0640 GMT February 17, 2020
Competition between Iran and Qatar in South Pars Gas Field entered a new phase with the construction of refining complexes indicating a new chapter by both sides to increase production.
In line with this, Laffan Refinery, Qatar's first condensate refinery went into production in September 2009.
The refinery, in the northeastern part of the country, has an initial processing capacity was 146,000 barrels per day (bpd). The Arab country has conducted research on doubling this capacity.
Similarly, Iran also planned to construct eight gas condensate refineries, each with the capacity to process 60,000 bpd on the vicinity of its gas reserves in Siraf Port.
The project to establish eight refineries in Siraf is one of the biggest and due to its significance, it is called the octopus of Persian Gulf.
Managing Director and Member of the Board of Directors of Siraf Refineries Infrastructure Company (SRIC) Alireza Sadeqabadi pledged maximum production from South Pars reserves. He maintained that once the project becomes operational, Iran’s negotiation power on sales from the reserves will be increased.
Operations to establish the eight refineries will begin in the coming days. Iran Daily conducted an exclusive interview with Alireza Sadeqabadi. The full text of the interview follows:
IRAN DAILY: Tell us something about Siraf Condensate Refinery Complex, its management and its shares and explain SRIC’s role in this complex?
SADEQABADI: This refining complex is located in Siraf Refining Park between phases 11 and 13 of South Pars. Almost 20 percent of its shares are owned by Iran's Oil Industry Pension Fund while 80 percent belong to the investors.
The company is responsible for conducting basic research, buying licenses, leveling, consolidating and preparing the ground for the whole refining park. Also it is duty-bound to construct joint utility, process and support units. Actually, the company provides services to other refining companies. The project will require $3 billion to become operational.
Qatar pursued the construction of a similar refinery at Ras Laffan Condensate Refinery with a capacity of 73,000 bpd.
You have mentioned similar undertakings by Qatar in refining projects, how do you evaluate the significance of the complex in extracting gas from joint South Pars reserves in competition with Qatar?
In fact, Siraf guarantees maximum production from South Pars joint gas field which has rich gas reserves, namely ethane, methane, propane, butane and gas condensates. You cannot extract and process selectively and process one type of gas and leave out the other reserves. In another word, ethane production will inevitably lead to tapping other gas reserves. Thus, we are able to guarantee maximum production in competition with Qatar given that the ground is prepared for extracting all the reserves. This goal will be achieved by constructing Siraf Refining Complex.
How was the idea of establishing the complex formed?
Nearly 70 percent of Iran’s fuel comes from ethane. In other words, maximum ethane production will also ensure greater production from other gas reserves. Now, imagine that gas condensates are to your disadvantage and we cannot sell them easily in the market, so methane and ethane production must be reduced.
Reduction in methane production means that we must substitute it with liquid fuels in power plants. The reason is that we have no other option for domestic consumption of gas and reducing its production means losing money in addition to generating a lot of pollution.
However, since Iran cannot sell its gas condensates, it could not use the entire capacity of the refineries which are in operation.
In terms of ethane, it must be noted that we made a lot of investment for ethylene chain and its downstream products. Given that we cannot provide the units’ feedstock, we have unused investment.
Therefore, in case we do not initiate maximum production for methane and ethane, investments will be untapped in upstream industries and gas refining complexes. At the same time, we will be obliged to consume liquid fuels which means losing capital and creating pollution.
What is the significance of making products from gas condensates from South Pars gas fields in Iran? Don’t we have international markets for such products?
Actually, condensates do not have a huge global market. The market can take in 1.5 million bpd. When sanctions were imposed on Iran’s oil industry, major world refineries continued their activities. International crude oil market has the capacity to absorb 90 million bpd which can easily be supplied by OPEC member states. But the world market for gas condensate has an API gravity value of 55°-57°. This is while the API for the lightest crude oil is 43°. It means that if you lose gas condensates in the world market, you cannot substitute it. That’s why no one is inclined to make big investments on gas condensates, because there is no supply security. All investors will be worried about meeting their needs if Iran and Qatar stop supplying condensates.
Another aspect of this is that foreign investors are aware that gas consumption increases in the winter and you need to sell your gas condensates even at a low price to extract more gas. Therefore, the customer has more negotiating power. We decided to turn gas condensates into value-added. Doing so changes gas condensates from a threat to an opportunity.
Do you anticipate exports for products from this refining complex?
We are highly interested in exporting all our products. Iran produces liquid gas, light and heavy crude, jet fuel, diesel fuel, and naphtha. As you know, naphtha is the basic material for producing plastic in the world and it also constitutes almost 70 percent of petrochemical feedstock. As opposed to fuels, plastic consumption is directly linked to economic development. The reason is that when countries develop, they use automobiles with lower fuel consumption. They are more inclined to produce cars which cut their need for fuels. Consequently, demand for fuel will decline or the countries may use hybrid or bio-ethanol fuels (biofuels).
On the other side, when countries become more affluent, their demand for plastic will increase and people will change their furniture (mostly made of plastic) sooner. The world is moving toward using composites and plastics rather than metal and iron and eventually the demand for plastic goes up. However, the price of naphtha is not dependent on crude oil price rather it is governed by the demand for plastic. According to the prediction on global economic development, the demand for plastic is ever increasing.
When will the refining complex become operational?
At present, preliminary studies on and buying license for the project is underway. Operations of planning, hydrology and géotechnique were carried out. The executive operations of the project is planned for May 24 in a ceremony attended by First Vice-President Es’haq Jahangiri and Oil Minister Bijan Namdar Zanganeh. The time span for early production and final production is predicted at almost 3½ years and 4½ years respectively.
Tell us about the project’s investors? Are foreign investors participating in the project?
Currently, Social Welfare Organization of Iran, Tappico Holding, Social Welfare Organization of the Armed Forces, Petro Farayand Karkhe, Iran's Oil Industry Pension Fund and Information Ministry Pension Fund are among the investors. Meanwhile, all our stockholders are committed to offer 30-35 percent of their shares in the over-the-counter and thus foreign stockholder can participate in the project.