0828 GMT September 24, 2019
Alireza Sadeqabadi said the project, which will process as much as 480,000 bpd of condensates, is already drawing interest from key Asian buyers such as South Korea and Japan — both in terms of shareholding participation and as an off-taker of the products.
"Asia is the center of gravity for oil and all the incremental demand will come from Asia. We are expecting to ship more than 50 percent of our products to Asia," Sadeqabadi told Platts on the sidelines of the 19th Annual Condensate and Naphtha Forum Thursday, organized by Conference Connection.
Siraf Refineries Infrastructure Co. has overall responsibility for managing and building infrastructure for the project.
The project includes eight private refineries and, once fully operational, will have the capacity to produce about 270,000 bpd of naphtha, 140,000 bpd of gasoil, 30,000 bpd of LPG and 40,000 bpd of kerosene.
The eight private local Iranian firms will individually invest funds to build the processing plants, each with a capacity of 60,000 bpd. They will also be making their own export decisions, Sadeqabadi said.
"Early production will start in 2018, but final production and trading will take place in 2019," he said, adding that site preparation has been nearly completed for the project.
Iran's oil sales have dropped to around one million bpd as a result of sanctions, but the country has been aggressively shipping out condensates — a light oil extracted along with natural gas — from the South Pars Gas field. Condensate exports faced no restrictions so long as they were shipped to buyers permitted under US sanctions to take Iranian crude.
According to the International Energy Agency, Iran's condensate exports doubled to about 200,000 bpd in 2014, accounting for total Iranian oil shipments of about 1.3 million bpd.
But Sadeqabadi said that once the Siraf project is fully operational, condensate exports out of Iran would disappear as the country was more keen to export value-added products.
"We are seeing strong interest from China, South Korea and Japan, Taiwan for participation — either to take equity in the project or buy the products from us," he said. "We are also in talks with other Asian countries that have naphtha-based petrochemical units."
Sadeqabadi said refineries from the project would be aiming to sell bulk of their products in the spot market, rather than venturing into numerous long-term contracts. "There is a big spot market for these products and we are hoping margins will be better in the spot market," he said.
Naphtha, an area of growth
He said that Siraf was expecting to see buoyant demand for its naphtha in countries with strong economic growth, such as India.
"Plastics consumption is directly related to economic growth and we are expecting strong demand for naphtha from those countries which are expected to witness strong economic growth in Asia," he added.
He said Siraf would eventually stop exporting naphtha once its own petrochemical project — for which feasibility study is currently being carried out — is constructed under Siraf's second phase of development.
Sadeqabadi said all eight refineries are still open to foreign investor participation. "While some European investors are interested only in financing the projects, they are not keen on any off-take agreements. Asian investors are interested in both investing and also buying from those refineries," he added.
Commenting on the outlook for the condensate and crude markets, he said he does not expect the market to bounce back anytime soon, as the supply-demand fundamentals were unlikely to change from the current status.
"I think Iran's coming back to the market has already been priced in," he said. "So I don't think the market will fall after Iran supplies are back in the market in full volumes.
"As far as I think, any movement in oil prices in the near term will be largely dependent on the dollar index."
Iranian officials are confident about their ability to deliver an additional 500,000 bpd of exports within six months of sanctions being lifted, and as much as one million bpd within a year. This would take total production to 3.8 million bpd.