebani said fuel conservation

and energy efficiency are among the main policies of Petroleum Ministry.He said gasoline consumption in the country is on the decline, despite the growing number of vehicles. “Following the implementation of energy efficiency policies in the country, Iranian cars’ mileage has dropped from 12.8 liters per 100 kilometers to 8 liters.”“at present, more than 90 million liters of gasoline and gasoil is consumed in the country and we have no problem with the fuel supply,” he said.He added that more than 2.8 million cars are dual-fuelled in Iran, consuming gasoline and CNg. “Iran is the second largest country in the world in terms of CNg vehicles.”

Production Costs Reduction Targeted

Qalebani stressed the need for reducing oil production costs in the country. “to that end, the only option would be using the state-of-the-art technology.”“some companies have fared well in outsourcing and we can benefit from their experiences notably in the upstream oil and gas sectors,” he said.Qalebani said oil and gas production in the shortest possible time, at lowest price, best quality and in conformity with the latest technological progress are among objectives of NIOC. “under conditions of sanctions, solidarity and coordination for exchanging experiences would effectively help NIOC achieve its objectives.”He said the experiences of veteran oil staff need to be documented in books to serve newly recruited staff.

Self-Sufficiency in Onshore Drilling Rig Construction

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9december 2012

No. 8

turkmenistan has basically agreed to deliver more natural gas to Iran, a deputy

minister of petroleum has said.Javad Oji said the two countries held talks during a visit to ashgabat by Iranian Minister of Petroleum Rostam Qasemi who met with his turkmen counterpart. Oji said Iran is ready to provide turkmenistan’s oil and gas industries with the necessary equipment manufactured by Iranian contractors.The official said Iran is the second largest holder of gas reserves, while turkmenistan comes fourth. “the two countries held talks about energy cooperation. they reached agreement about transit of turkmen gas via Iranian territory to turkey and armenia.”

las month, Oji said Iran is planning to import nearly 40 million cubic meters per day (mcm/d) of natural gas from turkmenistan.“In the light of the talks held between energy officials from the two countries, our gas imports from turkmenistan would soar to 40 mcm/d [from current 5 mcm/d],” Oji, who is also managing director of National Iranian gas Company (NIgC), saidIran imported 2.7 bcm of gas in the first half of the current calendar year which began in March. Oji had earlier said Iran’s reduced gas import from turkmenistan was due to overhaul in the gas facilities of the two countries.Iran has been importing natural gas from turkmenistan since 1997.

as one of the main gas exporting countries, turkmenistan plans to expand gas exports to new markets including Europe, Pakistan and India. the country is one of the main suppliers of gas to littoral states of the Caspian sea, and plans to raise its annual gas exports to 230 bcm.

South Pars Gas for Guilan

Oji said the last stretch of the third trans-national pipeline would transfer natural gas from South Pars gas field to the northern guilan province.He added that the third trans-national pipeline is the longest gas pipeline in the country. “By injecting gas to the last stretch of this pipeline, south Pars gas would be transferred to northern provinces including guilan through a 1,270-kilometer

route.”“Until recently, the first trans-national pipeline was the only pipeline bringing gas to northern and northwestern provinces, and that is why they faced shortages in the winter.”“But the third pipeline would even deliver gas to golestan province,” Oji said. He added that the third trans-national pipeline has been one of the most difficult projects operated by NIgC as it crosses rivers, rugged land and treacherous mountains. It is being constructed by Iran gas development Engineering Company (IgdEC).Oji, however, said that logical consumption of gas in the winter would help a balanced distribution of natural gas.

Iran, Turkmenistan Enhance Gas Cooperation

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deputy Minister of Petroleum ali-Reza Zeighami says

Iranian manufacturers plan to supply 80 percent of the requirements of refineries.“Indigenization of technical knowledge for refineries, increasing the share of Iranian commodities in the construction of refineries and self-sufficiency in engineering are examples of progress by Iranian engineers and specialists,” he said. Zeighami said 40 trillion rials have been spent on the development of Imam Khomeini Refinery in central Iran. “For the first time, an Iranian consortium steered this megaproject to the end.”“after implementation of this project, the refining capacity of the refinery would increase from 170,000 b/d to 250,000 b/d, while its fuel oil production would drop to 15,000 b/d from a current 38,000 b/d. Moreover, converting fuel oil to gasoline is one of the most important goals of the development project of the refinery.”Zeighami, who is also managing director of National Iranian Oil Refining and Distribution Company (NIORdC), said Iranian manufacturers have accelerated their

manufacturing as sanctions were tightened against Iran.“We will use exclusively Iranian knowhow for the development of abadan, Isfahan and Bandar abbas refineries, and also for the construction of Persian gulf Star Refinery,” he said.Noting that Iran’s refineries meet international standards, Zeighami said “the standards for building the refineries require endorsement of foreign companies. In order to get around enemies’ sanctions, we have to reach self-sufficiency in standardization, too.”He said the gasoline production unit of Imam Khomeini Refinery was a successful example of benefiting from Iranian specialists and researchers, adding: “this national project is the result of joint efforts made by the Research Institute of Petroleum Industry (RIPI) and Imam Khomeini Refinery engineers which was conducted four years.”

Iranian Commodities to Make 80% of Refineries Equipment

Iran’s deputy minister of petroleum for petrochemical affairs abdol-Hossein

Bayat says the country’s petrochemical sector seeks to develop domestic brands, export technical and engineering services and enter into competition on the global scale.He said indigenization is essential in the petrochemical sector. “the petrochemical industry’s priority is to use domestic capabilities. to that effect, we do not allow import of commodities which can be manufactured in the country.”Noting that Iran launched its self-sufficiency campaign in the petrochemical sector in 1996, Bayat said Iran’s dependence on foreign

technology has dropped sharply, thanks to new progress in the petrochemical sector.The official said the oil industry is determined to invest 300 billion dollars up to 2015 when the country’s third Five-year Economic development Plan ends.

Sales under Control

Bayat, who is also managing director of National Petrochemical Company (NPC), said supervisory bodies are closely monitoring the supply of petrochemical products on the market.“the petrochemical industry plays a valuable role in the country’s economy and all administrators in supervisory organs should exercise

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cooperation and solidarity for the development and growth of the industry,” he said.“the petrochemical industry has never violated the law and we deal with possible violations within the framework of the law,” he added. Bayat warned that any illegal selling of petrochemicals would be firmly confronted.The official said negotiations were under way with the Commodities Exchange for simplification of trading process.Regarding cooperation with banks, he said: “Bank Mellat is in good cooperation with the petrochemical industry. Bank Melli and Bank tejarat are also active in this industry and we expect

other banks to cooperate further with the petrochemical industry, as investment in this sector would be lucrative.”“several petrochemical plants would come on-stream this year and next year, and by enhancing upstream production we can guarantee the development of downstream industries. It should be noted that cooperation on the part of government and parliament would clear the way for development of the industry,” Baayat added.“Petroleum Ministry and NPC are ready to collaborate with domestic and foreign financiers to develop downstream petrochemical industries in view of

generating value-added and completing the production chain. attractive incentives have been envisaged for potential investors.”

$7b Revenues

Bayat said Iran earned seven billion dollars from exporting petrochemical products to foreign markets during seven months beginning in March. “Exporting 10 million tons of petrochemicals was indicative of demand for Iran’s petrochemicals.”“Iran’s petrochemical industry is taking great strides towards development and it considers supporting investors as its main objective,” said Bayat. He said the recent Iran Plast exhibition indicated that the petrochemical production chain is being completed at high speed. “Without any exaggeration, Iran’s petrochemical industry has been on the right path over the past years. However, we need investment for the mid-stream and downstream sectors,” Bayat stated. The official stated that the country’s petrochemical output would hit 60 million tons by March 2013 with the implementation of several petrochemical projects.“Moving to develop downstream industries and expanding petrochemical townships can create job opportunities and help the country take great strides in developing the oil industry.”“due to its appropriate geographical position and its easy access to markets in neighboring states, Iran can earn hard currency by investing in downstream petrochemical industries,” Bayat noted. “Iran is a huge and proper market for downstream petrochemical

industries.”“there are opportunities for nearly 70 billion dollars of safe investment in the upstream petrochemical sector. ten downstream petrochemical projects are also envisioned.” “Ministry of Interior and Ministry of Industry, Mining and trade can boost their cooperation with Petroleum Ministry to clear the way for the development of downstream petrochemical industries,” the NPC managing director said, adding: “We can guarantee the downstream development we upstream output is enhanced.”

Downstream Sector Prioritized

Bayat stressed the need for developing downstream industries, saying: “development of downstream petrochemical industries would lay the groundwork for the development of this valuable industry.”“NPC supports development of downstream petrochemical industries in a bid to complete the value chain, and investors can benefit from official supports to contribute to petrochemical towns,” he said. He added that the challenges in the upstream and downstream sectors would be overcome under the aegis of further cooperation among associations and government bodies.“Currently, Iran’s petrochemical industry needs to undergo development. to that end, all activists and industrialists need to close ranks and exercise solidarity. NPC is open to any kind of cooperation with the private sector,” Bayat said.


Deputy Minister of Petroleum for Research and Technology

Mohammad-Reza Moqaddam says upgrading

domestic capabilities by removing hurdles to production and blunting the impact of sanctions would help Iran to indigenize technical knowhow for manufacturing.“Currently, the petroleum

industry is concentrating on acquiring technological savvy notably in the upstream oil and gas industries. To that effect, it is cooperating with universities and other scientific and research

centers,” Moqaddam said recently.“Exporting technical knowledge is three times more valuable than exporting natural resources. The countries possessing technological savvy can earn

Iran Moves to Boost Domestic Manufacturers’ Potentiality

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more than those relying on their natural resources.”Moqaddam said mastering the state-of-the-art technology would give Iran, already rich in energy resources, an unassailable lead in the world. Moreover, higher level of knowledge would improve the quality of products and cut costs.He added that several research documents have been drafted to regulate the requirements of the oil industry like drilling rigs, downhole pumps and chemicals.“Regulating technical knowledge purchased [from foreign companies] would clear the way for the production of technical knowledge in the country. At present, international sanctions are targeting many technical knowhow. When we pass through these bottlenecks we would no longer be dependent,” he said.Moqaddam said 19 items used in the oil industry are to be manufactured domestically. Some of them are drilling rigs, rotary equipment, pumps, compressors, catalysts, chemicals and deep water technologies.

“In case of commercialization of these 19 items, the oil industry would become self-sufficient and we would even be able to export technical knowhow,” he stated.Moqaddam said Iran’s Petroleum Ministry is holding a national seminar on upgrading domestic capabilities in late December in collaboration with Sharif University of Technology. He added that the seminar is aimed at finding solutions to remove obstacles ahead of domestic manufacturing.“Domestic manufacturers are facing myriads risks and they need to be protected,” Moqaddam said.

Focus on Challenges

Reza Rousta Azad, chancellor of Sharif University of Technology, said business in any country is an asset that could have positive effects on all

political, social, economic and cultural fields.According to him, proper management of efforts for business regulation, while the country is facing tough sanctions is a necessity. He added that threats could be transformed into opportunities if the economy of resistance is implemented properly.Noting that industrialized countries restrict business activities, Rousta Azad said: “These countries do not allow the formation of a competitive atmosphere in other countries by imposing sanctions on them. Iran is currently under oil embargo aimed at preventing the country from joining global networks.”In cooperation with Petroleum Ministry’s R&D Department, Sharif University of Technology is determined to overcome challenges to oil business.

Documentation of Experiences

Ali-Reza Mir-Mohamad Sadeqi, a top advisor to the petroleum minister, said foreign pressures and global crises have caused problems for Iranian

manufacturers, contractors and industrialists. “These challenges are posing threats to the production sector of the country; nevertheless they embody opportunities which would prove beneficial with proper planning.”He said the national seminars on upgrading domestic capabilities held since four years ago have helped spread knowledge and document experiences and achievements.The fourth seminar is to focus on supporting national production through preparation of legal, supervisory and executive grounds, quantitative and qualitative assessment of national production, transforming threats into opportunities, generation of value-added and creating job opportunities.

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Iran’s Petroleum Ministry PR Awarded

the second Congress of Muslim Public Relations Practitioners awarded its special international prize to the director of Public Relations department of Iran’s Petroleum Ministry Es’haq Royvar.the congress which was held in tehran on december 8-9 also awarded abbas Kazemi, director of public relations department of Iran Petrochemical Commercial Company (PCC) for implementing a project against sanctions.the congress, whose main theme was Islamic public relations, discussed different issues related to the Muslim world within the framework of public relations and Muslims’ expectations of public relations practitioners.

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the fourth China Overseas Investment Fair (COIFaIR) was held december 3-4 in

Beijing. an Iranian delegation comprised of representatives of various ministries, as well as some state and private organizations.the exhibition inaugurated in presence of 4000 high ranking Chinese officials ,companies, investors and business owners from countries such as usa, Russia, Iran, France, germany, Korea and some other countries in the region. the participants came from a range of Chinese enterprises, financial institutes & professional service providers, international business associations, research institutes and government agencies. the fair aimed at identifying investment opportunities in countries all over the world. this year the Fair had the theme of ‘Invest and Cooperate for a Better World’. the fair was also a proper opportunity for business owners and those involved in small and big projects in various fields such as oil, gas and

petrochemical industries to make themselves known to investors. It is said that with regard to the volume of investment China is one of the major economies in the world. China made foreign investment worth $65 billion in many countries. the fair was a good chance for Iran’s petroleum industry and other state and private organizations to provide investors with detailed information about their projects. Chief among the important events held on the sidelines of the fair were roundtables dealing with themes such as energy and sustainable security wherein international officials offered reports on energy investment opportunities. It is noteworthy that one full day was allocated to Iran to introduce its foreign investment opportunities.the seminar entitled:” Chinese Foreign Investment Opportunities in Iran” held on the sidelines of the fair. Iran’s ambassador to China addressed the seminar, while some of the other Iranian officials attended it.there were 200 stands in the

fair, and over 2000 projects in various fields- energy, resources, infrastructural facilities and production- introduced to the investors.“COFaIR is expected to speed up Chinese investors’ presence in international markets through providing more details on the details of new policies applied to transnational cooperation projects, and signing international cooperation contracts”, the fair organizers said. addressing the inauguration ceremony of the fair, Iran’s deputy economy minister Behrouz alishiri said the Islamic Republic offered investment opportunities in the oil, gas and petrochemicals sector. talking about Iran’s oil reserves and its considerable capacity in producing oil products, Behrouz alishiri declared Iran’s readiness for construction of 9oil refineries through attracting foreign investment. “Iran welcomes investors from various countries, as it is facilitating capital and profit transfer process as well as administration processes required for investment. Iran guarantees

investors’ interest, as well.While expressing the current investment atmosphere in Iran, alishiri said that investment and profitability market in Iran is not comparable to any other country in the world.addressing the event entitled:” Investment in Iran”, Mehdi safari Iran’s ambassador to China said Iran’s strategic position is an advantage for the country to have easy access to investors and required technical experiences. “Having a population of around 77 million, and benefitting from abundant energy resources, infrastructural facilities, the proper geopolitical position in the region, and being located in the Persian gulf region, Iran can be considered as the economic progress engine in the region.One of the Chinese officials is quoted as saying that although unilateral sanctions are imposed on Iran, we are confident that Iran’s market will be developed shortly, because Iran has abundant energy resources, and the superiority is not comparable to any other country in the world.

Iran’s Petroleum Industry Shines at Beijing Fair

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Q: What has so far been done to integrate the procurement of commodity for the oil industry in Iran?a: One of the objectives the Petroleum Ministry department for supervising Oil Industry Projects is following up through publishing upstream and downstream documents is to define technical standards for the commodities. We also intend to identify and categorize the main suppliers of commodities. It is necessary to establish a

e-Procurement under Way in Oil Industry Iran’s oil industry is more than 100 years old. Over these years, millions of commodities and equipment have been purchased from a variety of foreign companies and installed in Iran’s oil and gas facilities. Up to 30 years ago, that posed no challenge because foreign companies supplied the required products to Iran. But after the 1979 Islamic revolution, sanctions have been hampering supply of equipment and commodities to Iran’s oil sector. In the face of these problems, Iran has decided to indigenize the manufacture of strategic commodities. A variety of questions still remain unanswered, to that effect. Should Iran indigenize even the commodities manufactured with old technology? Due to the oil industry’s growing need for commodities to be used in major oil and gas projects, Iran’s Petroleum Ministry is determined to launch an electronic system of commodity procurement. To get further information about this project, Iran Petroleum has interviewed Majid Parsania, deputy petroleum minister for supervising oil industry projects.

Mohammad afshin

Q: Iran Code is another project under way by this department. What’s the main idea behind it?a: In the oil industry, different codes are attributed to a specific commodity. Iran Code system would identify identical commodities so that they would receive a single code. all purchased

commodities need to have Iran Code, which serves as a common language between suppliers, producers and consumers. another objective of this project is to unify Material and Equipment standards and Code (MEsC) in the oil industry.MEsC is a tool of the materials department

for standardization and handling of materials used in business. It was created in 1932 for internal use by shell, but later on licensed to every company that wished to pay for it.the system is a catalogue of specifications in the English language, to allow buyers to purchase standardized materials all

over the world.the system has a numerical “coding schedule” of 10 digits to code the materials. It consists of groups, sub-en sub-sub-groups of 2 digits each and a “Buying description” of 3 digits. local coding is allowed for every company. the last digit for central coded materials


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databank for oil industry commodities. Initial surveys estimated more than seven million commodities, but further surveys have cut the figure to 1.4 million.

