Iran's Oil and Gas Refining Industry - January 2017
The industry that handles the refining and distribution of oil products involves various processes, including production, imports, exports, storage, transfer and distribution of billions of liters of products in non-stop operations as part of a network as vast as the entire area of the country – its import-export points included. This industry supplies more than 40 percent of the energy consumed around the country.
The refining of 1.7 million barrels of crude oil in nine refineries across the country produces, among others, some 260 million liters of oil products such as liquefied gas, gasoline, diesel, kerosene, and fuel oil.
In a bid to enhance the safety of energy supply, in addition to development and optimization of existing refineries, recent years have seen the construction of gas condensate facilities such as the Persian Gulf Star and Shiraz Refineries. Facilities in Abadan and Bandar Abbas to refine extra heavy crude are also designed to contribute to that goal.
Liberalization of the economy is another important step toward achieving positive results from privatization with the aim of enhancing efficacy. As long as the raw materials companies purchase and the products they sell are subjected to pricing by the state and market factors play no role in determining these prices (the absence of a competitive atmosphere and failure to liberalize foreign trade) that goal would remain elusive and the refining companies wouldn’t be able to identify opportunities and problems. So on top of the failure to develop their rather old equipment, one of the biggest obstacles the refining companies are facing is the absence of a distinct, unified mechanism to price products and feedstock.
The present study tries to take a look at Iran’s oil reserves and at the position of oil refineries in Iran, their development plans, pricing, risks, etc.
What we have learned shows that the aging equipment at Iranian refineries, coupled with economic sanctions, has rendered them unable to optimize their product baskets. As a result, their profit margins are by far lower than their international peers. In light of the fact that the volume of fuel oil Iranian refineries produce is rather too high, most of them are making losses rather than profits.
When it comes to the oil refining capacity in the world, Iran stands in 11th place; as far as production of gasoline, and diesel is concerned, Iran is respectively in 9th and 13th places in the world. But when it comes to fuel oil, Iran is the world’s biggest producer of this product. So if no changes are introduced to the product baskets of refining companies and if oil prices continue to remain low, the industry could be on course to bankruptcy given the existing approach and the vague pricing tactic employed by the National Iranian Oil Products Distribution Company (NIOPDC).
Under development policies worked out to promote the quality and quantity of oil refining in Iran in the post-sanctions era, measures should be taken to decrease the volume of fuel oil the refineries have in their product baskets to below 10 percent.
To that end, talks have been held with Japan, China, and South Korea to implement projects to improve the quality and reform the quantity of oil products in some old refineries such as Abadan, Esfahan, Bandar Abbas, and Lavan.
The refining of 1.7 million barrels of crude oil in nine refineries across the country produces, among others, some 260 million liters of oil products such as liquefied gas, gasoline, diesel, kerosene, and fuel oil.
In a bid to enhance the safety of energy supply, in addition to development and optimization of existing refineries, recent years have seen the construction of gas condensate facilities such as the Persian Gulf Star and Shiraz Refineries. Facilities in Abadan and Bandar Abbas to refine extra heavy crude are also designed to contribute to that goal.
Liberalization of the economy is another important step toward achieving positive results from privatization with the aim of enhancing efficacy. As long as the raw materials companies purchase and the products they sell are subjected to pricing by the state and market factors play no role in determining these prices (the absence of a competitive atmosphere and failure to liberalize foreign trade) that goal would remain elusive and the refining companies wouldn’t be able to identify opportunities and problems. So on top of the failure to develop their rather old equipment, one of the biggest obstacles the refining companies are facing is the absence of a distinct, unified mechanism to price products and feedstock.
The present study tries to take a look at Iran’s oil reserves and at the position of oil refineries in Iran, their development plans, pricing, risks, etc.
What we have learned shows that the aging equipment at Iranian refineries, coupled with economic sanctions, has rendered them unable to optimize their product baskets. As a result, their profit margins are by far lower than their international peers. In light of the fact that the volume of fuel oil Iranian refineries produce is rather too high, most of them are making losses rather than profits.
When it comes to the oil refining capacity in the world, Iran stands in 11th place; as far as production of gasoline, and diesel is concerned, Iran is respectively in 9th and 13th places in the world. But when it comes to fuel oil, Iran is the world’s biggest producer of this product. So if no changes are introduced to the product baskets of refining companies and if oil prices continue to remain low, the industry could be on course to bankruptcy given the existing approach and the vague pricing tactic employed by the National Iranian Oil Products Distribution Company (NIOPDC).
Under development policies worked out to promote the quality and quantity of oil refining in Iran in the post-sanctions era, measures should be taken to decrease the volume of fuel oil the refineries have in their product baskets to below 10 percent.
To that end, talks have been held with Japan, China, and South Korea to implement projects to improve the quality and reform the quantity of oil products in some old refineries such as Abadan, Esfahan, Bandar Abbas, and Lavan.
