Reaching natural gas production of one billion cubic metres per day (Bcm/d) has been one of the three core hydrocarbons resource strategies of Iran since the Islamic Republic began to seriously develop the supergiant South Pars non-associated gas field in 1990, alongside producing 5.7 million barrels per day (bpd) of oil and building out a world-class petrochemicals sector. As highlighted by OilPrice.com, Iran is currently working quietly towards the oil output and petchems sector targets, but it also announced last week that it is finally to achieve its monumental and long-awaited gas production target this Iranian calendar year (ending on 20 March 2021). At the same time, it also announced that its flagship Persian Gulf Star Refinery (PGSR) – essential to Iran’s new-found gasoline self-sufficiency – is ramping up its refining capacity.
South Pars - the 3,700 square kilometer portion of the 9,700 square kilometer gas basin that Iran shares with Qatar (the North Dome field) - holds an estimated 14.2 trillion cubic meters (tcm) of gas reserves (8 percent of the world’s total and around 40 percent of Iran’s total estimated gas reserves of 33.8 tcm) plus 18 billion barrels of gas condensates. For at least two decades it has additionally accounted for around 60 percent of Iran’s overall gas production and is also central to Iran’s ambition of becoming a top-tier global player in the liquefied natural gas (LNG) market. Given the global significance of this resource, the South Pars field was, up until the re-imposition of sanctions by the U.S. in 2018, the focus of a superpower tug-of-war between NATO members and Russia, with both sides eager to put their best companies on the ground in one or more of the South Pars phases.
For Europe (and the U.S.) this opened up the opportunity of being able to significantly reduce the continent’s extreme dependence on Russian gas flows. Russia, understandably, was equally eager to retain its gas-centric power over Europe and instead to divert Iranian gas flows eastwards, to bolster its own gas arrangements with Asia in general and with China in particular. With the withdrawal of French oil and gas major Total from Phase 11 as a result of the new U.S. sanctions, Russia has the dominant position now in Iran (albeit with China working increasingly busily alongside it), although for the time being the enormous degree of its participation is disguised in the form of ‘contractor-only’ work, as revealed by OilPrice.com.
With Russia and Chinese money, equipment, technology, and expertise available as and when required, South Pars will exceed 750 million cubic meters per day of natural gas output by 20 March, in turn bringing the country’s total natural gas production capacity to one Bcm/d, according to a comment last week from Iran Petroleum Minister, Bijan Zanganeh. He added that the first major offshore development stage of Phase 11 (now under the leadership of Iran’s Petropars) – will be spudded within the next few weeks, with the Phase’s output destined to be pumped to refineries in Assaluyeh and Kangan in the Bushehr Province, and noted that the platform jacket for the Phase is in Qeshm Island ready for installation.
According to Petropars’ plans, Phase 11 is now scheduled to be developed in two integrated and consecutive stages, with each stage containing 15 wells and the aim being the production of 56 mcm/d of natural gas plus 75,000 bpd of gas condensate and other tangential products. In addition, Zanganeh said, two 32-inch pipelines jointly stretching over 270 kilometers will be constructed and installed to ensure the onward distribution of the gas to the intended refineries.
With around US$33 billion having already been spent on the development of South Pars as a whole, according to sources in Iran spoken to by OilPrice.com last week, a very high percentage of the work on all phases has already been completed, with just a handful not having a 95 per cent plus completion rating as of now. Of these relatively under-developed phases, Zanganeh stated earlier this year that Phase 14 would come online by the end of the current Iranian calendar year on 20 March 2020 and, according to a source who works very closely with the Petroleum Ministry, this objective was only missed because of the sudden onset of the coronavirus in Iran as elsewhere. As it stands, the third platform of the offshore field is already loaded for installation in its designated spot, and, once operational, the platform is designed to produce 14.1 mcm/d of natural gas.
Its adjunct phase – 13 (SP13) - targeted to produce 56 mcm/d of gas on its own, saw two platforms (B and D) become ready for an operation just prior to this development and since then, according to its operator at the end of March – Iran’s Pars Oil and Gas Company – the last platform (13C) of the offshore project has been successfully installed in the Persian Gulf. In sum, 38 offshore wells have now been drilled in the offshore sector of SP13 located in the northwestern part of the gas field, with the delivery of gas to the onshore refinery scheduled to begin when an offshore pipeline becomes available. In preparation for this, a fourth train is now ready, allowing for the processing of up to the full 56 mcm/d of nominal gas capacity, which would then be fed into the Iran Gas Trunkline (IGAT) system.
At the same time, the flagship of Iran’s enormously important gasoline sector – the PGSR (more generically known as the Bandar Abbas refinery) – that is fed by gas condensate produced from South Pars is now back to full operation following a similar slowdown caused by the coronavirus outbreak and is geared towards breaking new production records. Its importance to Iran is difficult to overstate, suffice it to say that for a resource-rich country such as Iran no element of previous U.S.-led sanctions was more galling to it than having to rely on international assistance to meet its day-to-day needs for gasoline. An indication of how important it was to Iran to become self-sufficient in gasoline is evidenced by the breakneck speed with which it moved on the development of the PGSR, with the original plan involving a 360,000 bpd three-phase refinery development, each designed to produce 12 million liters per day (ml/d) of Euro 5 gasoline, plus 4.5 ml/d of Euro 4 standard diesel, 1 ml/d of kerosene and 300,000 liters per day of liquefied petroleum gas (LPG).
To achieve these targets, the project’s developers were given a €260 million additional loan from the National Development Fund of Iran, as part of the estimated total cost for the three stages of approximately US$3.4 billion. Phase 1 was officially inaugurated in April 2017, with the first shipment of gasoline delivered for distribution just one month later in June, and Phase 2 began producing Euro 5 standard gasoline shortly after its own official launch in February 2018, running at full capacity by the end of June that year. Phase 3 saw its official inauguration shortly after that.
Despite reaching its initial targets, plans for the PGSR have been extended and, according to a comment last week from the chief executive officer of the project, Mohammad Ali Dadvar, the PGSR’s gas condensate refining capacity is set to increase to 480,000 bpd by September of this year. To this effect, according to Dadvar, air conditioning units for new cooling products and pumps, are already on-site and the construction of the required equipment is underway. “Currently, an average of 45 million liters of petrol and 17 million liters of gasoil are being produced at the refinery on a daily basis, which will increase to about 54 million liters and 20 million liters per day, respectively,” he said. In addition, he said, the refinery also now supplies 3.5 to 4 million liters per day of naphtha which is mostly exported or supplied to Tabriz and Arak petrochemical plants as feedstock. “[Given] sanctions...nearly 70 percent of the Persian Gulf Star Refinery’s output is petrol, which provides the lion’s share of the country’s demand for quality fuel,” he underlined.
By Simon Watkins for Oilprice.com
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