Q: Why such a sharp cut?a: a large number of commodities used in the oil, gas, petrochemical, and refining and distribution sectors have been identical, but known under different names because of the variety of suppliers. therefore, setting up a databank in the oil industry would provide easy access to the oil commodities and remove challenges to the procurement of equipment.

Q: What is the main task assigned to Petroleum Ministry “Department for Supervising Oil Industry Projects”?a: the department has so far conducted a comparative study of the oil industry commodities in a bid to categorize them, evaluate contractors and weigh the proposed prices. this department is in fact tasked with management and planning in the oil industry. due to international restrictions,

this department is determined to take advantage of its past experiences for indigenizing oil industry commodities in cooperation with universities and scientific centers.

Q: Could you provide us with any successful examples of implementation of e-procurement of commodities and industrial activities in the world?a: yes, in an asian state, the Ministry of Economy has designed a system requiring state-run companies to install it anytime its transactions exceed 10,000 dollars. this system comprises state-run financial resources, a list of main suppliers of commodities and the cost price of products. this system would dispense with the need to run tender bids in newspapers and going through administrative red tape for the purchase of products.

Q: What has Iran done in line with launching an electronic supply system?a: since three years ago, Iran embarked on implementing commodity e-supply system in its oil industry. E-supply system is a national requirement and given Petroleum Ministry’s volunteering to implement it, we can expect a systematic supply of commodities in the near future. In such a system, all necessary commodities would be identified and provided. The suppliers would be given equal and just chances for competition, and buyers can choose the commodities of their desired quality and price. such a system would resolve the problem of commodity supply for the oil industry and would increase productivity in view of achieving our objective of acquiring Iranian technology for the oil

industry. Petroleum Ministry subsidiaries are currently implementing a project for electronic procurement of commodities. this project is aimed at regulating and integrating logic processes for coordinating orders and inventories.studies conducted to that effect indicate that implementing such a system would reduce the costs for the procurement of commodities by at least ten percent. Coding oil commodities would be something like a common language between producers and consumers of commodities.

Q: When will these objectives be achieved completely?a: Within two years, all commodities required in the oil industry projects would be available on the electronic system. Currently, domestic manufacturers provide 70 percent of the necessary commodities for the oil industry. The figure is planned to soar to 90 percent by 2015, marking the end of the Fifth Five-year Economic development Plan.

is a 1, the last digit for local coded materials is a 9. With a single 10 digit code materials can be purchased all over the world, independent of the manufacturer or brand.

Q: Are there any other advantages?a: Other advantages include lowering

production costs, increasing domestic manufacturing standards, supporting domestic manufacturers, centralization, self-sufficiency in import of some equipment, standardization of equipment and reducing risks for consumers of domestic products.Currently, 120 companies

affiliated with Petroleum Ministry have their own lists of commodity procurement. this department is unifying the list so that the companies with brilliant background would be on the same list. the system is being tested in a company now.

Q: Does the department have any plans for customs tariffs and insurance?a: the department is also seeking options to support production and procurement of commodities by studying customs tariffs levied on the commodities used in the oil industry.

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Towards Self-Reliance

Heydar Bahmani, NIDC Managing-Director

“drilling is the key to conquering oil and gas reservoirs and it is active in the oil industry from beginning to end. after conducting preliminary studies on the reservoir, exploration wells are spudded to show whether a reservoir has recoverable oil or not. then, appraisal wells are drilled to provide supplementary information about the reservoir and its fluids like the crude oil’s aPI. this data is transmitted to the reservoir engineering section to study the economic aspects of the reservoir. If the project is proven to be cost-effective,

drilling operations are planned.Currently, most reservoirs in the county are in the second half of their life span; however, enhanced recovery projects could be conducted on them. drilling new production and injection wells would guarantee long-term recovery from the reservoirs. a reservoir will see its recovery rate increase if drilling is conducted properly. this issue indicates the instrumental role of drilling in enhanced oil and gas recovery.drilling industry plays a vital role in oil and gas exploration. so far, more than 120

exploration wells have been spudded across the country, resulting in new discoveries which would enhance the country’s energy reserves.drilling makes up more than 40 percent of fund spent on the development of reservoirs. It influences the position of oil companies in the world. all oil-related industries can be assured of the durability of their activities when their drilling is acceptable. drilling experts have well–paid jobs, due to the significance of drilling industry.In 1985, NIdC drafted a 20-year development program which has been

implemented properly. Industriousness and sacrifice have become inseparable elements of NIdC and I believe that these two factors are the most important in advancing the drilling and oil industries. We have managed to succeed in all our measures. Over the past three decades, we have carried out drilling three times the drilling conducted over 70 years. this breakthrough could not

have been achieved without establishment of NIdC, which has already conducted more than 6.5 million meters of drilling. NIdC experts’ high technical knowledge has dispensed with the need for foreign experts.

Drilling, Most Strategic Industry in Iran’s Economy

By Forough Gashtasbi

development of oil and gas industries is dependent on the drilling industry more than previously thought. drilling is recognized as the main strategy for recovery from hydrocarbon reservoirs. to

acquire oil and gas, exploration groups should first conduct geological and petrophysical studies to see if there are oil layers. then drilling can start.drilling oil and gas wells is one of the most exciting chapters of the story of petroleum. It recounts the story of mankind who battled the violent nature and its hidden forces in order to upgrade his life through tapping underground treasures.since 1979 when Iran’s late revolutionary leader Imam Khomeini ordered the establishment of National Iranian drilling Company (NIdC), Iran’s drilling industry has

maintained its status as a strategic and upstream industry in the oil production, and has put on display its capabilities and merits. up to the 1979 Islamic revolution, Iran highly depended on foreign companies and their employees for all drilling operations, and it had to spend huge sums on drilling. But today, Iran’s drilling experts are handling all tasks without any problem.the establishment of NIdC was a turning point in Iran’s oil industry growth and development. Many consider Imam Khomeini’s order as the nationalization of drilling industry in Iran. directors of Iranian drilling companies positively evaluate the capacities of this industry and the trend of its development throughout the past three decades.


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Iran’s drilling industry has valuable experiences in harnessing oil and gas blazes. during the 1980-1988 imposed war, NIdC extinguished fires at nearly ten oil wells in southern Iran. Iran also contributed to harnessing fire in Kuwaiti oil wells set afire by Saddam during the second Persian gulf War.Before the 1979 Islamic revolution, fires had broken out in several oil wells in southern Iran and they had all been put out by foreign experts. Iranian experts had no experience at that time, but today they outdo Western companies.In line with the country’s 20-year development plan up to 2025, good investment has been done in the drilling industry under the aegis of support from Petroleum Ministry.Self-sufficiency and self-reliance have always been the focal points of the activities of this company. Before the 1979 revolution, all drilling equipment was manufactured by foreign companies and Iran spent millions of dollars on the purchase of drilling equipment every year.Between 25,000 and 35,000 drilling items, largely used in operations, were in the first phase planned to be purchased from domestic manufacturers. Iranian companies have so far developed 17,000 of them.”

Presence in Deep Waters

Hedayatollah Khademi, Managing director, North drilling

Company (NdCO)

“With the victory of the Islamic revolution, foreign companies and their engineers left Iran’s oil industry for good. Following their departure, Iran faced restrictions, but Iranian engineers managed to operate six drilling rigs which existed in the country by that time. the drilling industry was revived soon and the few drilling rigs could meet the country’s needs at that time. In 1982, seven drilling rigs were purchased from National Oilwell Varco (NOV). at the same time, trained human resources joined the drilling industry, which has been progressing incessantly in the past three decades. In March 2003, NdCO officially joined the oil industry by launching operations based on modern technology and knowledge-based management. It has since carried out complicated operations like drilling oil, gas, water and geothermal wells for offshore and onshore exploration, description, development, reparation and technical services in deep and shallow waters.NdCO is currently operating nine semi-heavy onshore drilling rigs and one offshore rig. Having recruited 1,500 experienced engineers specializing in drilling, the company is currently conducting drilling operations for oil and gas discovery and recovery, reparation of oil and gas reservoirs, spudding injection wells and other related technical services.as a harbinger of drilling in deep waters, NdCO currently enjoys an elevated status among Iranian companies in terms of access to technical knowledge and modern drilling technology.

given its mastery of onshore and offshore, deep and shallow waters drilling technologies, it is capable of providing all relevant services.Iran’s drilling industry ranks the fourth after the united states, Canada and a European country in terms of operational capacity. to that effect, it has to train specialized manpower to meet the growing oil industry needs for drilling.”

20,000 Drilling Items Indigenized Asghar Rostami, Managing director, Dana Drilling Company (DDC)

“given the daily increasing progress by Iranian engineers in terms of accessing technical knowledge, we face no shortcomings in drilling operations for onshore projects. the only problem we currently face is related to the procurement of some drilling equipment. this problem would be also resolved soon, as we are progressing to reach self-sufficiency in the near future. Iranian manufacturers have so far indigenized more than 16,000 drilling equipment, out of 20,000 widely used ones.as far as the offshore projects are concerned, drilling equipment cost around 200 million dollars and letting them is subject to specific regulations. In this regard, ddCO – involved in upstream oil and gas sectors – is increasing its drilling equipment in a bid to expand its activities in West asia. dana already has two onshore drilling rigs; however, the number would reach four soon. It has also purchased an offshore drilling rig which would become operational before the

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end of the current Iranian year in March 2013.DDCO is the first private company that has managed to conduct drilling operations in South Pars gas field. It has drilled 24 wells in Phases 15 and 16 of south Pars. the company’s main objective is to become competitive in the upstream oil and gas markets, exchange experiences, knowhow and technology in view of broader strategic cooperation and more investment.NIdC has cleared the way for private companies to grow in a competitive atmosphere. thanks to its background and history, NIdC has trained drilling engineers and can be an effective example for other state-run and drilling companies

to follow.drilling is the most important section of the oil industry for exporting technical services. this industry is a pillar of oil and gas production in the country.a large number of Iran’s reservoirs are currently in the second half of their life span. In order to preserve or enhance their output, their recovery rate needs to be enhanced. to that end, applying new drilling methods for completing the wells is a must.Our main asset in the drilling industry is our human resources in which state-run and private companies should heavily invest. Orientation to domestic manufacturing and protection of the environment are other important points to be taken into consideration.”

Private Drilling Companies

Masoud Geshnizjani, Managing director, Dana Petro Rig

“since the oil industry and subsequently drilling oil and gas wells enjoy a long history and there are many oil fields in our country, drilling industry is of special importance to Iran. some unique and complicated features of Iran’s oil fields have necessitated the application of the latest methods of drilling. Establishment of private drilling companies mainly recruiting young and experienced manpower has made the drilling industry more competitive and progressive. since these companies face

fewer restrictions in their communications, they have interacted with foreign companies and benefited from their technological achievements.Fundamental steps are needed to be taken for exporting technical savvy in drilling activities to make this sector better known in foreign countries. Widespread activities have already begun to supply the necessary commodities to contractors.today, Iranian manufacturers meet the bulk of oil industry needs. Quality control and standardization entities should catch up with them, and domestically manufactured commodities need to be tested by all consumers.legislative bodies should support the drilling sector and



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domestic manufacturing so that Iranian producers would compete with foreign rivals. It is necessary to support Iranian manufacturers to guarantee their presence in the global markets.NIdC has cleared the way for private companies to grow in a competitive atmosphere. thanks to its background and history, NIdC has trained drilling engineers and can be an effective example for other state-run and drilling companies to follow.”

Drilling, Lucrative Business

Mohammad Rajabi, Managing director, Sarvak Drilling Services Co.

“drilling operations in the oil and gas projects need special supplementary services without which the operations would not go ahead. It would be up to all drilling companies to employ one or more drilling service companies to meet their needs. selection of drilling companies is based on parameters some of which are as follows: market needs, competitors’ advantages, accessory technology level, company inter characteristic (capability and core competency), client preference, and government role.Iran’s Petroleum Ministry announced in 2011 that the country would need to invest about 100 billion dollars in developing offshore and onshore oil fields up to 2015. For such investment, drilling would cost 10 billion dollars.there are more than 20 types of services provided and supplied by well drilling service companies across the world whose accuracy and functions are improved every day. schlumberger and Halliburton are the pioneers of drilling services across the globe. any company willing to enter this market has to get familiar with the state-of-the-art technology.”

NIDC Should Interact with Foreign Companies

Mahmoud Javadian, Petropars drilling manager

“the oil industry is a pillar of Iran’s economy. drilling bits are rotating round the clock in order to enhance the country’s oil and gas production. drilling opens the entry gate to the most sensitive segment of upstream oil industry.up to the 1979 Islamic Revolution, 46 foreign companies were operating drilling projects in Iran’s oil industry. after the Islamic revolution, they left the country imagining that we would depend on them. they were

waiting for us to call them back; little knowing that Iran’s oil industry was turning a page. a group of oil industry experts met with the late revolutionary leader Imam Khomeini and proposed the establishment of a national drilling company. In January 1980, Imam Khomeini ordered the establishment of National Iranian drilling Company (NIdC).the company started its work with six drilling rigs. In conformity with the oil industry’s need for development, NIdC grew and increased the number of its drilling rigs.some young staff in NIdC suggested that NIdC handle development projects too, but veteran experts convinced them that drilling and engineering should be distinguished from each other.Currently, NIdC is on the right path towards sustainable growth and development. a bright future is awaiting Iran’s oil industry.as a leading drilling company, NIdC has struck a balance to the market rates. Privatization of this upstream company would cause irreparable consequences.In order to become more dynamic, NIdC had better collaborate with international companies. National Iranian Oil Company (NIOC) and Petroleum Ministry should provide opportunities to NIdC to interact with reputable foreign companies.Oil industry officials should also throw their weight behind this company so that it would be able to indigenize modern technological knowhow in drilling.Officials should not hasten in privatizing NIdC before conducting precise studies to that effect.”

Iran’s Drilling Industry at World Class

Mahmoud Sharifian, NIDC

ex-managing director

“Iran’s drilling industry was nationalized after the 1979 Islamic revolution and after that National Iranian drilling Company (NIdC) established. Over the recent years, a number of private companies have emerged in Iran’s drilling sector. their presence has boosted the country’s drilling capabilities and given rise to competition between NIdC and the private sector.the limited hardware facilities coupled with valuable experiences can be intermingled with training of new drilling technologies to clear the way for the development of exploration and drilling markets in the region and the world.after the Islamic revolution, Iran’s drilling industry has been oriented to domestic markets and that is why it has scarcely broadened its activities in the regional and international markets.If the drilling technology is updated and some shortcomings in the oil industry are removed, Iran’s drilling can be elevated to a high status in the world.NIdC has focused on training its manpower although it has to promote the level of education to catch up with the growing trend of technological achievements and new modern needs.Removal of some drilling projects bottlenecks can push forward the drilling industry and clear the way for planning in view of upgrading this industry in the state-run and private sectors.In 1985, when Iran was still involved in imposed war, dispatched a delegation of 19 experts from the Research Institute of Petroleum Industry (RIPI), Iranian Offshore Oil Company (IOOC) and NIdC to attend a seminar on deep Offshore technology in Italy. Indian and Brazilian delegates were surprised to hear that Iran was active in drilling even during the war.”

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Those who were there will never forget the sight. For days on end, the

sky above Kuwait blackened with a relentless outpour-ing of choking, poisonous smoke. Although the struggle was coming to its end, the damage was only beginning. In the early months of 1991, Saddam’s retreating troops detonated and set fire to 650 of Kuwait’s 900 oil wells, cre-ating a virtual hell on earth as five million barrels of oil a day fed raging infernos.A review of photos taken by a Brazilian photographer underscores the contribution of Iranians to extinguishing Kuwaiti oil fires.

How Did the Oil Well Fires Start?

The Kuwaiti oil fires were caused by invaders’ military forces setting fire to more than 600 oil wells as part of a scorched earth policy, while retreating from Kuwait in 1991 after invading the coun-try but being driven out by

US-led Coalition military forces. The fires started in January and February 1991 and the last one was extin-guished by November 1991.Saddam’s retreating troops detonated and set fire to 650 of the country’s 900 oil wells, creating a virtual hell on earth as five million bar-rels of oil a day fed raging infernos.By the eve of the invasion, Kuwait had set production quotas to almost 1.9 mb/d, which coincided with a sharp drop in the price of oil. By the summer of 1990, Kuwaiti overproduction had become a serious point of contention with Iraq.Some analysts have specu-lated that one of Saddam’s main motivations in invad-ing Kuwait was to punish the ruling family in Kuwait for not stopping its policy of overproduction, as well as his reasoning behind the destruction of said wells.About 700 oil wells were set on fire by Saddam’s retreat-ing army and the fires were not fully extinguished until

November 6, 1991, i.e. eight months after the end of the war. The fires consumed an estimated 6 mb/d of oil.Their immediate conse-quence was a dramatic decrease in air quality, causing respiratory prob-lems for many Kuwaitis. The sabotage of the oil wells also impacted the desert environ-ment, which has a limited natural cleansing ability. Un-ignited oil from the wells formed about 300 oil lakes that contaminated around 40 million tons of sand and earth. The mixture of desert sand with the un-ignited oil in accompany with soot formed layers of “tarcrete” which covered nearly five percent of the country.At the peak of the fires, the smoke absorbed 75 to 80% of the sun’s radiation. The particles rose as high as 20,000 feet (6,100 m), but were scavenged from the atmosphere relatively quickly.Vegetation in most of the contaminated areas adjoining the oil lakes

began recovering by 1995, but the dry climate has also par-tially solidified some of the lakes. Over time the oil contin-ued to sink into the sand, with as yet unknown consequences for Kuwait’s small ground-water re-sources.

