Greater Caspian Weekly Overview - December 18th 2015
IRAN
Petrochemicals conference in Iran follows two international conferences
After holding two international conferences, Tehran launched the 12th Iran Petrochemical Forum, which opened on December 13th with 368 Iranian and 97 foreign companies from 25 countries in attendance.
Previously this year, Iran hosted the Gas Exporting Countries Forum (GECF) meeting as well as a conference dedicated to introduce a newly designed hydrocarbons contract, called Iran Petroleum Contract.
Iran says it needs $185 billion investment in oil and gas sector, as well as $70 billion investment in the petrochemical sector by 2025.
During the Petrochemical Forum, Iran’s Oil Minister Bijan Namdar Zanganeh said that “direct foreign investment can pave the way for the development of the projects in Iran.”
Ali-Mohammad Bassaqzadeh, the production control director at Iran's National Petrochemical Company, said on December 9 that Iran expects an 8-12% rise in its petrochemical production capacity to reach 47 million tons annually in the next Iranian fiscal year, which starts on March 21, 2016.
Iran has planned to boost the petrochemical production capacity to 120 million and 180 million tons per annum in 2020 and 2025 respectively.
Abbas She’ri Moqaddam, director of Iran's National Petrochemical Company (NPC) also said during the Forum that lifting of the sanctions on Iran will reduce the country’s petrochemical export costs by 10%.
Iran exported 14.109 million tons of petrochemicals, valued at $8.205 billion in the first seven months of the current Iranian fiscal year, which started on March 21. Despite a 36.36% uptick in volume of petrochemical exports, revenues rose by just 0.01% compared to the same period last year, according to the Iran Customs Administration's report released on November 10.
Hamid Reza Rostami, director for planning at Iran’s NPC also said on December 14th that the world’s largest chemical company, Germany’s BASF, is ready to invest $6 billion in Iran’s petrochemical sector.
BASF confirmed two days later that the company plans to resume its business in Iran after the removal of international sanctions. However, it didn't comment on the Iranian official’s statement on BASF's $6 billion investment plan in Iran’s Pars Special Economic Energy Zone.
Amir Hossein Fallah, director for investment at NPC, said foreign companies can take advantage of investing $10 billion annually in Iran.
Currently, some 70 projects are being implemented and 36 new projects have been developed, he added.
The managing director of Russia’s SINIKON Company Vadim Konakov also said on December 14th that Russian industries require importing petrochemicals from Iran to develop.
Pointing to Russia’s 10-year outlook plan for economic activities, he said the Russian economy and the country’s petrochemical sector are in a critical situation.
However, renovating the country’s infrastructures in different parts of the economy can boost the demand for petrochemical products, he added.
“Considering the implementation of development plans over the next 20 years in Russia, the need for importing petrochemical products is felt more than the past.”
Iran plans to boost its share in overseas oil and gas fields
Iran plans to boost its share in oil and gas fields it co-owns with other countries, said Amir Hossein Zamaninia, director for international affairs at the Iranian Oil Ministry.
“There are plans underway for increasing the share of Iran in oil and gas fields in other countries. But, no final decision has been yet taken and we are studying the case,” he said on December 15.
Referring to the likelihood of increasing its share in Azerbaijan’s Shah Deniz gas field, he said: “Shah Deniz field is one of the [mentioned] fields, but the final decision has not been taken.”
Iran owns a 10% stake in the Shah Deniz project.
The National Iranian Oil Company also has a 50% stake in the Rhum gas field, located in the UK North Sea. The other half of the stake is owned by BP.
Iran reveals gas production statistics
Head of the South Gas Complex Masoud Hassani announced on December 17th that 387 million cubic metres per day (mcm/d) of enriched gas is produced from South Pars gas field, of which 320 mcm/d is refined.
The giant South Pars field accounts for 57% of the country’s total gas production, while some 520,000 barrels of condensate and 8,500 tons of liquid gas as well as 1200 tons of sulfur per day is extracted from this field.
Iran is planning to increase its production capacity of gas in the South Pars Gas field to 750 mcm/d in two years.
Iran produced 110 billion cubic metres (bcm) of gas totally in the first eight months of the current Iranian fiscal year, which started on March 21, 2015, a National Iranian Gas Company official has said.
Abdolhossein Samari, director for operations at the National Iranian Gas Company (NIGC), said on December 15th that the output rose by 5 bcm compared to the same period in the previous year.
Manoochehr Taheri, director of the dispatching centre at NIGC, said on November 7 that some 202 billion cubic metres of gas was produced in the country in the past Iranian fiscal year, which ended on March 20.
He added that gas consumption stood at 190 billion cubic metres last year.
On the other hand, Iran announced on December 16th that Phases 15 and 16 of South Pars gas field will come on stream next week.