2 NOTES
3 EXECUTIVE SUMMARY
4 BACKGROUND
5 OVERVIEW OF IRAN’S OIL AND GAS INDUSTRY
5.1 Total Primary Energy Consumption
5.2 Management of Oil and Natural Gas Sectors
5.3 Crude Oil and Condensate Production
5.3.1 Crude Streams and Oil Fields
5.3.2 Non-Crude Liquids Production
5.3.3 Upstream Projects
5.3.4 Crude Oil and Condensate Exports
5.4 Natural Gas Production
5.4.1 South Pars Gas Field
5.5 Natural Gas Exports
6 IRAN’S REFINERY INDUSTRY
6.1.1 Nelson Complexity Index
6.2 Domestic Consumption and Fuel Subsidy Reform Plan
6.2.1 Gasoline Supply and Demand
6.2.2 Comparison of Gasoline Production Capacity
6.2.3 Gasoline Pricing Formula
6.3 National Iranian Oil Refining & Distribution Company (NIORDC)
6.4 Oil Refining Companies
Abadan Oil Refining Company
Bandar Abbas Oil Refining Company
Esfahan Oil Refining Company
Imam Khomeini Shazand Oil Refining Company
Kermanshah Oil Refining Company
Lavan Oil Refining Company
Shiraz Oil Refining Company
Tabriz Oil Refining Company
Tehran Oil Refining Company
6.5 Other Entities Involved in Oil Refining
National Iranian Oil Products Distribution Company (NIOPDC)
Iranian Oil Pipelines and Telecommunications Company (IOPTC)
National Iranian Oil Engineering and Construction Company (NIOEC)
Oil Refining Industries Development Company (ORIDC)
6.6 New Refinery Implementation Projects
Persian Gulf Star Condensate Refinery
Goureh-Jask Crude Oil Pipeline Project
Jask Oil Storage Terminal Project
Pars Farayand Refinery of Shiraz
Anahita Refinery
Bahman Geno Refinery (Hormuz)
6.7 Projects to Enhance Capacity and Product Quality at Refineries
Lavan Refinery
Bandar Abbas Refinery
Isfahan Refinery
Tehran Refinery
6.8 Share of Refineries in Producing Different Products
6.9 Comparison of Refineries
6.10 Comparison of Crude Oil Refining Capacity in the World
6.11 Government Policies
6.11.1 Branding
6.11.2 Development and Optimization of Refining Companies
6.11.3 Liberation of the Price of Special Products
6.11.4 Oil Regulatory Plan
6.12 Review of the Industry Sector’s Risks
6.13 SWOT [strengths, weaknesses, opportunities, and threats] analysis
Strengths
Weaknesses
Opportunities
Threats
6.14 On the Refining Industry in the Stock Exchange
Lack of Supply and Demand Mechanism in Sales
Fluctuations of Foreign Exchange Rate
Production Waste
Aging Refineries
Pricing Oil Based on Quality
Pricing of Products
Global Oil Prices
Vague Financial Statements
7 REFERENCES
3 EXECUTIVE SUMMARY
4 BACKGROUND
5 OVERVIEW OF IRAN’S OIL AND GAS INDUSTRY
5.1 Total Primary Energy Consumption
5.2 Management of Oil and Natural Gas Sectors
5.3 Crude Oil and Condensate Production
5.3.1 Crude Streams and Oil Fields
5.3.2 Non-Crude Liquids Production
5.3.3 Upstream Projects
5.3.4 Crude Oil and Condensate Exports
5.4 Natural Gas Production
5.4.1 South Pars Gas Field
5.5 Natural Gas Exports
6 IRAN’S REFINERY INDUSTRY
6.1.1 Nelson Complexity Index
6.2 Domestic Consumption and Fuel Subsidy Reform Plan
6.2.1 Gasoline Supply and Demand
6.2.2 Comparison of Gasoline Production Capacity
6.2.3 Gasoline Pricing Formula
6.3 National Iranian Oil Refining & Distribution Company (NIORDC)
6.4 Oil Refining Companies
Abadan Oil Refining Company
Bandar Abbas Oil Refining Company
Esfahan Oil Refining Company
Imam Khomeini Shazand Oil Refining Company
Kermanshah Oil Refining Company
Lavan Oil Refining Company
Shiraz Oil Refining Company
Tabriz Oil Refining Company
Tehran Oil Refining Company
6.5 Other Entities Involved in Oil Refining
National Iranian Oil Products Distribution Company (NIOPDC)
Iranian Oil Pipelines and Telecommunications Company (IOPTC)
National Iranian Oil Engineering and Construction Company (NIOEC)
Oil Refining Industries Development Company (ORIDC)
6.6 New Refinery Implementation Projects
Persian Gulf Star Condensate Refinery
Goureh-Jask Crude Oil Pipeline Project
Jask Oil Storage Terminal Project
Pars Farayand Refinery of Shiraz
Anahita Refinery
Bahman Geno Refinery (Hormuz)
6.7 Projects to Enhance Capacity and Product Quality at Refineries
Lavan Refinery
Bandar Abbas Refinery
Isfahan Refinery
Tehran Refinery
6.8 Share of Refineries in Producing Different Products
6.9 Comparison of Refineries
6.10 Comparison of Crude Oil Refining Capacity in the World
6.11 Government Policies
6.11.1 Branding
6.11.2 Development and Optimization of Refining Companies
6.11.3 Liberation of the Price of Special Products
6.11.4 Oil Regulatory Plan
6.12 Review of the Industry Sector’s Risks
6.13 SWOT [strengths, weaknesses, opportunities, and threats] analysis
Strengths
Weaknesses
Opportunities
Threats
6.14 On the Refining Industry in the Stock Exchange
Lack of Supply and Demand Mechanism in Sales
Fluctuations of Foreign Exchange Rate
Production Waste
Aging Refineries
Pricing Oil Based on Quality
Pricing of Products
Global Oil Prices
Vague Financial Statements
7 REFERENCES