Thumb-up for Iranians Who Put Out Kuwait Oil Well blaze

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The Brazilian photographer present there took pictures of the most significant oil well fire containment in the world and the firefighters present there have recounted stories of their operations, but few people may know how hazardous and complicated conditions the Iranians were confronted with in Kuwait despite their experiences of extinguish-ing oil well fires throughout the imposed war (1980-1988).The petroleum burn caused pollution to the soil and air, and the oil fires have been linked with what was later called Persian Gulf War Syndrome; however, studies have indicated that the firemen who capped the wells did not report any of the symptoms suffered by the soldiers. Whether this syndrome has been caused by the oil fires, by chemical attack, or other causes has not been determined, and the long-term environmental effects of the fires have yet to be fully understood. It is now known that smoke from the Kuwait Oil Fires dominated the weather pattern throughout the Persian Gulf and surrounding region during 1991, and that lower atmospheric wind blew the smoke along the eastern half of the Arabian Peninsula, and cities such as Dhahran and Riyadh, and countries such as Bahrain experienced days with smoke filled skies and carbon fallout.Despite all hardships the Iranian drilling experts tolerated, their break-throughs brought achievements for the country. They trained many Iranian firefighters about putting out oil well fires.

All in Black

The resulting fires burned out of control because of the dangers of sending in firefighting crews. Land mines had been placed in areas around the oil wells, and military demining was necessary before the fires could be put out. Around 6 mb/d of oil were lost. Eventually, privately contracted crews extinguished the fires, at a total cost of $1.5 billion to Kuwait. By that time, however, the fires had burned for approximately ten months, causing widespread pollution. Immediately following Saddam’s inva-sion of Kuwait, predictions were made of an environmental disaster stemming from the dictator’s threats to blow up captured Kuwaiti oil wells. Specula-tion ranging from a nuclear winter type scenario, to heavy acid rain and even short term immediate global warming were presented at the World Climate Conference in Geneva in November of that year.A Brazilian photographer, embed-ded in US Army, was taken to Kuwait from Saudi Arabia. He managed to take stunning photos of the hazard-ous and incredible circumstances of extinguishing the fires. In his memoirs, he writes: “The Kuwaiti oil well fires were spinning out of control. The big companies, pretending to be specialized in extinguishing fires, were watching

the spreading fires in frustration.” The award-winning photographer under-scores the stench of burning oil in the environment. “It was very dangerous to work there. Oil was in fire. The workers there knew quite well that even any con-tact between two metals could have ig-nited a new blaze to spread everywhere. I saw workers sitting on the ground and crying due to high stress.” “Working in such a hell was almost im-possible. One of the lenses of my camera melted in heat and I had only two 35 and 60-mm lenses. Due to such limita-tions, I tried to take the best possible photos of the biggest and the most dan-gerous oil well fire in the world. I was all in oil,” writes the photographer.“I had always two liters of gasoline and a box of paper tissue with me to clean my hands, polluted with petroleum. I regularly cleaned my lenses and my hands so that I could take photographs. I considered myself a firefighter then. I had worked with them for many days. I was tolerating all those hardships be-cause I was sure that I was recording an event which would never repeat itself.”

Iranians Intervene

A large number of foreign companies, mainly from US, were there to put the blaze out. The US companies had signed lucrative deals for extinguishing the Ku-

waiti oil well fires, but they soon realized that it was not so easy to accomplish the mission by themselves. The US experts had estimated that extinguishing the fires would last at least two years and had tried to convince the Kuwaiti of-ficials to reject offers of assistance from other countries.Due to the harmful impact of the fires on the environment, companies from other countries dispatched teams to Kuwait. The Kuwaiti people were angry at the slow pace of operations by the US companies.

Iranian Firefighters’ Activities

Iranians managed to extinguish a fire in several hours. Due to this success, which was widely reflected in international news, Kuwaiti officials gave Iranians more work to do. But rapidity was not the only outstanding feature of the job done by Iranian firefighters. Another point was that unlike the Americans and Hungarians who used explosives like TNT and Mig fighter jets, Iranians had developed their own less dangerous methods to put the blazes out. Iranian firefighters had managed to extinguish 20 well fires.

Working Conditions and Int’l Achievements

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drilling operations are considered to be the first step towards oil and gas recovery. It is definitely hard work to extract oil and gas from thousands of meters deep beneath the ground. drilling is the most instrumental

parameter in oil recovery. The Iranian people were the first in the Middle East to hear drilling bits piercing the ground in Khuzestan. In Masjed Soleyman where the first Middle East oil well was spudded, still stands a drilling rig dating back to 104 years ago. the more time passed the more experienced oil industry experts became in discovery of new hydrocarbon reserves.up to the 1979 Islamic revolution, foreign companies were in charge of operating drilling rigs and providing the relevant technical services. But later on, Iran’s drilling industry opted for indigenization of drilling tools manufacturing. to that effect, the requirements of the industry were identified precisely, so that the necessary equipment would be manufactured domestically.the presence of major drilling companies in Iran’s oil industry like National Iranian drilling Company (NIdC) has helped the country become self-sufficient despite restrictions by Western companies. No drilling project has been halted due to the shortage of equipment and parts. at present, NIdC does not even let one-hour delay when wells are being spudded. Before drilling operations begin, NIdC Operations directorate prepares a list of the necessary equipment so that the operations could go ahead as planned. Iran’s Petroleum Minister Rostam Qasemi and Managing director of National Iranian Oil Company (NIOC) ahmad Qalebani have introduced NIdC as a prominent example of domestic manufacturing. Petroleum Ministry has tasked a group of experts and engineers with identifying companies capable of manufacturing drilling tools, providing technical support to them and assessing their performance. The qualified companies would be registered in a databank with Petroleum Ministry.the companies are given the required equipment to manufacture. after the equipment is constructed, they are tested in operations before being mass produced. Oil industry experts regularly monitor the mass production for a better output. after the end of mass production, the products undergo engineering control so that they could be allowed into store.No domestically manufactured drilling equipment has been recalled or phased out for bad quality. Nearly 25,000 items are widely used in drilling. Iran has managed to indigenize nearly 20,000 of them thereby saving money. It is possible to reach self-sufficiency in manufacturing other equipment, but it should be kept in mind that the most significant factor in mass production is cost-effectiveness. that is why some items are never mass produced.Construction of drilling rigs in Iran has gathered steam in recent years, but the country still needs more rigs to meet the oil and gas recovery requirements set in the 2010-2015,i.e. the Fifth Five-year Economic development Plan.

It is widely believed that drilling industry is key to conquering oil and gas reservoirs. since drilling

is considered a hi-tech industry, and roughly one third of oil production costs go to drilling operations, the industry is viewed as vital for all producers. Over the past years, Iran has made significant progress in the drilling industry and has managed to cut the oil and gas production costs to a large

extent. undertaking endeavors to renovate drilling equipment, training human resources and above all, synergy of facilities and the necessary potential for the transfer of drilling rigs at the right moment would effectively modify the costs, which are analyzed in this article.the drilling costs could be divided into three categories, namely; exploration, production and gas injection into oil fields. Experts say in giant oil fields,

nIdC Springboard

for Drilling Rig Constructors

A Preview of Drilling Costs

By Setak Kakoei

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nearly 30 percent of the total investment is spent on drilling. For smaller fields, drilling accounts for 60 percent of the costs. the reservoir’s depth, the radius and angle of drilling are among factors swaying the drilling costs. the deeper the drilling, the more difficult costs estimates will be. More precisely, from 2,750 meters deeper, extra costs are imposed. Drilling costs could be defined as a function of the drilling

depth. this function includes other dependent variables like casing design, geological studies and the casing radius – which could all help us estimate costs. For depths lying in the 380-100,000 meters interval and higher depths, the cost estimates could be illustrated in linear or logarithmic diagrams.since the drilling costs are in proportion with the well depth in the form of a linear or non-linear equation. the type of the

well, its location and its depth are all determining factors in estimating the relevant costs. as the well gets deeper, new variables get involved in the estimates. spudding wells costs between 10 and 100 million dollars depending on its depth. Time is another significant factor in estimating the costs of such projects. If for whatsoever reason the project’s progress is slowed down or halted, the financier would face exorbitant costs. to calculate the total costs for a project, time is multiplied by the result of manpower pays plus equipment costs. another interesting point in the calculation of costs is the direct relationship between crude oil prices and the average number of drilling bits’ rotations. since 2000, drilling costs have experienced sharp fluctuations due to the upward trend in the oil prices. In other words, the higher the oil prices the higher the costs of letting drilling equipment. the companies owning operational rigs or possessing the technology for rig construction, and above all, those companies which have the most qualified drilling staff could overshadow the impact of oil price hikes on the drilling costs.For example, in 2000 when oil was at 26 dollars, drilling was charged 126 dollars per cubic foot, which soared past 400 dollars in 2006. Currently, each cubic foot of drilling costs around 1,000 dollars.there are a limited number of drilling rigs in the world and there is growing need for acquiring the technology to design and construct derricks. to that effect, Iran has sought to master the required technology for the construction of rigs in a bid to largely enhance its crude oil and natural gas production and play a more prominent role in the global markets.some technical factors contributing to the estimation of drilling costs are as follows:

1. Well control 2. Drilling fluid density

3. Wellhead pressure coastal equipment 4. Well design

Any flaw in these factors would make drilling more expensive. Moreover, cementing, drilling casting and drilling bits rotation account for the biggest share in expenses. as the number of casings rises, the ratio between drilling costs and depth increases.

Other technical parameters involved in the drilling costs are:

1. Pre-spud costs2. Casing and cementing costs3. drilling bits rotation costs 4. trouble costs (stuck pipe, twist-offs, lost circulation, hole stability problems, well control problems, casting and cementing problems, directional problems)

some experts believe that geological expenses and the well’s depth rather than the well’s radius increase the drilling. these two factors may lead to imposing the costs of bits not rotating; because if at present the bit penetration coefficient is enhanced about 80%- energy ranging from” very little” to “average”; saving the relevant costs by 20% is a possibility which can not be ignored.as far as safety is concerned, higher costs do not necessarily mean a negative point. For instance, between two 5,000-meter wells, one with four casings and one with five, operations in the former cost lower, but safety concerns always loom large. technologies focused on higher productivity, reduce the drilling costs. Precise design of drilling activity and concurrence of drilling with casing operations are among the options to reduce the drilling costs.last but not least, modern technology and well trained human resources may help reduce oil and gas well drilling costs.

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Q: The new parliament took office not long ago. How has the Majlis Energy Committee contributed to resolving the oil industry challenges?a: the Energy Committee is supposed to propose pieces of legislation for the oil, gas and petrochemical sectors. to that effect, the Energy Committee, which has its own oil, gas and energy subcommittees, has concentrated all its efforts on the progress of oil and gas sectors and has taken effective steps in this regard. the oil and gas subcommittees have held regular meetings with oil and gas experts from Petroleum Ministry, and a joint committee has been established to study obstacles, challenges and problems hindering exploration, production and exports.Negotiations have been held and the Energy Committee is firmly determined to remove the hurdles and accomplish its task, that is, clearing the

way for the oil industry so that Petroleum Ministry would achieve its objectives in the three sectors of exploration, production and exports.We have also held talks with the Planning and Budgeting Committee of Majlis in a bid to get more budget allocation for the development of oil and gas fields Iran shares with its neighbors.

Q: What do you think of the parliament’s monitoring of implementation of oil industry regulations?a: Majlis focuses mainly on progress in domestic manufacturing within the framework of the country’s 2010-2015 economic development plan. In the Energy Committee, we have also concentrated all our attention on the objectives and perspectives of the upstream oil sector.

Q: As you know, the environmental issues have become major causes of concern wherever the oil industry is active. What plans does the Majlis Energy Committee have to deal with probable problems related to the environment in oil and gas zones?a: It is natural to see environmental challenges surface, while oil and gas industries are making progress. to that effect, we have submitted a proposal to MRC for carrying out comprehensive studies on environmental challenges in assaluyeh, south Pars and North Pars. then, an all-inclusive plan could be adopted by Petroleum Ministry to safeguard the environment.Petroleum Ministry and its HsE directorate have already set up systems in the oil-rich spots in the country to have a better knowledge of the level of pollution there. It is also

Petroleum Ministry, MrC Study north Pars Environment By Parisa Rahnama

Mousa Ahmadi, first secretary of Iran’s Majlis (parliament) Energy Committee is a native of an oil- and gas-rich region in southern Iran. He is well aware of Iran’s oil and gas challenges and how people live in oil and gas zones.Ahmadi told Iran Petroleum that the Majlis Research Center (MRC) is currently conducting an environmental study in North Pars gas field. He says Majlis Energy Committee is also offering proposals to MRC in view of safeguarding the environment in North Pars. Here is the full text of the interview he gave to Iran Petroleum:


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No. 8

Halting crude oil sales for the purpose of completing the oil products’ value-

added chain would multiply job opportunities by ten, and earn the country huge profit and benefits. Oil industry has always been significant in creating job opportunities, but the problem is that the country has become dependent on petrodollars; therefore progress has been slow in entrepreneurship and making non-oil revenues. However, Iran’s oil industry has taken effective steps by attracting domestic and foreign investment for South Pars gas field, Mahshahr Port, petrochemical and other projects across the country.Iran is determined to establish a flexible and dynamic economy of resistance. Iran does not want a stagnated economy which would have no innovation.a dynamic economy would overpower restrictions imposed on Iran by some Western governments, and would clear the way for development. Iran will definitely succeed to overcome the problem, and it is up to the government, parliament and other state bodies to draw up the necessary plans for a dynamic economy of resistance.as far as the oil industry is concerned, the economy of resistance would create a value-added chain for the oil products and create job opportunities with high productivity. When we broaden our outlook, downstream industries like petrochemical sector would also get involved in the effort. underdeveloped zones should be specifically taken into consideration. Iran should establish other zones like assaluyeh in a bid to make the economy more resistant.If justice is respected in the distribution of job opportunities, investments and location for the projects people would be content and the country’s national security would be stepped up. People’s satisfaction does undoubtedly guarantee economic stability of the country.unemployment and low income would naturally lead to social abnormalities, while launching downstream oil and gas industries like petrochemical plants in Iran’s underdeveloped regions would reduce unemployment rate, which is in direct proportion with national security.

Creating Job Opportunities

through Halting Crude Sales

By Abbas Qaed Rahmat, Head, Majlis Job Creation Committee

building hospitals to serve local residents.Both Majlis Energy Committee and Petroleum Ministry are seriously following up on centralization of environmental measures in line with the country’s civil defense preparations. local residents also expect Petroleum Ministry to take measures focusing on development of the surroundings of the place wherein they live.

Q: Whereas you come from southern Iran you are well familiar with the challenges of oil- and gas-rich zones. How do you assess measures taken by Petroleum Ministry regarding the environmental issues?a: In my view, civil defense should become operational in North Pars. as far as south Pars is concerned, myriads approaches like establishment of greenbelt around petroleum

facilities have been proposed for reducing pollution.the second point is related to welfare facilities. Petroleum Ministry has promised to earmark the necessary budget to that effect.It is customary across the globe that local residents of industrialized zones are provided with some facilities, and petroleum industry is not an exception to the rule. those living in southern oil-rich regions expect Petroleum Ministry to create job opportunities in that region. Contractors and companies working in these zones should keep in mind that local residents are prioritized for being recruited.

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Whenever we review the future of oil and gas, shale

oil and shale gas become the talking point. Known as unconventional sources of energy, shale oil and gas are in fact organic-rich fine-grained sedimentary rocks from which hydrocarbons could be produced. Oil and gas shale have their separate stories. In the early 14th century, oil shale was used as an oil source in switzerland and australia. later on, in the 17th century, shale oil was used a source of light. But

modern and industrialized use of shale gas dates back to 1830s and 1840s in France and scotland. Europe was experiencing its industrial revolution and the demand for energy was growing.shale oil extraction was seriously taken into account in the united states, Brazil, australia, New Zealand, south africa, spain and sweden in the early 20th century. However, shale oil recovery was nearly halted after the discovery of huge oil reservoirs in the Middle East. australia and China were the only countries

to go ahead with oil shale drilling. at the outset of the 21st century, oil shale was again pushed into bold relief mainly due to enhanced demand for oil.Many believe that shale gas extraction began in New york in 1821, but industrial shale gas recovery was conducted in 1970. government and private sectors were debating gas shale drilling, but studies had concluded that drilling would cost too much.at present, gas shale is considered as the main source of natural gas in the

us. shale gas accounted for one percent of gas production in us in 2000. the percentage reached 20 in 2010 and is forecasted to hit 46 percent in 2035.Many experts believe that shale gas can influence the world’s energy sources balance. drilling is a key element in the discovery and extraction of shale gases. Hydraulic fracturing, or hydrofracking, is one of the significant drilling methods which revolutionized the industry. the method is a well stimulation process used to maximize the extraction

Are Unconventional Energy Sources More Valuable? By Arash Haji Khalili

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of underground resources. Hydrofracking was first applied unsuccessfully in 1947 in Hugoton gas Field in the us state of Kansas. But horizontal hydrofracking proved to be successful when applied in 1998 in Barnett shale gas drilling rig near alvarado, texas. this method of drilling caused profound changes in the shale oil and gas recovery in the us. Horizontal hydrofracking is a means of tapping shale deposits containing natural gas that were previously inaccessible by conventional drilling. It uses a mixture of 596 chemicals, many of them proprietary, and millions of gallons of water per frack. this water then becomes contaminated and must be cleaned and disposed.This method was first used for shale oil extraction in Bakken shale in the us state of North dakota in 2007.Currently in us, 35 wells are drilled annually by applying horizontal hydrofracking. According to official figures, one million wells have been drilled in this way since 1947. More than 80 percent of natural gas recovery drillings in the next decade is forecasted to require horizontal hydrofracking.

