Sanctions-busting Iranian Pipeline To Make First Shipment In June

Iran’s Goreh-Jask oil pipeline is due to ship its first crude oil in June, with all construction having finished last week. This pipeline will enable Iran to transport huge quantities of oil from its major oil fields via Goreh in the Shoaybiyeh-ye Gharbi Rural District of Khuzestan Province 1100 kilometres to the port of Jask in Hormozgan province on the Gulf of Oman.

The 42-inch pipeline is absolutely crucial to Iran’s ability to continue to circumvent U.S.-led sanctions against it and to consolidate its burgeoning customer base in Asia. Although signs have emerged in recent days that a new iteration of the Joint Comprehensive Plan of Action (‘nuclear deal’) might emerge, Iran regards the Goreh-Jask pipeline as the most vital strategic oil export route to avoid it ever being beholden to the U.S.’s wishes in the future.

Without the Goreh-Jask pipeline in place, Iran has been forced to side-step U.S. sanctions re-imposed after Washington unilaterally withdrew from the JCPOA in May 2018 through three tried-and-tested methods. These comprise: first, the re-labelling of Iranian oil into Iraqi oil on the border and at the shared oil reservoirs of the two allies whereupon it is sold on as Iraqi oil but the vast bulk of the revenues go to Tehran; second, the use of international brokers to hide Iranian oil movements under the guise of other clients; and third, the disguising of oil shipments and export routes through the use of ship-to-ship transfers of Iranian oil in the territorial waters of Malaysia, Indonesia, and China, among others. Each of these methods, though, involve considerable manoeuvring and cost on Iran’s part that the Goreh-Jask pipeline now in place will remove.

The pipeline will also give the option to Iran of blockading the world’s key oil transit route – the Strait of Hormuz in the Persian Gulf – for political purposes without the blockade affecting its own oil exports. The reason why is that the Goreh-Jask pipeline does not run through either the Strait of Hormuz or the Persian Gulf. Instead, it allows for the free movement of light, heavy, and ultra-heavy crude oil through a 1,100 km-long, 46 inch diameter pipeline that runs from the Goreh oil terminal in the north-west Bushehr Province to Mobarak Mount in the western Jask region along the Sea of Oman and freely out to anywhere else in the world. “The logistical model for exporting oil that Iran has been working with before the Goreh-Jask pipeline was not sustainable, with around 90 per cent of all of it loaded at Kharg Island, which made it an obvious and easy target for the U.S. and its proxies to cripple Iran’s oil sector and therefore its economy,” a senior oil and gas industry source who works closely with Iran’s Petroleum Ministry exclusively told OilPrice.com last week. “Conversely, Iran wants to be able to use the threat – or reality – of closing the Strait of Hormuz for political reasons without also completing destroying its own oil exports revenue stream,” he said. Indeed, any such blockade of the Strait of Hormuz by Iran would not only be extremely effective for whatever political Tehran might have in mind but would also financially benefit Iran as oil prices would rise significantly from such an action.

In the initial stages of its operation, the Goreh-Jask pipeline will transport around 350,000 barrels per day of crude oil. This will be increased within a month of satisfactory operation to a daily delivery capacity 460,000 bpd of heavy crude oil and 254,000 bpd of light crude oil to export terminals. After up to three months of satisfactory operation at these levels, transport volumes will be increased again to 1 million bpd. The focus in the first two stages of operation will be moving oil from the huge oil fields cluster in the West Karoun region. These targeted volumes of crude oil to be transported in each phase of the Goreh-Jask pipeline are entirely realistic, as the West Karoun oil fields’ cluster alone comprises North and South Azadegan, North and South Yaran, and Yadavaran – plus some lesser fields – which together contain at least 67 billion barrels of oil in place.

With an average recovery rate currently of only around 4.5 per cent (compared to over 50 per cent at similar oil fields in Saudi Arabia), the potential to dramatically increase output from these fields is huge, particularly as they are not geologically difficult structures to exploit. Indeed, the West Karoun cluster has an average lifting cost of crude oil (excluding capital expenditure) rating as the lowest in the world, alongside Saudi Arabia’s optimal barrels, at just US$1-2 per barrel. Raising the output across the West Karoun oil fields cluster by at least 500,000 bpd also remains the key commitment from China in the 25-year deal with Iran revealed by OilPrice.com.

Given this initial close association to the massive West Karoun fields, the starting point in this logistical chain for the Goreh-Jask pipeline will be the West Karoun pumping station, the middle point the Omidieh pumping station, and the end stage the Bahregan and Jask terminals. Once in Jask, the oil will be stored in one of the 20 storage tanks each capable of storing 500,000 barrels of oil, in the first phase (10 million barrels total) for later loading on to very large crude carriers (VLCCs) headed from the Gulf of Oman and into the Arabian Sea and then on to the Indian Ocean.

The second phase will see an expansion to an overall storage capacity of 30 million barrels, according to the Iran source. These VLCCs will be accommodated in shipping facilities costing around US$200 million in the first phase, although the plans are to expand capacity to allow for further regular shipping of various oil-adjunct and petrochemical products in particular demand in Asia.

In addition, three single-point moorings (SPM), and other infrastructure features for the import and export of crude oil and other products will be in place, with more under construction. According to a recent comment from Hossein Azimi, director of the Pars Oil and Gas Company that oversees developments at Iran’s supergiant non-associated natural gas field, South Pars, an  SPM loading system with a capacity of 7,000 square metres per hour of loading capacity is also being installed in Assaluyeh, southern Iran.

This would augment gas condensate loading capacity of the field and will further allow for the handling of liquid cargo, such as petroleum products, for tanker ships. “There will be a few more of these installed in the south, in the Gulf of Oman, in the coming months, as they are very useful in areas where a dedicated facility for loading or unloading liquid cargo is not available,” the Iran source told OilPrice.com. These SPMs will operate in a similar manner to those of Iran’s neighbour, Iraq, in that they will be located many kilometres away from the onshore facilities, connected to them by a series of subsea pipelines, and able to handle the biggest of VLCCs.

By Simon Watkins for Oilprice.com

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