The development of phases 15 and 16 aims to produce 50 million cubic metres of sweetened gas, as well as producing 80,000 barrels of gas condensates to be supplied to refineries, and 400 tons of sulfur to be exported to international markets.
Iran has started early gas production from these phases since late 2014, producing 20 mcm/d of gas. This volume is planned to reach full capacity (50 mcm/d) next week.
South Pars, divided into 29 development phases, contains 40 trillion cubic metres (tcm) of natural gas. It covers an area of 9,700 square kilometres, of which 3,700 square kilometres are in Iran’s territorial waters in the Persian Gulf. The remaining 6,000 square kilometres are situated in Qatar’s territorial waters. The gas field is estimated to contain about 8% of the world’s reserves, and approximately 18 billion barrels of condensate.
Currently Iran produces about 700 mcm per day of enriched gas in total and plans to increase raw gas production to 1,100 mcm per day by late 2018.
Hamid Reza Araqi, managing director of the National Iranian Gas Company announced on December 13th that Iran’s gas industry will see a significant development within the next 6 years.
Through implementing a comprehensive plan, which comprises 300 modules, the gas industry will develop significantly, he said.
“There are 10 gas refining complexes operating in the country with an annual output of 260 billion cubic metres per annum. Meanwhile, over 10 cross-country pipelines, totalling about 36,000 kilometres, are transferring gas nationwide,” he explained.
Iran starts gas exploration near Turkmenistan border
Iran has begun exploration operations at Sufikom region, located in the Gorgan plain, neighbouring Turkmenistan, aiming to find new gas reserves, a company has said.
Yousef Etemadi, director for exploration at Iran’s Khazar Oil Company, said exploration operations officially kicked off on December 15 by the drilling rig number 56 of the National Iranian Drilling Company, Shana news agency reported on December 16.
Two years ago, Khazar Oil Company conducted seismic operations across 1,200 square kilometres of the region, he added.
“According to the plan, we have planned to conduct drilling down to 2,400 metres depth and are hoping to complete the operations within 130 days,” he explained.
Iran imported some 6.5 million cubic metres of gas from Turkmenistan last year, according to BP.
AZERBAIJAN
Snam completes the acquisition of the 20% interest held by Statoil in TAP
Snam S.p.A. has completed the acquisition of the 20% interest held by Statoil Holding Netherlands B.V. in the Trans Adriatic Pipeline AG (TAP), for an amount of €130 million, the company's official website reported on December 17th.
As a result of the transaction, Snam also replaces Statoil in the shareholders’ loan currently granted to TAP for a nominal amount of €78 million and takes over all of Statoil’s rights and obligations related to the development of the project, including the appointment of two Snam executives in the board of directors of TAP.
The closing of the transaction–which follows the exclusivity undertaking–was preceded by a meeting between Snam CEO Carlo Malacarne and Statoil President and CEO Eldar Sætre in Oslo, which led to the signing of the share purchase agreement.
“Snam’s entry into TAP marks another important step forward in its international growth strategy and, following the signing of the MoU with SOCAR last September, allows Snam to play a key role in the development of a major new route for gas flows to Europe”, Snam CEO Carlo Malacarne commented.
TAP is the company established for the purpose of developing the Trans-Adriatic Pipeline project, spanning from the Turkey-Greece border to Italy along the South Corridor. The project will allow gas produced from Shah Deniz II in Azerbaijan to flow to European markets–through multi-annual ship-or-pay contracts–using the Snam Rete Gas pipeline system. This will reinforce the leading role of Italy’s infrastructure in strengthening security of supply and boosting competition among supply sources, for the benefit of the entire European gas system.
Shah Deniz gas export increases
Export of gas from Azerbaijan's Shah Deniz gas field's Stage 1 (SD1) in 11 months of 2015 amounted to 6 bcm, which is 1.6% higher than the same period in 2014, the State Statistics Committee of Azerbaijan reported December 16th.
In 2014, the export of Azerbaijani gas generated from SD1 stood at 6.5 bcm.
Azerbaijan plans to bring the Shah Deniz gas field to full capacity by 2018, by adding 16 bcm/d to the production level from the second stage of this field.
From 2022 to 2028 years in the field will produce 25 bcm/y. Curently the output of the field stands at 29.6 mcm/d, or around 10 bcm/d.
There are no figures for total gas export in 11 months, but according to the latest official report Azerbaijan in January-October 2015 has exported 6. 76 bcm gas, which is 2.7% below the same period in 2014.
Bulgaria wants an alternative pipeline to import Azerbaijani gas
Turkey and Bulgaria plan to construct a connecting pipeline for importing Azerbaijani gas to Bulgaria, Turkish Prime Minister Ahmet Davutoglu said.
He made the remarks during a press conference following a meeting with Bulgaria’s Prime Minister Boyko Borisov in Sofia.
“We have decided to link Bulgaria with Turkey with a gas interconnector which will deliver gas from Azerbaijan,” he added.