Recovery has reached staggering levels from the fields where horizontal hydrofracking drilling has been conducted. a prime example is Bakken shale which saw a 79 percent growth in its output in 2011. This oil field had produced a total of 144,000 b/d during five years (2005-2010), but its output reached 114,000 b/d in 2011 alone. Following this huge recovery, North dakota became one of the four oil-rich states in us. Bakken is forecasted to contain between 3 and 4.3 billion barrel of undiscovered oil – much higher than the 1995 forecasts of 151 million barrels. thanks to these huge resources, North dakota’s unemployment rate sharply fell from 9 to 3.8 percent.However, compared with its shale gas reserves, us shale oil reserves are meager. the United States is an influential country on the gas prices but its shale oil reserves could meet only one to two percent of the world’s needs by 2015.Experts maintain that unconventional energy supply could not be summarized in the united states as oil-rich states in the Persian gulf have taken this issue into account. Recently, National Iranian Oil

Company (NIOC) experts announced the discovery of shale oil reserves in western Iran. to that effect, NIOC director of exploration says shale oil is much heavier than what is known as heavy crude oil. “given Iran’s huge oil and gas reserves, shale oil and gas recovery does not have economic justification,” Hormuz Qalavand says.He, however, notes oil price hikes in the world markets may justify shale oil and gas recovery. “If for whatsoever reason the oil prices fall in the global markets, most shale oil projects would stop.”NIOC Exploration directorate has assigned the Institute for Petroleum studies of university of tehran the task of conducting a massive study about unconventional energy sources. sea of Oman is known to be rich in unconventional sources of energy.unconventional energy sources have made oil companies more competitive. Indian Oil Corporation’s recent investment in sudan’s oil fields has overshadowed its investment in the us shale gas fields.

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Brent Oil Prices (2000-2012)

International institutes have forecasted a different trend for the oil prices for 2103, while acknowledging that the prices would stay above 100 dollars per barrel. geopolitical factors, OPEC output and positive economic indicators in developing asian states would keep the prices above 100 dollars in 2013 in spite of excess output by producers. In the meantime, 16 international bodies have estimated the oil price at 108.2 dollars. analysts have revised down their 2013 forecasts due to the slow demand for crude and rapid production.Influential oil analysts at investment bank goldman sachs forecast lower oil prices for 2013 and 2014 and warned that the reduction could make it more difficult for oil companies to hit their growth targets. goldman now forecasts that the average price of international crude benchmark Brent will be 110 dollars a barrel in 2013 and 105 dollars a barrel in 2014 compared with a forecast of 120 dollars a barrel for this year. goldman’s previous forecasts for 2013 and 2014 were 130 and 85 dollars per barrel, respectively.

Credit suisse has raised its 2013 average price forecasts for crude oil, saying that while prices will trade in a range until 2015, they should move into the upper half of that range next year.It raised its 2013 Brent crude forecast to 115 dollars per barrel from 103 dollars per barrel, and for WtI to 106 dollars per barrel from 97 dollars per barrel.Citigroup global Markets lowered its 2013 Brent crude oil price forecast by 17.5 percent to 99 dollars per barrel.the bank lowered its 2013 Brent price

forecast to 99 dollars from 120 dollars and 2012 price forecast to 115 dollars from 125 dollars per barrel.JBC Energy is the only institute to have revised up its oil price forecast for 2013. It says global demand for oil would reach 1.2 mb/d next year and some Middle East countries will have to reconsider their oil supply policies.However,uBs and Barclays banks have not changed their forecasts. analysts have revised down their WtI forecasts more than their Brent forecasts

By Zeinab Karami, Energy Economics Expert

2013 Oil Price Forecasts Oil prices are affected in general by fundamental

and non-fundamental factors. Fundamentals include global supply and demand, global economic conditions, crude oil stocks, refining

conditions, seasonal changes, environmental regulations and price of other energy carriers. Fundamentals directly impact the crude oil prices. On the other hand, such factors as speculation, foreign exchange rate fluctuations and central banks’ decisions, political reactions and regional crises are known as non-fundamentals affecting the oil prices.global crude oil prices have seen severe volatility since the outset of the 21st century. During the first four months of 2012, Brent prices nearly stood at 125 dollars per barrel.undiplomatic positions adopted by certain Western governments against Iran and the persistence of Islamic awakening, or arab spring, in the Middle East and North africa – where mainly oil-rich countries are located – have cleared the way for speculation in futures markets.

speculators are currently betting on higher prices in the long term. some experts set the real oil prices between 60 and 70 dollars per barrel, but the fact is that speculators are instrumental in oil price hikes and its instability. speculators have already driven up oil prices sharply. On July 14, 2008, which was an unprecedented situation, each West texas Intermediate (WtI) barrel soared to 145 dollars.Regardless of the low economic growth of member states of the Organization for Economic Cooperation and development (OECd) and renewed risk of recession in the European union (Eu), speculators guarantee their own interest in the futures and options trading by destabilizing the oil prices through betting. the important point is that a large number of new factors influence financial and mercantile markets. These nouveaux riches have mainly invested in futures and options in order to benefit from price volatility and not due to the future supply shocks.

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because the us oil production growth has been more than expected. Bofa Merrill lynch has forecasted that the us oil supply would exceed 9.4 mb/d in 2013, up from 8.5 mb/d forecasted in February.Enhanced oil recovery by us, Iraq, libya and some other oil producers, pessimistic economic growth prospects for major oil consumers, low economic growth in developing countries, persistent economic turmoil in the euro zone and the dollar’s strength against euro would all lower the oil prices.In the meantime, there are factors considered to be threatening the oil market, i.e. they are likely to sharply raise the oil prices. the factors are as follows:

1. the possibility of geopolitical incidents cut in non-OPEC oil production and unrest in the region would disrupt oil supply.

2. the possibility of better economic recovery than forecasts for leading oil consumers like us and China and

finding a solution to Europe economic crisis would raise demand for crude oil.

3. the market plunges into turmoil psychologically due to the lack of a reliable level for excess production and stocking.

therefore, the oil prices are unlikely to experience a sharp decline in 2013. In general, the oil market uncertainty continues to help speculators pocket more profits. Due to this uncertainty, the forecasts for oil prices remain above 100 dollars a barrel. any shock into the market – either by producers or by consumers – would significantly affect the oil market. the International Energy agency (IEa)’s decision to dip into strategic Petroleum Reserves(sPR) in case of growing demand is only a short-term solution because any release of the strategic stocks would make the market more vulnerable to unpredicted incidents which would psychologically push the market into turmoil.

Dollars per bblInstitute

110Bofa Merrill Lynch

125Barclays Capital

120BNP Paribas

91CGES

117.25CIBC

99Citigroup

102.5Credit Suisse

104Deutsche Bank

110Goldman Sachs

110.68JBC Energy

113JP Morgan

112.5Lloyds

102.9Societe General

100UBS

95VTB

119ANZ Bank

108.2Average

2013 Brent Price Forecasts

PHOtO: MOHaMMad gHadaMalI

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untapped oil and gas fields in Iran’s territorial waters have prompted

Iran’s oil industry to make long-term plans for their development. Mahmoud Zirakchianzadeh, managing director of Iranian Offshore Oil Company (IOOC), has said: “this company is negotiating $14 billion worth of deals this year [to March 2013].”The official said the heads of agreement (HOa) signed for “Farzad A” field between the IOOC and an Iranian contractor. “Based on the

HOa, the contractor has conducted the pre-MdP and 3d seismic testing.”Zirakchianzadeh said IOOC is the second company involved in development of oil fields, adding that it is becoming the top company in development projects in two years.

Sirri, Persian Gulf Gas Hub

Zirakchianzadeh said transforming sirri Island into the Persian gulf gas hub is one of the most significant plans the IOOC has under

way. “since this island is connected to Kish and Qeshm islands, as well as salman Field and assaluyeh through pipeline, we have made planning to connect it to abu Musa Island and some neighboring states so that sirri would become the Persian gulf gas hub.”The official expressed hope that the construction operations would begin in the near future.

Lavan to Become Petrochemical Hub

Zirakchianzadeh said

the IOOC also plans to make lavan the third petrochemical hub in the country. “to that effect, we are in close collaboration with the National Petrochemical Company (NPC).”He said lavan is already a special economic zone, adding: “In order to make it the third petrochemical hub of the country, 3 bcf of gas needs is to be delivered from the nearby islands to lavan for conversion into petrochemicals.”

IOOC, RIPI Conduct Oil System Modeling

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Qeshm to Become Gas-to-Wire (GTW) Hub

the IOOC chief said development of “Forouz B” for electricity production is one of the prioritized projects of the company. He added that the project for development of this field was awarded to an Iranian contractor several months ago.“this contractor has already conducted more than 86 percent of 3d seismic testing and pre-MdP. Consultants are being chosen now.”Zirakchianzadeh said

more than $ 200 million need to be invested in this project this year, adding that National Iranian Oil Company (NIOC) has agreed to supply the necessary gas for the generation of 12,000 megawatts of electricity to applicants for 25 years.

Water Injection into IOOC Fields

Zirakchianzadeh said the amount of water injected into the IOOC-run oil and gas fields would total 530,000 barrels by next calendar year beginning in March 2013.

He said that water injection is a well-known method for secondary recovery from oil fields, noting that IOOC has four decades of experience in enhanced recovery.“the volume of injected water into the fields run by

this company has soared from 200,000 b/d to 420,000 b/d in recent years. this figure will increase by 110,000 b/d after several projects come on-stream next year,” the official said.

25% Improved Recovery from Sirri Fields

Zirakchianzadeh said two water injection projects are to be launched in sirri by March 2013, adding that the projects would enhance recovery from the Sirri fields by 25 percent.The official said water and

gas are to be simultaneously injected into Doroud field in order to see its recovery rate rise from 23 to 33 percent.

Revival of Depleted Well

the head of the IOOC said an acid fracturing project has been conducted in sirri in order to revive a depleted oil well. “By implementation of this project, the depleted well is now producing 2,000 b/d.”

“this project has been carried out in the country for the first time. The IOOC is studying this project for other depleted wells.”

IOOC Fields Recovery Rate to Rise

Zirakchianzadeh said two important projects – 3d seismic testing and oil systems modeling in the Persian gulf and sea of

Oman – are under way in order to enhance recovery from the IOOC-administered hydrocarbon fields.He said the oil systems modeling project in the Persian gulf and sea of Oman – known as Persian gulf Pearl project – is a significant national research project.“under this project, oil rocks and displacement of oil and gas in the Persian gulf

and sea of Oman since the Paleozoic Era are studied.”Zirakchianzadeh said this project is under way by the Research Institute of Petroleum Industry (RIPI) and several other domestic and foreign research centers.this project, already 41 percent complete, is planned to become operational in three years.

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Research Center for Industrial Protection, affiliated with the Research Institute of Petroleum Industry (RIPI), has conducted a research entitled “Regulating Paints and Coating systems of atmospheric surfaces of Gas Refinery Installations” in cooperation with Research and technology directorate of National Iranian gas Company (NIgC).during visits to oil, gas and petrochemical facilities in the past one year, some instal-lations had shown signs of improper painting and early coating destruction. In some cases, paint had been deterio-rated in less than six months, while on average; industrial paints are expected to function for 10 years. When painting quality is not appropriate, cor-rosion occurs and repainting is needed. Repainting the outer surface of a one-million-barrel tank and one meter of its inner surface would cost around six

trillion rials.Nearly 30 percent of the paints used for coasting are indus-trial solvents, mainly aromatic hydrocarbons. Repainting in-creases air pollution and there would be no option but to stop the work or reduce production. That would definitely be loss-producing.to resolve this problem, RIPI researchers defined the afore-mentioned project about paints and coating in gas refineries. This project defines a process to prevent destruction due to corrosion of gas refinery facili-ties. among the common meth-ods of corrosion prevention, painting plays the prominent role, and based on documents, painting lowers the possibility of corrosion by 35 percent.the study began with visits to all gas refineries for assessing the painting conditions of their installations. It was known that such factors as improper choice of coating systems and low

quality of paints have affected the function of coating sys-tems. Two refineries, located in different climatic conditions, were selected.this project is conducted in three phases. In the first phase, data are gathered about paints and coating systems used in the refineries. The reason of early destruction of coating and pain-ing is examined.the second phase is about selecting the proper paint and coating for the installations. to that effect, influential factors are determined before qualified contractors are picked. the whole operation needs to be monitored regularly, while the instructions related to testing, preparation; coating and in-spection have to be drawn up.the third phase of the project deals with designing software to gather data about coating of the outer surface of gas refinery installations in a databank and analyze them.

The first phase of the project started last March and is ex-pected to last one year. during this time span, the paints used in the refineries installations and their destruction is exam-ined.given the key role of the environment in selecting coat-ing systems, the refineries are classified based on ISO 9223 standards.the paints and coating systems should have a useful life of at least 10 years, while meet-ing the latest international standards. Painting based on the operational conditions of the refineries, no repetition of preparation and painting, no halt in the predation, no reduction in the output, lower pollution, higher productivity, less destruction and corrosion are among the significant out-comes of the project.

Preventing Corrosion in Gas Refinery Installationsstudies indicate that direct and indirect

costs from industrial corrosion signifi-cantly impact the economy. Oil, gas, petrochemical, chemical, infrastructur-

al and transportation sectors are at the receiv-ing end of these costs.the expenses are not limited to economy and one has to take into account possible losses of life due to the scourge of corrosion.


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Project Significance

due to the growing prices of oil products, increasing importance has been paid to recycling scrap plastics, encouraging many countries to invest vastly in generating energy from plastic wastes.In Iran, per capita waste production is much higher comparing to the other countries and less than one percent of the wastes are recycled. In this project, conducted by the Research and technology directorate of National Iranian Oil Refining and Distribution Company (NIORdC), a new approach is presented about converting plastic wastes into liquid fuels. this method will also help to face an environmental challenge, that is, costly annihilating plastic wastes like irrecoverable vessels and hospital wastes.transforming these polymer wastes into liquid and gas fuels is valuable as burning these materials, mainly solid, takes long time because of their additives and they have low calorific values. In the pyrolysis process, these materials are decomposed and lose their properties. In most cases, the liquids and gases obtained from pyrolysis of these compounds are high calorific value fuels.

Objectives

the main objective of this pilot experiment is to produce gasoline and liquid fuels from plastic and tire wastes, for the first time in the Middle East. In this multi-purpose pilot project, a variety of processes including catalytic Pyrolysis, thermal pyrolysis and hdyrocracking have been studied. another objective was to resolve the harmful impacts the plastic and tire wastes leave on the environment regarding the extent of their production which is not to be ignored.

Introduction

Polymers are, either naturally or artificially, a large part of the materials around us. some of them are plastics, tires, wood and foodstuff. Every day, millions tons of these materials are discarded, causing a major environmental challenge in the third millennium. If used correctly, these wastes could play a major role in providing a part of global energy needs.Pyrolysis is a thermochemical decomposition of organic material at elevated temperatures without using oxygen. It involves the simultaneous change of chemical composition and physical phase, and is irreversible.

Steps to Implementation In order to show the significance of the issue, general data are first presented for the wastes and their elimination methods. then, customary methods of converting polyolefin wastes into liquid fuels are discussed. afterwards, the pilot facility is constructed to facilitate the study of various polymer grades and their differences with each other in the polymerization process. In the end, methods of gasoline production are presented. the necessary feedstock for this project should be such that minimum properties of gasoline could be met. For this purpose, two issues have to be taken into account; the feedstock composition should be close to the composition of disposed plastic wastes and it should be appropriate for gasoline production. to achieve this, several points need to be taken into account. First of all, all produced polystyrene is disposed of and nothing is recovered. secondly, a major amount of polyethylene and propylene which are as film or some other final products of plastics are buried and not recovered. thirdly, polyethylene, polypropylene and polystyrene, which could be aggregated or waste monomer, lacking customer,

are partly discarded. after all, some oxygenated polymers are thrown away while they could provide oxygenated compounds.

Results

this project assessed the thermal resistance of different polymer grades, their destruction mechanism and the variety of products by applying thermal pyrolysis or catalytic thermal decomposition, and using various carrier gases. as the results show, the type of polymer, its molecular mass as well as its molecular mass distribution affect the final products. Various compositions have been surveyed and the best one has been selected using FCC catalyst for gasoline production.

Achievements

• acquiring technical knowledge for converting plastic and tire wastes into premium gasoline• Converting plastics and wastes into strategic products of high value-added to serve the economy and the environment• supplying part of the country’s fuel needs by converting tire wastes into liquid fuels• Reducing municipality costs in plastic wastes disposal like irrecoverable vessels and hospital wastes

Pilot Study on Producing Liquid Fuels from Scrap Plastics & Tires

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Iran’s recoverable crude oil reserves were estimated at 151.3 billion barrels last year. this year, the reserves have crossed 155 billion barrels, expected

to rise in the coming years because so far only one third of Iran has undergone exploration survey. as much as Iran produces crude oil every year, new reserves are discovered. But giant oil reservoirs like ahwaz, Aghajari and Maroun oil fields are no longer discovered in Iran and even in the world.given the natural loss in production from reservoirs, Iran has to adopt modern Enhanced Oil Recovery (EOR) methods in a bid to produce 5.1 million barrels per day in three years. today, 80 percent of Iran’s crude oil is produced from the fields in the second half of their life. For instance, production from Maroun field has fallen from 920,000 to 400,000 barrels. Iran’s giant oil field Ahwaz once accounted for one-fourth of the country’s oil production. Today, oil fields produce 10,000 to 15,000 barrels at best. Enhanced Oil Recovery is a top priority in Iran’s oil

industry. Water injection into offshore oil fields has been the method applied over recent years to enhance recovery. But water injection is not enough due to the low viscosity of water. If a polymer solution is added to water, the viscosity would rise and more oil would be pushed up.the Research Institute of Petroleum Industry (RIPI), which is the scientific arm of the oil industry, has defined four projects in view of preparing the most effective polymer for that purpose. Jamal alaei, RIPI researcher specializing in the application of polymers in the oil industry, has shared his views with Iran Petroleum.according to him injecting polymer solution into water before injection into oil fields would improve EOR. another additive could be also mixed to reduce the surface tension and prepare the grounds for the injection of polymer solution. to do so, the polymer solution should be first spread on a sand bed which would provide researchers with more details. the next step would be to receive oil cores from operational companies and regularly assess the applied polymer. application of simulators like HP would shed light on the effectiveness of the solution. an experienced contractor is required for cooperating in this research

Revival of Mature Oil Reservoirs through Using Polymers


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project. RIPI is also studying injection of polyfoam and

leading it into oil reservoirs.Alaei confirmed that RIPI

is intent on replacing metal structures with

low-density and easily-processed

polymers, although

they are not resistant

enough.“yes,

but we intend

first to

reinforce them

before any replacement.

to that effect, we will

use polymer composites. to

reinforce these materials, nearly 30 percent of glass

fibers are added to them. The result has been desirable most of the time, but the weight of these materials increases

and to remedy this problem nanotechnology is needed,” he replied.RIPI first started its activities in this field in 2005 and managed to explore the oil industry’s priorities in three times. the first step was fabricating nanocomposite hydrogen to control holdup, the second step was fabrication nanocomposite pieces for separating natural gas and the final step was upgrading the quality and value-added of polymer products in petrochemical plants. to that effect, one national and one international invention have been patented for RIPI.after identifying the necessary infrastructures for production of nanocomposites, two industrial projects were defined. One of them was to make a nanocomposite shield to protect paints. In this project, destructible nanocomposites, which are of higher quality compared with ordinary polyethylene, were fabricated. this research center also developed nanocomposites resistant to bacterial growth in electric devices like washing machines and refrigerators. they are antimicrobial and resistant to gas penetration.Oil fields produce water besides oil. up to 10 percent of water production is natural, but sometimes this percentage more than doubles. In some oil wells of Iranian Offshore Oil Company (IOOC), nearly 70 percent of the output is water which is a big challenge for production companies. asked to say if RIPI has any solution to the consequences of water injection, alaie said: “a variety of technologies e.g. gel injection is applied to resolve this problem. there are four to five types of gel for injection. this technology was first used in 1980, but it cannot be effective in Iran due to the high temperature in Ian’s oil and gas fields and the ordinary gels’ saltiness of around 200,000 ppm. Within the framework of a two-year project, RIPI has managed to produce polymer

gels by using nanotechnology so that the polymers could be durable in Iran’s reservoirs.”Marathon Oil Corporation and shell are the only companies capable of producing these gels, but Iran’s Jamal alaei has developed the technology for producing a polymer gel resistant to salty waters.“Currently, RIPI is in talks with oil and gas production companies like Iranian Offshore Oil Company (IOOC) and Iranian Central Oil Fields Company (ICOC) so that a major project is defined in view of indigenizing the technology.”the production of unwanted water throughout oil and gas production would be minimized at the lowest cost possible and by using polymer gels resistant to salty waters. that would allow controlling extra water produced in the oil and gas fields. Polymer gels cost much lower than ordinary gels and that is a significant point for oil companies.Moreover, a project entitled: “access to technology for Fabrication and application of Polymer Nanocomposites in Oil Industry” was conducted in view of meeting the requirements of the oil industry. In the first phase of the project, nanotechnology was used to reinforce and improve the efficiency of polymer hydrogen to face difficult conditions. In the second phase nanocomposite membranes were produced for separation and purification of gases. and in the third phase, polymer nanocomposites were produced to be resistant enough to bacterial growth, gas penetration and bio-destruction.“these materials can boost industrial production and could be used in different sections of the oil industry like water management in the oil and gas wells, enhanced recovery from oil reservoirs, separation and purification of gases, increasing resistance to oil structures flares, facilitating crude oil transfer and reducing environmental pollution,” alaei said.

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Q: Would you please start with Iran Code missions and its activities in the oil industry?a: today, the growth of human science and technology based on growing needs has largely diversified commodities. this high diversity has faced organizations with complicated procedures. Now the question is to know which mechanisms could be worked out in view of simpler, more effective and productive management.since 2000, certain mechanisms have been designed, and in the light of the growing ICt technology and object-oriented developments, certain methods have been developed for designing systems. these methods help organizations know their entities and register their information in databanks. One principle consists of identifying the entities and attributing a code to each entity. after that, the data related to each entity would be identified and recorded in a databank. Finally, the data is shared among all beneficiaries. In that way, registration of basic data about a commodity, service or entity serves as a common language among those who need information about commodities. World’s oil giants concentrate on the procurement of commodities. For instance, following the three aforesaid principles, British shell has established an integrated supply databank although it offers more than 300,000 items. the same goes for Japan’s carmaker toyota.Productivity is sometimes lower in Iranian enterprises than in foreign ones. If the three principles are observed in an organization and each commodity is given a code, a common

language would be created and the technical information would be recorded in a databank, and productivity will rise.In the organizations that have not implemented this process, information about an item is registered and saved a lot of time and prevents repeated activities. But when a coding system is implemented, the diversity of commodities declines and the costs would be reduced.For example, if Iran’s Petroleum Ministry is dealing with 1.5 million items, implementation of commodity coding system would more than halve the figure. Moreover, procurement costs would be cut by 60 percent. as much as diversity of commodities decreases, productivity increases.

Q: What challenges do you think Iran’s oil industry is faced with in terms of commodity procurement? What solutions do you propose?a: Currently, efforts are mainly focused on indigenization of commodities and equipment, and fortunately Iran Code can make great contribution to that end.One challenge in Iran’s oil industry is the high volume of procurement. Iran Code can help reduce this big volume. Iran Code can help beneficiaries from the oil industry to reduce the costs for purchase of commodities and equipment.Establishment of knowledge bases for commodities and services in the oil industry is a must. Cultural activities and information, education and promotion of advantages of implementation of coding system would encourage organizations to apply this system and benefit from its advantages.

Implementation of a system in an organization requires regulations, instructions, systemic and legal obligations. to that effect, in order to promote coding system in the oil industry companies, National Iranian Oil Company (NIOC) It department should set obligations. Effectiveness of this system needs management support and legal instructions. Petroleum Ministry should follow up on this issue more sensitively. the ICt technology needs to be the top priority in procurement. Implementation of this system does not cost too much.

Oil Code, Prelude to E-Procurement in Iran Oil Industry

National Iranian Center for

Product and service Coding

(NICPsC) has developed a classification and coding system to gather data about products and their suppliers

and record them in a comprehensive web-based

database known as Iran Code. Iran Code can provide

organizations with useful data about choosing

their desired supplier, facilitate management of available items and can

lay the groundwork for the implementation of electronic

procurement.government’s Electronic Procurement system is

a national experience for implementing electronic procurement in state-run

bodies benefiting from Iran Code. Iran’s oil industry offers a good opportunity for the implementation of e-procurement given the diversity of transactions,

growing number of suppliers and high turnover. that

could lead to saving money, boosting efficiency and

making more transparent transactions.

In order to get familiar with the latest developments regarding Iran Code’s

plans for the oil sector, Iran Petroleum has interviewed

ahmad gholamzadeh, managing director of

NICPsC.

amirhossein Hashemi Javid

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Q: What are the advantages of implementing coding system? Has Iran had any successful experience to that effect?a: Implementation of commodity coding system while reducing costs increases productivity. the system serves as an information infrastructure to facilitate production, procurement and

distribution. When the data are standardized, the purchase and sale system becomes easier, more cohesive and more integrated. that would also facilitate domestic production. For example, Bahman group implemented the commodity coding system and managed to reduce the diversity of its commodities from 60,000 to 12,000. Entekhab Bartar Company, producing household appliances, slashed its diversity from 31,000 to 5,000 items.

Q: In the absence of Iran Code, how is the process of implementation of e-procurement going on in the oil industry?a: Procurement accounts for 60 percent of oil industry costs, which are spent on knowing the supplier and the purchase. as far as procurement is concerned in the oil industry, two categories of data are needed. The first category is about the commodities and their coding, and the second category includes data about suppliers. the need for coding in the oil industry was felt 50 years ago and the MEsC system was designed. But MEsC cannot serve as an infrastructure for electronic procurement system because it has been installed separately in five operational zones. When an information system is not integrated and cohesive, an item might have been given five different codes.at present, Petroleum Ministry purchases its required commodities based on its vendor list.When different codes and names are presented in a system, the diversity of commodities increases, and some purchases become repetitive. Consequently, the organization would face stocked commodities.

Q: How does Iran Code help the Petroleum Ministry for the commodities purchases from abroad?a: If we intend to indigenize a foreign product we need to know the specifications of the product. Iran Code facilitates this job. If each item has an electronic certificate and a standard, Petroleum Ministry could easily inform manufacturers what commodities it needs.

Q: What has Iran Code done to create such communications with Petroleum Ministry and its suppliers?a: the oil industry deals with diverse commodities. Currently,

nearly 70 percent of every oil industry project’s costs go to the procurement of commodity and equipment. Iran Code is currently following up on two commodity coding projects in the oil industry. Implementation of these projects could lay the groundwork for e-procurement. under a contract with Petroleum Ministry, Iran Code has started implementing coding system in the oil industry and has so far created electronic certificate for more than 700,000 commodities and equipment. Iran Code is implementing the system in 140 companies affiliated with Petroleum Ministry.Petroleum Ministry expects the coding system to codify 1.5 million items used in the oil industry so that their data could be registered and shared. Implementation of this project began in 2010. In the first phase, 700,000 items were coded.

Q: What about Iran Code-based electronic procurement in the oil industry?a: Iran Code prevents repetition of codes when it has access to commodities’ data and their technical specifications. An immediate result of implementing these systems is a decline in the diversity of items and costs. Moreover, domestic suppliers would be identified.Iran Code provides Petroleum Ministry with the necessary data about commodities and their suppliers. the ministry would have the chance to choose from among the suppliers. after the coding network is created in the oil industry, it would become connected to other databanks of Iran Code.E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet as well as other information and networking systems, such as electronic data interchange and enterprise resource planning.

Elements of e-procurement include request for information, request for proposal, request for quotation, RFx (the previous three together), and eRFx (software for managing RFx projects).the e-procurement value chain consists of indent management, e-tendering, e-auctioning, vendor management, catalogue management, and contract management. Indent management is the workflow involved in the preparation of tenders. this part of the value chain is optional, with individual procuring departments defining their indenting process. In works procurement, administrative approval and technical sanction are obtained in electronic format. In goods procurement, indent generation activity is done online.all Petroleum Ministry companies can register in this system to receive the necessary data about the commodities they need. after searching among commodities, they order their desired item by simply entering its code.the technical data available on Iran Code are comprehensive and Petroleum Ministry can systematically search and find its desired products.

Q: What advantages does the implementation of e-procurement have for the Petroleum Ministry and what challenges are overcome?a: after full implementation of coding system in the oil industry, the grounds would be prepared for the development of e-supply system. Coding system would reduce the diversity of items while providing a good opportunity to know potential suppliers.after Oil Code is linked with Iran Code, e-procurement software could be installed.

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Iran is the top holder of hydrocarbon reserves in the world. Extraction of these God-given

resources deep underground requires special pumps and rotary machinery. Moreover, transfer of gas in pipeline needs compressors and pressure booster stations. To that effect, for each 1,800-kilometer oil and gas pipeline, 18 compressors are needed. The giant offshore South Pars gas field could be divided into 40 phases and therefore 400 compressors would be required. On the other hand, compressors can work up to 10 years and the need to be replaced then.Acquiring the technology to manufacture rotary machinery has been a major cause of concern for the oil and gas sectors. Although more than a century has passed since oil operations began in the country, Iran was until recently importing the bulk of equipment needed in the oil and gas sectors. Turbocompressor was chief among them. Given the extension of gas networks on a daily basis in the country, it was significant to manufacture turbocompressors domestically in a bid to save money. OTC envisaged manufacturing turbocompressors in 2000. Iran’s Turbogenerator Company (ITC) was established in 1991 in order to manufacture turbogenerators

for power plants. Nine years later, the company was tasked with producing natural gas turbocompressors and the company was renamed TCMFG.Manufacturing turbomachines in the country is a strategic objective and the main philosophy behind the establishment of OTC was to develop turbomachinery in the country. OTC is active in engineering, construction and installation of gas booster stations as well as implementation of EPC-based projects. Three companies have been born out of OTC, namely Oil Turbo Compressor Engineering Company (OTEC), Kala Gas Co. Pars (KGC) and Oil Turbocompressors Construction Company (OTCC).OTC, whose main partner is a European company, has managed to transfer 90 percent of compressor technology and 52 percent of turbine technology.

OTC Products’ Services

Given its strategy of maximizing national share in manufacturing the necessary equipment for the oil and gas industries, OTC has managed to indigenize the technical savvy required for manufacturing power plants’ turbogenerators.Services provided

by OTC include manufacturing 25-megawatt turbocompressors and turbogenerators, processing electrocompressors, ethylene electrocompressors, gas injection compressors, designing gas booster stations, small and medium-sized gas-operating power plants, and utility services for oil and gas refineries.Other activities of OTC include reparation and maintenance of turbocompressors and turbogenerators, joint collaboration with foreign companies for after-sales services, EPC-based oil and gas projects, offering technical, financial and commercial consultation and assessment about oil and gas

Oil Turbocompressors Indigenized

Oil Turbocompressor Company (OTC) was established in January 2000 by Petroleum Ministry Pension Fund to contribute to transfer of technological knowhow for manufacturing 20 to 30-megawatt turbocompressors. The main strategy followed by OTC was to make maximum use of the capacities of domestic manufacturers. Based on this strategy, nearly 50 domestic companies are currently cooperating with OTC leading to the indigenization of the manufacturing of industrial turbocompressors and preparation for manufacturing turbogenerators for power plants.OTC has been collaborating with German Siemens for manufacturing gas turbines and gas compressors. The products offered in the country are up to the European standards. OTC is owned 66 percent by Petroleum Ministry Pension Fund and 34 percent by the Turbo Compressor Manufacturer (TCMFG). OTC is a holding company with several subsidiaries.

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tenders.OTC’s main customers are National Iranian Gas Company (NIGC), National Iranian Oil Company (NIOC), National Petrochemical Company (NPC), Gas Engineering and Development Company (GEDC), Petropars Company, Kharg Methanol Company as well as National Iranian Oil Products Distribution Company (NIOPDC).Using the latest technology in the world requires compliance with international standards, specifically American Petroleum Institute (API) standards.API distributes more than 200,000 copies of its publications each year. The publications, technical standards, and electronic and online products are designed, according to API itself, to help users improve the efficiency and cost-effectiveness of their operations, comply with legislative and regulatory requirements, and safeguard health, ensure safety, and

(perhaps most controversially) “protect the environment”. Each publication is overseen by a committee of industry professionals, mostly member company engineers.These technical standards tend to be uncontroversial. For example, API

610 is the specification for centrifugal pumps, API 675 is the specification for controlled volume positive displacement pumps, both packed-plunger and diaphragm types are included. Diaphragm pumps that use direct mechanical actuation are excluded. API 677 is the standard for gear units and API 682 governs mechanical seals.Turbocompressors are the main component of gas booster stations. They are comprised of two machines – gas turbine and gas compressor. Manufacturing turbomachines, gas and industrial turbines requires a sophisticated technology. Few countries own this technology, but Iran is one of them. Germany, Italy, United States, Russia and Ukraine are among the proprietors of this technology.Gas turbine and compressor are strategic products in the oil industry. Over the past 35 years, nearly 700 turbines and compressors – designed in 32 models – have been used in the oil and gas sectors with a nominal capacity of 4,500 megawatts. Until recently, no European country had launched after-sales services office in Iran and up to the 1979 Islamic Revolution, Iranian engineers and technicians were always kept at distance, so that they would not learn how to fix the turbines.But currently, the country has reached a stage where it can manufacture, install

and operate turbines and compressors, not to mention after-sales services. The number of countries manufacturing compressors is more than those developing turbines. Turbine is more sensitive and accounts for 85 percent of a turbocompressor’s task.Kavosh High Pressure Cylinder Manufacturer is an offshoot of TCMFG. It produces 200,000 tons of compressed natural gas (CNG) cylinders for cars. It has signed contracts with Iran Fuel Conservation Organization (IFCO), Saipa and Iran Khodro – both top car manufacturers.Although OTC products could be supplied on global markets and they can vie with the products of big companies, Iranian markets are not still saturated and they could not be exported yet.