Borisov noted that Bulgaria, Turkey and Greece have decided to construct an interconnector that, alongside with the "Balkan" gas hub, will facilitate diversification and transportation of natural gas in any direction.
Borisov said that to revive the idea on supplying Azerbaijani gas, together with Greek Prime Minister Alexis Tsipras they have decided to hold a meeting in Brussels Dec.17.
Earlier, it was planned to supply Azerbaijani gas from the Stage 2 of development of Shah Deniz field to Bulgaria via the IGB gas pipeline that will be connected to the Trans-Adriatic Pipeline (TAP) meant to supply annually 10 billion cubic meters of Azerbaijani gas from Shah Deniz to European markets.
The initial capacity of IGB will be three billion cubic metres of gas.
It is expected to start the pipeline’s construction in October 2016.
SOCAR’s LNG import license revoked by Turkey
Turkey’s Energy Market Regulatory Authority (EPDK) has cancelled the license of SOCAR Turkey LNG Satis AS for import of liquefied natural gas (LNG).
“The EPDK has revoked the licenses of 13 companies issued for various activities, including that of SOCAR Turkey LNG Satis AS issued for the LNG import in March 2014 for a period of 30 years.
The EPDK hasn’t commented on the reason for revocation of the license.
In early December, Turkey signed a contract with Qatar for the LNG purchase.
Ankara also has agreements with Algeria and Nigeria for the supply of 4.4 billion and 1.2 billion cubic meters of liquefied natural gas per year, respectively.
CENTRAL ASIA
TAPI started, Ukraine, Bangladesh eyeing participation
Construction work on the Turkmenistan-Afghanistan-Pakistan-India Pipeline (TAPI) started on December 13th, aimed to transport 33 bcm/y of Turkmenistan’s Galkynysh field's reserves to the participant countries by late 2019.
Turkmenistan has taken the decision to become the lead financier.
Pakistan's Federal Petroleum and Natural Resources Minister Shahid Khaqan Abbasi announced on December 16th that Bangladesh has also expressed its willingness to join TAPI
“Turkmenistan will invest an estimated $25 billion in developing gas fields and laying the 1,680km pipeline. Other partner-countries will have 5% share each in building the pipeline,” Abbasi said.
Abbasi declared that the gas would be the cheapest and said Bangladesh had expressed interest in being part of the project, but it would be an arrangement between Delhi and Kabul.
On the other hand, Ukraine's Minister of Regional Development, Construction and Housing and Utilities Gennady Zubko said that Ukraine would like to be involved TAPI.
“Ukraine is interested in taking a role in the realisation of the project,” he said in a statement published on the Ministry’s website.
China, Kazakhstan ink $10bn worth of deals
Deals worth $10 billion were signed at the Kazakh-Chinese Business Council meeting on December 13 in Beijing, the Kazakh PM's press service said.
Prime Minister of Kazakhstan Karim Massimov paid an official visit to China, where he took part in the third meeting of the Kazakhstan-China Business Council. The meeting was attended by Chinese government officials, as well as major companies and financial institutions of the two countries.
The signed deals include a Memorandum of Cooperation between JSC "Kazakhtelecom" and China Telecom Global Limited; a Memorandum of Understanding between the KazMunayGas JSC and the Sinopec corp.; and a Memorandum of Understanding for cooperation on the project of industrial park of ferrous metals (production of copper) between the “Central Asia Gold Corporation” and Shenyang Lianli Copper.
A month ago, the third line or Line C of the Kazakhstan-China main gas pipeline was officially inaugurated in Almaty.
Kyrgyzstan and China sign gas pipeline construction agreement
Kyrgyzstan and China on December 16th signed an agreement between the Kyrgyz Government and Trans-Kyrgyz Gas Pipeline Company Ltd on construction of a natural-gas pipeline through Kyrgyzstan to China, the Kyrgyz Economy Ministry said.
Agreement on the pipeline construction was reached during Chinese President Xi Jinping’s visit to Kyrgyzstan in September 2013.
The pipeline construction is one the largest investment projects in Kyrgyzstan; it will cost around $1.5 billion (USD). According to preliminary estimates, during 35 years of the pipeline’s operation, Kyrgyzstan would earn more than $2 billion for the transit of gas from Turkmenistan and Uzbekistan to China.
The ministry said that Chinese investments in Kyrgyzstan in 2014 exceeded $200 million or around 30% of the total direct foreign investments in the country.
Last year trade between Kyrgyzstan and China amounted to $1.18 billion, Kyrgyz Economy Minister Arzybek Kojoshev at the Kyrgyz-Chinese investment forum in Beijing on December 17, said the press service of the Kyrgyz Government.
Ilham Shaban is is a Natural Gas Europe expert and Director of the Azerbaijan Centre for Oil Studies in Baku