OTC Achievements, Standards and Certificates

OTC is the first holder of ISO 9001: 2000 for manufacturing 25-megawatt turbocompressors in the country. It has also been awarded certificate by Management and Planning Organization (MPO) for its EPC-based gas booster station projects. In 2006, OTC was praised for being an exemplary entrepreneur.OTC conducts specific tests on the turbines and compressors in a bid to guarantee their functioning in view of

acquiring SGS certificate. SGS S.A. (formerly Société Générale de Surveillance) is a multinational company headquartered in Geneva, Switzerland which provides inspection, verification, testing and certification services. It has around 70,000 employees and operates over 1,350 offices and laboratories worldwide.Turbocompressor is a strategic and technologically advanced product. Manufacturers of turbocompressors are loath to provide their technology to others.

Objectives and Strategies

In a bid to realize the objectives sets in Iran’s 20-year vision plan, OTC has based its strategy on indigenizing the technology for turbine manufacturing in a bid to be able to supply its products on domestic and foreign markets. Acquiring the new technology for manufacturing turbocompressors for the oil, gas and petrochemical sectors, maximum use of the capacity of domestic manufacturers, facilitating the transfer of technological savvy for turbocompressor manufacturing and creation of new job opportunities are among the objectives pursued by OTC.OTC produces 18 turbocompressors a year, but the country needs 40 of them every year and the company is planning to raise its output.

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Qeshm Voltage Co. Innovator in Automation &

InstrumentationPHOtO: HassaN HOssEINI

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the idea of automation was first developed in ancient greece in

a bid to bring about welfare and facility. greek scientist Hero of alexandria (lived c. ad 60) invented the first automotive system for the monasteries’ doors. He had designed the doors in a way that they opened immediately after a flame was lit in the altar. However, the real changes occurred with the industrial revolution in the early 18th century. today, factories need to install easy-control systems for better productivity and avoiding accidents. Instrumentation and control are the fundamental sciences applied to that effect.automation is progressing on a daily basis. Earlier, pneumatic systems were used in the oil plants. today, controlling systems have advanced and they are available in electronic, dCs and PlC forms.In the oil and petrochemical industry, it is highly significant to monitor units and sites with instruments in a bid to keep a tab on risks and prevent probable accidents.automotive systems in factories operate like brain and neurons in human beings’ body. that is why they are so vital for the industry. there is strong evidence of the strategic role of automation and control in different industries.International statistics indicate that several industrialized countries are the leading manufacturers and consumers of this technology. the united states, Japan and germany (the world’s three largest

industries), account for respectively 39, 23 and 10 percent of automotive systems’ application. they also manufacture 36, 26 and 16 percent of the relevant equipment and software. These figures should motivate Iran to focus on the application of advanced automotive technology in its industries if it really intends to win a proper position in the oil industry. the automation technology is competitive and it enjoys a special position in all industrial disciplines. Competition in the world’s diverse markets requires industrial renovation in the country in view of improving the design quality and manufacturing. to that effect, automation plays a strategic and determining role. Now the question is whether Iran has paid enough attention to automation and its application. as far as automation systems are concerned, only a few Iranian companies are working in the power industry, and their main job is providing services, installing and repairing the equipment, and sometimes holding relevant training courses. Qeshm Voltage Company is one of the companies which are active in designing and manufacturing industrial robots and automotive networks.Qeshm voltage started its activities in 2000 by manufacturing automotive equipment and instrument. due to its remarkable work, it managed to win the representation of german siemens in 2001. By 2008, this company attracted over 2,500 permanent customers from oil, gas, petrochemical, auto making, foodstuff, and

paper and glass industries. at present, Qeshm Voltage Co. is supplying automatic systems to all but production lines in Iran. Over the past 12 years, the company has attracted more customers and diversified its services.Omid Barezi, sales engineering manager of Qeshm Voltage Co., says the company has set up an experienced technical team to implement projects for the industrial sector. It has also launched a reparation unit to handle after-sales and overhaul services for factories.the technical unit of Qeshm Voltage can design and implement automation for projects from a to Z. For instance, petrochemical companies give their data about their products to this company whose engineers would design control and power supply system under EPC contracts.In the process of launching electric systems, there are two acronyms widely used: Factory acceptance testing (Fat) and site acceptance testing (sat).Fat is usually performed on the site of the vendor before the equipment/application is purchased, to ensure that the product has all the required functionality. sat is the type of testing performed on the site to ensure that the application/equipment works as intended.after being tested, the equipment enters the phase of operation. technicians from Qeshm Voltage keep a tab on the operation of the system to make sure that everything is working properly. In case no fault emerges, the project is finished.Barezi says: “several points

“Qeshm voltage started its

activities in 2000 by manufacturing

automotive equipment and instrument. Due to its remarkable work,

it managed to win the representation of

German Siemens in 2001

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are highly significant in the implementation of these projects. they need to be taken into account seriously. The first point is correct design. In case of defective design, any changes to expensive components would cost too much. the second point is coordination with other contractors involved in a project. We are part of a bigger structure and we have to collaborate with a construction contractor, mechanical engineer and electrician. absence of coordination in whatever way will directly impact the product.”Qeshm Voltage has not confined itself to being a mere importer of technology. In parallel with selling the siemens product in Iran, it has focused on indigenization of technology for automotive systems and instruments.Barezi notes that most

Iranian factories were totally unfamiliar with automation technology when Qeshm Voltage started work. to that effect, the company promoted this technological knowhow in the country.training expert human resources to operate advanced electric systems in Iran was a necessity and Qeshm Voltage paid special attention to this parameter. training has been one of the unforgettable jobs carried out by Qeshm Voltage. all foreign factories selling products to Qeshm Voltage consider training as the inseparable part of their sales.Within seven years, Qeshm Voltage has fared remarkably well in training human resources. at present, Iran no longer needs foreign instructors of instrumentation. Qeshm Voltage has trained more than 10,000 engineers since

its establishment. despite its low-profile background in instrumentation technology, Iran has engineers capable of handling such projects.signature of memorandums with universities and technical centers in the country resulted in compiling automation training sets in the country.Qeshm Voltage has been exporting its technical and engineering services related to automotive systems to Venezuela, Qatar, Oman, united arab Emirates and turkmenistan.today, Programmable logic Controller (PlC) is an instrument widely used in the developed countries; however, it experiences technical failure after some time and the production line comes to a halt. PlC is a digital computer used for automation of electromechanical processes, such as control of machinery

on factory assembly lines, amusement rides, or light fixtures. PLCs are used in many industries and machines.Qeshm Voltage has a travel sheeting group, tasked with dispatching technicians immediately to any factory facing problems with PlCs. a 24-hour hotline is also available for the factories and industrial entities using Qeshm Voltage automotive systems. In case of receiving reports of technical failure, the company would dispatch its experts in less than eight hours.the company has so far served more than 300 factories whose production line had stopped. In that way, the factories have not paid big sums to foreign companies. In order to avoid the exit of hard currency from the country, Qeshm Voltage Company set up a new platform for reparation


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in order to fix damaged parts inside the country.Barezi said that one million dollars have been saved in the past years due to services provided by Qeshm Voltage.One may ask why Qeshm Voltage has preferred to repair the major components of instruments while it could easily purchase them again from siemens. In response, Barezi notes: “We could have gained profits in this way, but we should take into account that Qeshm Voltage’s policies include attraction of investment, satisfaction of staff, customers and the society. We believe that these principles need to be respected in any working procedure.”“We may gain early profits if we base our work on purchase and sale. But we should also resolve the problems of our staff. lack of technical savvy would not benefit our customers.”Barezi stresses that foreign

companies were unhappy with Qeshm Voltage’s policies because they could no longer gain easy money. “Maybe that is why foreign companies always withheld any information to us on reparation. Whatever we have at our disposal was achieved by ourselves.”“Over the past years, Qeshm Voltage has improved the level of its after-sales services and subsequently created jobs. Moreover, consumers are paying less for the services they receive from the producer. We can set an example for others to follow, because all parties are benefitting.”Implementation of projects, procurement of equipment, training and reparation are among the services Qeshm Voltage Company offers in automation and instrumentation. Moreover, since human resources are based on a solid structure in Iran’s oil sector, there

are sufficient expert teams of maintenance. therefore, Qeshm Voltage collaborates with the oil sector mainly in holding training courses. so far, some 200 oil experts have been trained by the company. among its customers have been tabriz, Khorasan, amir Kabir, Fajr, shiraz and Kermanshah petrochemical plants, tehran, Isfahan and Sarakhs refineries, National Iranian south Oil Company (NIsOC), Iranian Offshore Oil Company (IOOC), Iranian Central Oil Fields Company (ICOFC), North drilling Company (NdC), Iranian Oil Pipelines and telecommunications Company (IOPtC), tehran Kala Naft Company and National Iranian gas Company (NIgC) with its 13 gas refineries.Barezi says: “generally speaking, the company is in collaboration with more than 70 percent of oil, gas and

petrochemical activists, and their collaboration depends on their needs.”Eight countries in the world have the technology for supervisory control and data acquisition (sCada), as well as distributed control system (dCs). some activities have been done for developing these two systems in Iran, but they have not been applied as they should in the production sector. sCada is a type of industrial control system (ICs).Industrial control systems are computer controlled systems that monitor and control industrial processes that exist in the physical world. sCada systems historically distinguish themselves from other ICs systems by being large scale processes that can include multiple sites, and large distances. these processes include industrial, infrastructure, and facility-based processes.dCs refers to a control system usually of a manufacturing system, process or any kind of dynamic system, in which the controller elements are not central in location (like the brain) but are distributed throughout the system with each component sub-system controlled by one or more controllers.Barezi says: “Qeshm Voltage Company realized that the only way to success in automation and instrumentation was to get technology from Joint Manager. We finally set up a company – sepehr Control Farayand – to represent Joint Manager in Iran.”Qeshm Voltage Company is pursuing its strategic policies in a bid to grab a share in the automotive products and instruments global market in the near future.


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a drill bit is what actually cuts into the rock when drilling an

oil or gas well. located at the tip of the drill string,

below the drill collar and the drill pipe, the drill bit is a rotating apparatus that usually consists of two or three cones made up of the hardest of materials (usually steel, tungsten carbide,

and/or synthetic or natural diamonds) and sharp teeth that cut into the rock and sediment below.Currently, Iran’s Petroleum Ministry concentrates its intention on the development

of oil and gas fields. To that end, drilling industry is a must. given Iran’s huge oil and gas reserves, acquiring the technology for designing and manufacturing drilling tools, particularly

Almase Saz Co. Eyes Drill Bits’ Self-Sufficiency

“Almase Saz Company” was established in 1987 in Hashtgerd industrial town, 70 kilometers from Tehran. The company began manufacturing tungsten carbide milling, cutting, grooving, drilling and turning tools, as well as alloy steel holders in 1996.In 2006, the company launched a unit on 500 square meters for oil drill bits manufacturing and assembly. This unit has a nominal capacity of five million inserts and 40,000

holders and special tools. Currently, 120 specialists are working in Almase Saze.The total investment made in the company amounts to €50 million plus 15 billion rials. The company was initially registered a privately-held entity; however, Bank Mellat purchased 35 percent of its stocks. The remaining 65 percent is still held by the private sector.M

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drilling bits as a strategic commodity, is a requirement for industrial progress and self-sufficiency.almase saz Co. is currently manufacturing five types of oil drill bits:5-inch, 8-inch, 12-inch, 17-inch and 26-inch. In terms of quality, they can rival with foreign bits. the company produces 20 drills a day, saving the country a satisfactory amount of hard currency.Reza Rahimi tari, a veteran industrialist, is currently the managing director of almase saz Co.

He was involved in PVC and VCM projects in Mahshahr special Economic Petrochemical Zone for nearly 20 months in 2004 and 2005.Well familiar with the oil, gas and petrochemical industries, tari says almase saz is meeting the oil industry’s need for drill bits and holders.He says oil exploration and recovery depend on the drilling industry. “since drilling operations are among the costliest in the oil industry, major oil companies always focus their efforts on minimizing the drilling costs,” he notes.tari expresses hope that National Iranian Oil Company (NIOC) would set up industrial workshops for manufacturing the necessary equipment and parts for the oil industry in order to reduce their imports.He gives an upbeat assessment of Iran’s growing oil industry in spite of obstacles and restrictions, recommending the oil sector to have its requirements met by domestic factories. For instance, tari says: “almase saz is capable of manufacturing mechanical equipment and drill bits used in the oil, gas and petrochemical industries.”almase saz has managed to acquire and master the technological savvy required for manufacturing oil industry equipment. tari gives assurances that almase saz would be able to manufacture drill bits the oil industry would need for a five -year period.according to him, almase saz is in close cooperation and coordination with the oil industry. “almase saz pledges to manufacture the necessary equipment the oil industry needs in a bid to save several billion dollars in

hard currency every year.”the technology required for manufacturing drill bits is complicated and therefore it is considered a strategic product. the quality of bits manufactured by almase saz has been confirmed by NIOC and National Iranian drilling Company (NIdC) after being used in experimental drilling in oil wells.“We have obliged the company’s workers not to work with a machine for more than six months in order to face a good opportunity to grow their talents and learn more. Moreover, the technical knowhow is not monopolized and everyone becomes experienced. this method has earned the company indigenization of manufacturing inserts, holders and drill bits.”Having won a german company’s license, almase saz is currently capable of manufacturing 10,000 types of inserts depending on the requirements of industrialists. despite restrictions imposed by the Western governments, the Iranian company is producing holders in compliance with the international standards.almase saz eyes presence in global markets given the fact that their products cost one-third of foreign ones, while being of high quality. the main rivals to almase saz are several german and american companies.almase saz can manufacture up to four million inserts a year – still lower than the five million inserts authorized in its license. domestic market cannot handle more than one million inserts.tari says the company can purchase raw materials for manufacturing two million inserts annually.

“We can buy raw materials after purchasing our products and increase our sales gradually. I can say that after every two years of activity, a new factory could be born. In this way, we can meet domestic needs and even export our products.”the tungsten carbide inserts and holders manufactured by almase saz are used in turning, milling, drilling, cutting and grooving.tungsten carbide insert is a very hard, and relatively small, cylinder made of tungsten carbide bonded with nickel or cobalt. One end of the insert is rounded or tapered; the other end is truncated (cut oft) and inserted into a bit cone. the round or tapered end touches the formation and drills it. several inserts make up the cutters on a tungsten carbide insert bit. the products offered by almase saz are used in dam construction, production of wire, cable and electrodes, and its tungsten carbide products are used in the oil, gas, and mining and energy industries.Mechanical seals manufactured by almase saz are as delicate as the foreign ones. they are used in pumps installed on pipelines in the oil, gas and petrochemical industries. In order to reuse junk mills and economills, almase saz has manufactured electrodes with a variety of alloys.almase saz has been awarded IsO 9001:2000 certificate for its cutting tools by germany’s dQs.In 2001, almase saz managed to assemble 12 percent of the oil drill bits with the help of smith International. the three-year contract was renewed in 2005.


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drilling rig creates holes in the ground. these massive structures

houses equipment used to drill water wells, oil wells, or natural gas extraction wells. they sample sub-surface mineral deposits, test rock, soil and groundwater physical properties, and they can also be used to install sub-surface fabrications, such as underground utilities, instrumentation, tunnels or wells. Nobody knows for certain what is going on down there, but drilling makes progress by development of new technologies and equipment.In geotechnical engineering, drilling fluid is used to aid the drilling of boreholes into the earth. Often used while drilling oil and natural gas wells and on exploration drilling rigs, drilling fluids are also used for much simpler boreholes, such as water wells. liquid drilling fluid is often called drilling mud. the three main categories of drilling fluids are water-based mud (which can be dispersed and non-dispersed), non-aqueous mud, usually called oil-based mud, and gaseous drilling fluid, in which a wide range of gases can be used.the main functions of drilling fluids include providing hydrostatic pressure to prevent formation fluids from entering into the

well bore, keeping the drill bit cool and clean during drilling, carrying out drill cuttings, and suspending the drill cuttings while drilling is paused and when the drilling assembly is brought in and out of the hole. the drilling fluid used for a particular job is selected to avoid formation damage and to limit corrosion.Drilling fluid carries the rock excavated by the drill bit up to the surface. Its ability to do so depends on cutting size, shape, and density, and speed of fluid traveling up the well (annular velocity). these considerations are analogous to the ability of a stream to carry sediment; large sand grains in a slow-moving stream settle to the stream bed, while small sand grains in a fast-moving stream are carried along with the water. the mud viscosity is another important property, as cuttings will settle to the bottom of the well if the viscosity is too low.Drilling fluids are water-, oil- or synthetic-based, and each composition provides different solutions in the well. If rock formation is composed of salt or clay, proper action must be taken for the drilling fluids to be effective. In fact, a drilling fluid engineer oversees the drilling, adding drilling fluid additives throughout the process to achieve more buoyancy or minimize

friction, whatever the need may be.In addition to considering the chemical composition and properties of the well, a drilling fluid engineer must also take environmental impact into account when prescribing the type of drilling fluid necessary in a well. Oil-based drilling fluids may work better with a saltier rock. Water-based drilling fluids are generally considered to affect the environment less, during offshore drilling.Disposal of drilling fluids after being used can also be a challenge. Recent technological advances have established methods for recycling drilling fluids.For years, drilling ended in the destruction of rigs due to the lack of sufficient knowledge about wells. In Iran, different companies specializing in drilling mud sampling are active. thanks to them, drilling rigs are less damaged. up to the 1979 Islamic revolution, the technology of drilling fluid sampling was monopolized by foreigners whose presence was a must. But over recent years, Iran has been manufacturing the necessary equipment. One of Iranian companies active in this sector is Pars geo data (Pgd), established in 2004 to log drilling fluid used in oil and gas well drilling.

Iran Petroleum interviewed Pgd’s managing director, amir sadeq al-Vaad, who is well familiar with drilling. He has developed software and hardware for designing and building units of drilling mud logging.Pgd began building the

Alchemy through Using Drilling Mud


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first drilling mud logging unit ordered by National Iranian drilling Company (NIdC) in 2006. One year later, it finished building the first offshore logging unit in Iran. the same year, dNV awarded Pgd the IsO 9001:2000 certificate. The company has also installed HsE management system.sadeq al-Vaad said the logging units are of social, economic and even political significance due to their myriads advantages.“as far as social aspects are concerned, one can refer to indigenization and self-sufficiency in logging services for the oil and gas

industry,” he added.Economically speaking, he stated, domestic manufacture of logging devices would save the country big money and create jobs for nearly 500 engineers.Iran no longer depends on foreign technology for these logging units, currently manufactured domestically.Entry into other fields of the oil industry, specifically drilling, is one of top priorities of Pgd, which has set its future plans in line with the country’s 20-year vision plan. Pgd is determined to promote its activities abroad to introduce Iran as an exporter of logging

technology.One of strategic plans of the company is to enter other fields like acid job and cement job in view of self-sufficiency. In parallel, the company respects HsE standards. In its future plans, Pgd envisions workplaces without accidents for people and damage to the environment, which are key parameters for sustainable development, not to mention productivity and profitability.Promoting the HsE standards, communicating management with staff and beneficiaries, monitoring regular assessment of HsE, training the staff and obliging

contractors to comply with HsE obligations are among the main objectives pursued by Pgd.Major oil, gas and petrochemical companies in the world heavily invest in HsE, indicating its significance in the quality of products and services.Pgd is a member of Civil Engineering union, association of Consultant Engineers, association of Oil Industry Equipment, association of Quality Control and Iran-germany Chamber of Commerce.

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Crude oil must be transferred from the production site to refineries and from

refineries to consumers. These movements are made using a number of different modes of transportation. Crude oil and oil products are transported across the water in barges and tankers. On land crude oil and products are moved using pipelines, trucks, and trains.Ever since the discovery of petroleum in the united states in 1859, transportation of crude oil has been a vital issue. It happened that the cost of transporting an oil barrel on draft animals exceeded the oil price. But gradually, pipelines, railroads and wagons replaced animals, and oil transport became less expensive and more secure. In Iran, transportation plays a major role in the oil industry because consumers are located in scattered sports. Oil products could be distributed only in tanks and on railroads.so far, railways have accounted for a meager share in distributing oil products, but the growing railway industry in Iran heralds a bright future

for this industry. Iran’s oil industry needs to establish close connections with North-south and East-West corridors.at present, Iranian Rail transportation Company (IRtC) operates 25 companies, five of which specialize in transportation of oil products. These five companies are closely collaborating with National Iranian Oil Refining and distribution Company (NIORdC). distribution of oil products circumstances is subject to change in different seasons of the year and therefore depending on the situation more or less tank wagons would be required. According to official figures, nearly 80 wagons are needed to transport fuel in the first half of the year, but 200 are needed in the second half. due to these big changes, private companies are reluctant to invest in railroads.Currently, nearly 55 percent of oil products are transported in pipeline, 40 percent on roads and only the remaining five percent by railways. In a bid to accelerate and develop railway transport and oil industries, tank wagon companies are determined to enhance the

share of railroad transport in oil products delivery. to that effect, it is operating a variety of projects in collaboration with Railroads union including construction of oil depots.In 2004, the Islamic Republic of Iran Railways moved to privatize wagon tank companies. Wagon tank Companies group is a subsidiary of the union of Railway transportation Companies. Established in 2004, the group is comprised of six railway companies involved in transporting passengers as well as cargoes (oil products, chemicals, minerals, etc). since its establishment, it has been in close collaboration with NIORdC. Equipped with 4,000 wagon tanks, the group makes great contribution to exports and transit of oil products. Official figures indicate that railways’ share of oil products transport has soared from four to 15 percent annually since the group was set up.a condition for the private sector to join railroad transport of oil products is to display a sense of responsibility and prove its trustworthiness.More than 40 big railway transportation companies are

working under supervision of the union of Railway transportation Companies. Managers of these companies maintain that the oil industry would see a brighter future in the distribution of oil products if it trusts the private sector.the union set up a consortium to purchase locomotives. It plans to buy 1,000 locomotives, each costing nearly 40 trillion rials. the necessary credit is provided by two consortiums, comprised of 16 companies. For further contribution to transportation of chemicals, oil products and petrochemicals, the union plans to expand its wagon tank fleet to 10,000 from a current 4,000. to that end, each company should purchase 2,400 wagon tanks. the wagon tank companies are also to buy a total of 50 locomotives using their shares, depending on their needs. Parviz alivand, chairman of Board of directors of the union of Railway transportation and Relevant services Companies, says the wagon tank companies plan to handle 2.4 million ton-kilometers of transportation in the coming days. these companies can transport kerosene, gasoline, gasoil,

Private Sector’s Role in Fuel Delivery

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petrochemicals, gas condensates and acid materials.

Railway Transportation Company

Run by the Pensions Fund of Islamic Republic of Iran Railway, Railway transportation Company is active in imports, exports and transit. It carries out air, maritime, road and railway transportation. It was first active mainly in transport of minerals. In 2007, it purchased 450 wagon tanks to transport oil products and chemicals, too.“the company has been delivered more than 450 wagon tanks. It has also signed a deal with the Islamic Republic of Iran Railway for letting 200 wagon tanks. Now with 650 wagon tanks, the company would account for a significant share of fuel delivery,” said alivand. “In case the necessary facilities and infrastructures are prepared, the company would be able to transport more than 1,200 tons of freight a year.”the company would also transport oil products through its road transportation fleet. It is already supplying minerals to Isfahan steel Mill from Shahroud, Pole Sefid, Kerman and tabas, and also transporting

iron ore from Bafq mines.

East Railway Company

abol-Qasem saeedi, managing director of East Railway Company Inc., has said the company feels committed to respect regulations about the delivery of oil products, chemicals and petrochemicals, and guarantee the safety and security of its transportation.

Niroo Rail Transport Company

the company has currently 1,400 wagons, 200 of which used for transporting liquefied petroleum gas. It can transport one million-ton or 1.2 billion ton-kilometer of fuel a year for power plants. In other words, this company can supply 60 percent of the annual fuel needs of power plants.the company is determined to launch “ton container” project for further interaction between road and railway transportation sectors. special wagons would be designed to carry three to four containers, measuring 20 feet in sides. Combination of road and railway transportation is a big advantage.

Fajr Rail Transport Company

the company was established in 2004 to transport oil products, chemicals and petrochemicals. It has more than 610 wagon tanks. Ninety percent of its activities are related to delivery of orders by National Iranian Oil Products distribution Company (NIOPdC). since most oil products are fuel oil and diesel fuel, the company is envisaging using bigger tankers for oil products transfer.Having started technical studies, the company would soon raise its transport capacity from 55 to 100 tons. that, along with the purchase of locomotives and wagons, would effectively increase and diversify its oil products transport. the railway sector would also see its share rise in transportation.adding two wagon tanks would be a proper response to the oil industry development projects.

Pars Silk Road Rail Company

Established in 2005 in Chabahar Free trade Zone, the company is a joint venture by the Islamic Republic of Iran Railway and

georgia’s silk Road group. Its main tasks are to transport crude for swapping from sarakhs corridors to Imam Khomeini Port, Bandar abbas and tehran.It has 140 CIs wagon tanks in its possession, while it has hired 800 MPs wagon tanks. It operates mainly in transit corridors linking Iran to Commonwealth of Independent states (CIs).the company is able to transport one million tons of crude from sarakhs to depots to be swapped with oil from Kharg Port. It can also transport 450,000 tons of fuel oil from sarakhs to Bandar abbas, 150,000 tons of fuel oil from sarakhs to Imam Khomeini Port.the company plans to activate Iranian wagons for transit of fuel oil from amir-abad Port to Bandar abbas.

Varsak Railway Company

the company was established in april 2002. It has managed to purchase 300 wagon tanks and let 800 more.the company started its activity in 2005. Its wagons are currently transporting oil products for NIOPdC.

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It would be a nightmare for petroleum engineers to spend tens of thousands of hours

and hundreds of dollars on drilling an appraisal well which may prove no oil. anyone involved in drilling might have

experienced such an undesirable situation.

drilling, which

forms the foundation of oil industry, is now 104 years old in Iran. It involves other fields of specialty without which recovery may be delayed or even become impossible.drilling a well is no longer spudding a vertical hole in the ground. Oil and gas

well drilling would be impossible with having acquired modern

technologies for that purpose. drilling industry

currently needs casing

shoes, downhole liner hangers, and swept bends and liner top packers. It is no longer acceptable that a well be damaged due to gas leak or under heavy pressure.using technology in the 21st century is by no means possible without expert

Iran Drillers Co. Focuses on Quality


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manpower present at the well site. any negligence in one of these related sectors may disturb the entire production process and inflict heavy physical and material damages.One of the most significant segments of drilling is wellhead and downhole equipment. Over the past one decade, Iranian experts have become self-sufficient in manufacturing too much of this equipment. until several years ago, Western and multinational companies were still supplying the main drilling equipment to Iran. But Iranian companies have managed to manufacture the necessary drilling equipment for the upstream oil sector.Iran drillers Company (IdC)

is one of

Iranian companies with an acceptable track record in manufacturing equipment for the oil industry. It is the first private entity involved in manufacturing wellhead and downhole equipment for the oil sector.abdul-samad Khanafari, IdC managing director, says the company has fulfilled nearly 50 contracts with Petroleum Ministry and its subsidiaries since its formation 15 years ago.IdC’s manufacturing of drilling equipment has saved the country four million dollars a year, not to

mention having created 90 direct and 300 indirect job opportunities.National Iranian south Oil Company (NIsOC), tehran Kala Naft Company, Iranian Central Oil Fields Company (ICOFC), National Iranian drilling Company (NIdC), Iranian Offshore Oil Company (IOOC), Pars Oil and gas Company (POgC), North drilling Company (NdC) and Oil Exploration directorate are among the companies and directorates that have

benefited from IDC’s services.

Khanafari said IdC has trained Iranian engineers

specializing in metallurgy, mechanics,

industries, design,

turning,

milling and welding to acquire experienced manpower. IdC has developed liner hangers in two hydraulic and mechanical models and in different sizes. Its liner top packers, manufactured in different sizes, are used to block downhole gas leak. shoes and collars, in stab-in, float and differential models are also manufactured in different sizes by IdC. swept bends applied for PsI 3000 and PsI 5000, spring bow and rigid centralizers as well as setting liner tools are among other IdC products.IdC can currently meet the annual needs of Iran’s oil industry for down-hole equipment. It regularly inspects the quality of its products to ensure conformity with aPI and IsO standards. It issues certificates for its products after undergoing the necessary quality control tests.IdC was awarded IsO 9001:2000 quality management certificate four years ago.

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Marker crude price trends were bearish over the

reporting period for a second consecutive month. Outlook turned bearish as economic growth stayed weak and high production and inventories weighed on oil prices. However, there were some supporting factors in the markets during the month. Rising tensions in the Middle East helped oil prices to lift and alleviating the oil price downward trend. U.S crude, WTI fell $ 2/90 per barrel to $86.57 per barrel, while Dubai and Brent prices recorded smaller loss. Brent declined

by $2.05/bl to $109.64 per barrel. The Persian Gulf marker Dubai decreased 1.61 dollars at $ 107.26 a barrel (see chart). As a result, the Dubai crude market rolled the most strength among crude benchmarks. In Persian Gulf, Saudi Arabia cut its oil production to balance growing global supplies. This might decrease the availability of heavier crudes and would result in a narrower light/heavy crude differential. In the recent months and following the weakness in fuel oil market, heavy grades were weak; hence the differential between

light and heavy grades was wide. According to JBC Energy report, Saudi Arabia’s new 400,000 b/d Jubail refinery may be opening as early as Q1 2013, potentially cutting Saudi export levels.

Asian Products MarketsOutright products prices decreased on the back of fall in crude prices. Traders were busy with term negotiations. Therefore, thin trades pressured most products over the month of November. Middle distillates supplies have increased as strong refining margins boosted production. Hurricane Sandy has decreased

demand for products on the US Coast. Therefore, Asian Middle distillates weakened because of poor arbitrage to US and Europe. Plentiful supply and scant demand weighed on fuel oil market. While high buying interests limited downward trend in naphtha market (see chart).

Light DistillatesThe monthly average of Singapore gasoline price was $119.62/bl, $4.46/bl down from October. Gasoline lost some ground over the month, despite Indonesian imports. Indonesian and Vietnam gasoline imports are expected to decrease in

Crude & Asian products markets november Crude Markets



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December. Meanwhile, South Korean and Indian gasoline consumption may rise according to Argus and JBC reports. There are also some expectations of higher demand from US after Hurricane Sandy. Hence, the outlook is not clear. Japanese gasoline production saw an uptick in the recent period.Naphtha was the luckiest product of November with the least loss. The mean of Singapore naphtha price was $102.64/bl on the reporting month. Tight supplies and emerged demand from

petrochemical producers to replenish inventories weighed on the market. However, expectations of increased Indian exports and arbitrage arrivals in December prevented the market from being bullish. Spot cargoes were available from India, but Persian Gulf producers limited the spot cargoes as they were doing term negotiations.

Middle DistillatesMoving to the middle of the barrel, the mean of Singapore gas oil and jet/kero prices were $123.91 per barrel and $125.21/bl, respectively. Poor arbitrage

to US and Europe and also thin spot trades has led to gasoil and jet fuel weak markets over the reporting period. The continued difficult arbitrage to US pressured jet fuel market. But, coming to the winter Japan and South Korea continued maximizing kerosene production in expense of jet fuel, limiting jet fuel supplies. The regrade- the differential between jet fuel and gasoil prices- came down from the October highs as a witness of weakness in jet fuel market and resulted to lower spot premiums.

However, at the end of November jet fuel deals for next year were done with firmer premiums.Lack of arbitrage to Europe and slim demand has led to a weak market. And demands from Vietnam, Philippine and Sri Lanka were not successful to support the market.

Fuel OilDuring November, the fuel oil 380 and 180 fell to $ 605.37 /mt and $ 614.35 /mt, respectively. Singapore fuel oil’s discount to Dubai crude reached to its widest in 18 months on the back of low demand and plentiful supplies. Strong arbitrage arrivals from Europe and US resulted in high Singapore onshore fuel oil stocks which was 22,521 thousands of barrels (see table). Demand from Chinese teapot refiners may fall as the refiners have received government licenses to import crude instead of fuel oil. Despite the wide differential between crude and fuel oil prices, the refiners prefer to import crude in order to prevent their licenses expiry. Coming to the New Year, it is expected to see some supportive demands from China due to the lunar year holidays in February.

Singapore Products Stocks ( Thousands of Barrels)Light Distillates

(gasoline, Naphtha)Middle Distillates

(gasoil, Jet)Residual fuels

(Fuel Oil)

29-August 8,283 9,600 17,321

26-September 9,773 9,325 18,532

31-October 9,180 9,370 20,471

28-November 9,443 9,931 22,521

M-O-M Change 263 561 2,050

Singapore Products Stocks ( Thousands of Barrels)Light Distillates

(gasoline, Naphtha)Middle Distillates

(gasoil, Jet)Residual fuels

(Fuel Oil)

29-August 8,283 9,600 17,321

26-September 9,773 9,325 18,532

31-October 9,180 9,370 20,471

28-November 9,443 9,931 22,521

M-O-M Change 263 561 2,050

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Commentary News Box

Production capacity of polymer products will hit 12 million tons at the end of

Iranian calendar year 1395, 20 March 2016. speaking to shana, NPC’s manager for planning and development, Ramezan Owladi, made the remarks adding the country not only will be self sufficient in polymer products at the end of 1395 but also a big exporter of the products.‘a plan aimed at diversification of petrochemical products will

be finalized in near future ,and through launching new petrochemical plants, production capacity of polymer products will make a great leap forward.‘While 21 years ago we had just one polymer unit in the country, these days polymer installed capacity has reached six million tons”, the NPC official told Shana.He continued: Completion of West Ethylene Pipeline and its phases will have a major impact on the country’s petrochemical industry and will provide

feedstock needed by many petrochemical plants.Earlier NPC’s managing director, abdolhosain Bayat had announced that the company exported 7 billion dollars of petrochemical products during the first seven months of current Iranian calendar year, began 20 March 2012.addressing a petrochemical conference Bayat said that during the above-mentioned period the country exported 10 million tons of petrochemicals implying high level of demand for Iran’s petrochemical

products. He said Iran’s petrochemical industry is moving toward development and in its drive considers backing investors as an important target.‘Iranian government and Petroleum Ministry are ready to cooperate with domestic and foreign investors in terms of developing complementary industries in petrochemical sector that aims at generating value-added and completion of production chain’, Bayat noted.

Iranian minister of petroleum says private sector should actively participate in providing oil and gas drilling rigs. Addressing a meeting on the ways of boosting efficiency in drilling sector, Rostam Qasemi said: drilling in offshore sector requires technologies that are more advanced,

an issue that Iran’s oil industry has succeeded to take great steps toward it.Referring to the impact of boosting efficiency in drilling sector on falling production cost, Qasemi noted that when oil and gas fields getting older the cost of drilling goes up simultaneously, while deployment of state-of- the-art technologies in drilling sector boosts efficiency.He went on to say that at present oil industry needed 100 onshore drilling rigs, adding contractors should actively participate in manufacturing or importing drilling rigs in order to realize the Fifth Five-year development Plan targets on rising oil production to 5.2 million barrels per day.‘In recent years National Iranian Drilling Company (NIDC) has played a significant role in meeting oil industry needs to onshore drilling rigs but these days there is a good opportunity for private sector to participate in development and construction of drilling rigs’, Qasemi told the meeting.He expressed hope private sector’s participation in building drilling rigs to create a more competitive environment will result in meeting oil industry needs.stressing on importance of quickness, price and quality, Qasemi noted that daily cost of hiring a drilling rig stands respectively at 150 to 160 thousand dollars and 40 thousand dollars in offshore and onshore sectors.at present it takes 100 days and even more to drill an oil well in onshore sector, while drilling in offshore sector takes more time, the official said adding the time for drilling in offshore sector should be reduced to 45 to 60 days, compatible with the world standards.‘If we succeed to exploit a well one month earlier, not only we will be able to boost efficiency but also we will succeed to reduce production cost’, Qasemi said.

Private Sector

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Commentary News Box

Negotiations between Islamic Republic of Iran and turkmenistan on importing gas from three spots in common border was satisfactory and the two sides reached good results, NIgC’s managing director, Javad Oji said. Speaking to Shana, Javad Oji said: The first round of talks was held November 27

between Iranian minister of petroleum and turkmen’s Vice President for Economic affairs, Khoje Mohammad Mohammadov focusing on energy exchange, rising gas imports from turkmenistan and other energy related issues.‘Talks continued afternoon between the two countries’ officials ,and representatives from 30 groups and businesses joined talks on boosting cooperation in other issues including providing heavy and light vehicles, building materials and steel industry, NIgC’s top executive added.Referring to Iran and turkmenistan as the second and fourth biggest holders of gas reserves in the world, Oji noted that the two sides also discussed boosting imports and exports and meeting energy needs of the neighboring countries and the region.‘the two sides reached agreement on transiting turkmenistan gas from Iran’s territory to the neighboring countries including turkey and armenia, an issue whose details would be discussed in expertise meetings’, Oji noted. Emphasizing the firm determination of Turkmenistan on boosting cooperation with Islamic Republic of Iran, NIOC’s managing director said Turkmen officials stressed on fulfillment of their commitments under previous gas contracts and stated that third parties’ pressures would have no impact on fulfillment of their contractual commitments. Iranian minister of petroleum, Rostam Qasemi departed tehran on 27th November to visit turkmenistan.

Iranian president has said that Iran-Pakistan gas pipeline will be completed on schedule in 2014 despite the us pressures to head

off the project. an aFP report from Islamabad on 25th November quoted Iranian President Mahmoud ahma-dinejad remarks vowing completion of a multi-billion dollar gas pipeline to Pakistan on time, downplaying financial woes as well as US pressure on Islamabad to scrap the project. Pakistan and Iran signed a deal in 2010

under which tehran would supply gas to its eastern neighbor from 2014, with sales to reach up to one bcf (28 million cubic meters) per day by mid-2015. the project envisaged a pipeline, 900 kilometers (560 miles) in length built from assaluyeh in southern Iran to the border with Pakistan. another 800 kilometers pipeline was also needed in-side Pakistan to receive gas from Iran’s South Pars field in the Persian Gulf.“We want to complete this project by 2014,” ahmadinejad told a press

conference in Islamabad.“the portion of pipeline on Iranian side is about to be completed swiftly, while that of Pakistan side will be completed shortly,” he said, adding that Iran was also extending “financial assistance” to Pakistan for this pur-pose. He said Iran was also providing electricity to Pakistan; and the two countries have signed agreements for up to 1000 megawatts of electricity supply.

Iran and Turkmenistan Boosting Gas Cooperation

Ahmadinejad Vows to Complete Pakistan Gas Pipeline By 2014

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up to the middle of the 20th century, coal was considered the most effective

and stable fuel. Viewed as a strategic commodity, coal ac-counted for two-thirds of the world’s energy supply up to 1949. Coal was much more signifi-cant for Europe than for other parts of the world. In 1955, coal accounted for nearly 75 percent of the West Europe’s energy needs.In the beginning of the second half of the 20th century when the world was seeing industrial and economic developments, energy consumption began ris-ing and nearly trebled in 1972.throughout these years, oil discovery and recovery gained momentum and oil exporting countries mainly in the Middle East supplied their oil on the market. Massive oil supply in the 1950s and 1960s resulted in sharp decline in the oil prices. Industrialized governments, seeking to accelerate their eco-nomic growth and modernize their industries, seized on the moment and replaced coal with oil in their industries.Oil prices kept falling and coal was gradually sidelined. due to its availability and easy use, oil further strengthened industrial powers’ presence in the global markets.another reason for the victory of oil over coal was environ-

mental issues. london was grappling with smog due to coal burning. People were suffering from respiratory dis-eases. to tackle this challenge, the government had established “smokeless zones” where coal burning was strictly forbidden even for heating purposes.the French government also believed that oil could help expand and renovate industrial entities. therefore it braced for oil. Even germany whose empire was based on coal and iron opted for oil due to its low price and environmental advantages.all these factors came together to give oil a 60 percent share of the world’s energy market in the 1970s. up to 1960s, oil had a 23 percent share in the energy market. Oil consump-tion was growing rapidly. through 1950s to 1970s, oil consumption in the united states tripled, in West Europe jumped 15 times and in Japan experienced the stunning 137-time increase.the contribution of oil to eco-nomic growth was so evident that oil experts consider the black gold as a miraculous economic and industrial factor in germany and Japan follow-ing World War II.as oil consumption grew across the world, coal lost its place as the top fuel. Oil became the leading source of energy in the world and

was recognized as the most important commodity in the global transactions in the 20th century. Right now world heavily depends on this strategic commodity.

How Oil Replaced Coal


59December 2012

No. 8

a dream Which Never Came trueForeign Engineers Quit Iran’s Oil Industry

these passengers had told journalists present at abadan-Khorramshar Quay that they would not take away their personal belongings because they would return soon. But it never happened. More than three decades have since passed and Iranian

engineers are smoothly running oil facilities in Iran.

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lavan Refinery, located on a Persian gulf island of the same name,

is to begin producing 2.8 ml/d of Euro-4 gasoline by december, managing director of lavan Oil Refining Company has said.“At present, the refinery is producing 1.4 ml/d of gasoline. the second phase of gasoline production at the refinery will raise the output to 2.8 ml/d,” Mohammad-ali dadvar said, adding that the quality of gasoline would also rise to reach 95 percent octane.“Currently, the refinery is producing 3.2 ml/d of gasoil and 80 tons of liquefied petroleum gas. Fuel oil production in this refinery has fallen to below 25

percent,” he added.The official stated that the refinery would be also producing 220 tons per day of liquefied petroleum gas and 1.6 ml/d of fuel oil after the operation of the second phase of the refinery.“By the end of the current calendar year [on 21 March 2013], 1.8 ml/d of Euro-4 gasoil and 1 ml/d of atK would begin in the refinery,” he said.Noting that 60 percent of the equipment required for the development of the refinery are manufactured domestically, dadvar said: “domestic manufacturing of the equipment has saved the country more than 1.4 trillion rials.”“steam boilers have been made in lavan and the

gas-fueled turbines have been ordered to domestic companies.” he added.Dadvar said Lavan Refinery is currently reaping 1.8 dollars in margins from each barrel.“During the first five months of the current year, the refinery exported 6.518 million dollars of liquefied petroleum gas, as well as 28,000 dollars of fuel oil,” he said.dadvar said the platforms in lavan are all fed by Lavan Refinery, adding that the refinery also meets five percent of the country’s fuel needs.He noted that the wastes produced by the refinery fell below 0.9 percent. “Construction of 30 ha of green space and

implementation of a new industrial and health waste treatment project in compliance with the international standards are among the environmental measures undertaken by the refinery,” he said.the National Iranian Oil Refining and Distribution Company (NIORdC) is planning to raise the refining capacity of Lavan Refinery to 50,000 b/d, its liquefied petroleum gas output to 220 t/d, premium gasoline output to 2.8 ml/d, premium gasoil output to 1.8 ml/d, its atK output to 1 ml/d, its fuel oil output to 1.6 ml/d and its sulfur output to 30 t/d.the total investment made in the project reaches 6.5 trillion rials.

Lavan Refinery to Yield Premium Gasoline

ByMohsen Qezeli

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lavan Island, with an area of 90 square kilometers, is located 14 kilometers away

from the coast in the Persian gulf. administratively speaking, the island is run by the southern Hormuzgan province. lavan has won fame due to its oil installations and its natural beauty has been overshadowed. Before oil was discovered there, the island was known for its coral coast, fig trees and even pearls. Bees there produce dark honey which smells of oil.

Hot and Humid Island

lavan Island enjoys two outstanding features: oil facilities and white houses home to 2,000 people.as we step out of the plane, hot wind lashes our faces. It was much above 30 degrees Centigrade announced by the stewardess before we got off the aircraft. It’s humid too and it is due to this humidity and warmth that we perspired in less than a minute. Now we

understand the cumbersome working conditions in the oil facilities.

Pearls

the single-minaret mosque indicates that the island is sunni-dominated. the local residents of lavan, following the sunni sect of Islam, are mainly fishermen and pearl hunters. the best time for pearl hunting in the Persian gulf islands is spring and summer. Pearl hunters wrap a rope around their waist and plunge deep into water with an ax. they pry out the pearls with their ax and place them into a basket. then they are pulled out of water. In the ancient time, hunters from nearby islands needed to get permission from the chieftain of lavan. and even after they hunted pearls, they had to pay taxes. until 50 years ago, Indian businessmen came to lavan to purchase pearls and sell them to European countries. at that time, the Europeans didn’t know

that those pearls had been hunted by people in lavan. Pearl hunting is becoming outdated in the island as the younger generation shows no inclination for this hazardous job and they prefer to find a job in the oil companies there.

Coral Coast

lavan is one of few coral islands in Iran. swimming is never recommended because sharks abound there. a local resident said jellyfish and a species of poisonous coral were much more dangerous than sharks.time was running out, otherwise, we were ready to jump into the water despite all these dangers.

Intact Nature

Lavan has its own specific flora. Species of salt cedar, prosopis, ziziphus and fig are seen massively in the island. there are also trees brought from outside and planted there. Bougainvillea is one of them.

this species adopts itself with heat and humidity of the island.

Poisonous Snakes

some 500 meters to the east of lavan, is located shitvar isle where poisonous snakes live. A local oil refinery worker, however, said there are not so many snakes there. I did not have the chance to go there because it was a protected zone.Besides poisonous snakes, big turtles live in shitvar. they lay eggs every year at the reproduction season and hide them under sands.

Beehives Smell Oil

apiculture is a famous activity there. the bees held there produce dark green honey smelling oil. the beehives are installed near the oil facilities.logically speaking, oil and honey mismatch, but lavan has rationalized this mismatch.

A Tour of Lavan Island From World Pearls to Oil Scent Honey

PHOtO: MOJtaBa MOHsENI


We had still one day during our trip to Khuzestan

province to visit ahwaz for one full day. We decided to go to Khuzestan’s ancient city which has been home to very ancient civilizations, and like other cities in this province has been built near a river. We first went to Susa and visited the ancient city for hours, but there was still a lot to see.

Mausoleum

Nearly 60 kilometers away from ahvwaz towards susa

stands a mausoleum known as abbas Mousavi, locally known as seyed abbas Mausoleum. this descendent of the prophet Muhammad (PBuH) is revered by local residents as saint. It was a large building decorated with tiles in the front and with bricks in the back. Inside the mausoleum, there were religious books dedicated by local people. We paid homage to seyed abbas, had breakfast and left there for susa.

Ancient Susa

susa is the cradle of an ancient civilization in Khuzestan, and the important point is that numerous civilizations have resurfaced since 6,000 years ago. One

of them is Chogha Zanbil, which literally means the hill of basket. the reason for this name is that the ancient temple is like a basket.at the entry to susa is seen acropole Castle, erected on a hill dating back to six millennia ago. the castle has no Iranian architecture and was built by the French in 1897. Nasser-uldin shah Qajar had authorized the French archeologists to do excavation work on the hills in return for nearly 15 dollars. But the French were not welcome and they had to mount tents. It was difficult for the Europeans to live in difficult climatic conditions. Jean-Jacques de Morgan, who led the French archeologists, had convinced the French government to

build the castle with the bricks discovered on the place. the castle is open to visitors on holidays.From the top of the castle is seen the remnants of apadana Palace and the tomb of daniel the prophet. Susa Castle, first built 6,000 years ago, has been destroyed and restored several times. alexander the great is blamed for one of destructions.apadana Palace is reminder of Persepolis and lebanon’s Baalbek. a capital similar to the head of an animal remains still on the hills. Visiting ancient places gives strange and mixed feelings: pride in such a brilliant civilization and regret over pillage.someone there said nobody

A Millennia-Old City By Mehdi Qezeli

62 PHOtO: HassaN HOssEINI

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is allowed to step on the hills, which are still rich in artifacts, often revealed after heavy rain. there is a museum where a stone lion, the staircases of the palace, horse head capitals, as well as vessels are on display.

Daniel the Prophet

down the ancient hill and near a river stands the tomb of daniel the Prophet. the minarets of the tomb are decorated with tiles and its cone-shaped dome has been adorned beautifully. such domes are seen in large number in this region. daniel is a descendant of david the Prophet. When he was young, he along with a group of Jews from Jerusalem were taken as prisoners by Bakht al-Nasr and taken to Babylon.after the Babylon conquest some 500 years BC, daniel was released and settled in susa. the body of this prophet was held in a cold storage facility, but after

the Muslims dominated the region, he was buried upon an order from the first Shiite imam, Ali. The Prophet daniel is revered by Muslims, Jews and followers of other religions.In front of the mausoleum sprawls an attractive green space where people rest.another tomb respected in susa belongs to the famous poet debal Khazaei. Next to him is laid to rest abdollah ibn ali, a descendant of the prophet Muhammad (PBuH).

Green City

an outstanding feature of susa is its green farmlands. Karkheh River in the west and dez River in the east of the city are of great help to gardening and growing sugar cane. agriculture is a good business in Khuzestan due to its proper water, fertile soil and adequate sunlight. Everything is available, but few cities in the province have undergone

development. susa has been lucky to host a sugar cane factory. Had Khuzestan no oil, agriculture would have been more popular. the farmlands here are envied by farmers from yazd, Kerman and Kashan.

Tribute to Martyrs

A former battlefield is located seven kilometers from susa. Every year, this place is crowded by people from across the country. they come here to pay tribute to the martyrs of the imposed war (1980 – 1988).Chogha Zanbil, ancient Elamite Complex Choghā Zanbīl, also spelled Tchoghā Zanbīl, or Choga Zambil, ruined palace and temple complex of the ancient Elamite city of dur untashi (dur untash), near Susa in the Khūzestān region of southwestern Iran. the complex consists of a magnificent ziggurat (the largest

structure of its kind in Iran), temples, and three palaces. the site was added to uNEsCO’s World Heritage list in 1979.Built about 1250 BC under the direction of the Elamite ruler untash-gal during the Middle Elamite period (c. 1500–c. 1000 BC), the complex was dedicated to Inshushinak (Insusinak), the bull-god of susa. Its irregularly shaped outer wall extends approximately 3,900 by 2,600 feet (1,200 by 800 meters) around the inner sanctum and 13 temple buildings, of which only four are well conserved. the square base of the ziggurat, 344 feet (105 meters) on each side, was built principally of brick and mortar. It now stands 80 feet (24 meters) high, less than half of its estimated original height. Its ornate facade was once covered in glazed

blue and green

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terra-cotta, and its interior was decorated in glass and ivory mosaics. at the apex of the building stood a temple from which Inshushinak was believed to ascend to the heavens every night. the complex was still unfinished, however (as evidenced by thousands of stacked bricks at the site), by about 640 BC, when Choghā Zanbīl was attacked, looted, and heavily damaged by the forces of the assyrian king ashurbanipal.

afterward it fell into ruin.Choghā Zanbīl is a local name meaning “large basket-shaped hill.” It was sighted in 1935 by prospectors of the anglo-Iranian Oil Company who were surveying the region by airplane. Initial studies were performed by French archaeologists in the late 1930s. From 1946 to 1962, excavations were carried out by the archaeologist Roman ghirshman. several bull

sculptures of Inshushinak were found within the complex, which served the royal families of Elam as a place both of worship and of interment. In addition, a variety of small artifacts were recovered, including a collection of Middle Elamite cylinder seals. a building on the grounds contains five vaulted underground tombs, within four of which are cremated remains, and there is one un-cremated corpse.

the Elamites traditionally buried their dead, and the reason for the cremation is unknown. Heavy rainfall has a harmful effect on the mud-brick outer walls and temples of the complex, despite the application of protective coverings. In the mid-1990s, it was noted that the brick walls of the ziggurat had shifted slightly, raising concerns about future structural damage.

Merry XmasHappy New Year2013&

iran petroleum issue no.8, december 2012

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