Cover: The DP3 Pipelay Construction Vessel Sahand (Jascon-5) is a highly ver-
satile, multipurpose, dynamically positioned offshore vessel with an advanced
hull design owned by the Iranian Offshore Engineering and Construction
Company (IOEC). The primary functions of this vessel are to perform pipelay-
ing, construction and/or accommodation work. The vessel can also be readily
equipped to carry out diving, pile driving, flexible pipelay and/or subsea instal-
The vessel is approximately 203 m long, including anchor racks and stinger. The
free main deck area is approximately 1,800 square meters. The navigation equip-
ment include features such as ARPA Radar, S-Band; X-band, W/ARPA Function;
Watch Radar in Tower; Radi o Weather Facsimile and Auto Pilot among other
Sahand has also been fitted with a (free standing) helideck, which is located on
top of the forward superstructure.
Contents IRAN OFFSHORE
Second Biggest Oil, Gas Reserves in Iran--------------------- Iranian Offshore Engineering & Construction
Over 41m Iranians Use Natural Gas--------------------------- Company (IOEC) #52 N. Kheradmand Avenue,
Khatami Hopeful of $100b in Oil Investments … ----------- Tehran, Iran.
Iranian Crude Delivered to Purchasers-------------------------
Oil Investments, a 4th Plan Priority---------------------------- Managing Director:
US LNG Developer Reports … ------------------------------- M. Ali Erami
Kazakhstan Keen on Building … ----------------------------- e-mail: firstname.lastname@example.org
Iran Finds 21Oil, Gas Fields … -------------------------------
NIOC Declares Current Year Plans ---------------------------- Executive Manager:
Qatar, Maersk Oil Sign $30m E&P Deal ---------------------- Babak Aghapour
Iran, Thailand Review Oil Cooperation ----------------------- e-mail: email@example.com
Mounting Tanker Terror Threats … ---------------------------
Sino-Iranian LNG Deal in the Pipeline ----------------------- Editorial Advisory Board:
Caspian Sea Agreement Seems More Likely -----------------
1st Phase of Caspian Crude Transfer … ---------------------- Massoud Soltanpour e-mail: Soltanpour@ioec.com
Saudi Oil Output Expected … ---------------------------------- Dr. Bahaari e-mail: Bahaari@ioec.com
Biodiesel Maker Forecasts Slow Progress ------------------- Mehrdad Sabbagh e-mail: Sabbaghi@ioec.com
Oil Price, a Source of Worry … ------------------------------- Dr. Rahbari e-mail: Rahbari@ioec.com
A Glance at a Challenging Task ------------------------------- Dr. Arabi e-mail: Arabi@ppars.com
Torkan: Oil, a regional Security Factor ---------------------- Haj-Hashemi e-mail: Hhashemi@ioec.com
Total Nears Iran Gas Deal ------------------------------------- M. Ali Erami e-mail: firstname.lastname@example.org
Brief Details of a Renovation … ----------------------------
Painstaking Efforts Produce Results ------------------------ Translation and Edited by:
About IOEC Company ---------------------------------------- Goudarz Goudarzi-Savadkouhi
Iran, Persian Gulf And Global … --------------------------- e-mail: email@example.com
Petroleum Hinders Drive for Democracy ------------------
Iran Enters Indian Ocean … ----------------------------------- Graphic Design and Lay-Out:
Oil And Conflict … ---------------------------------------------
Soroush And Norouz … ----------------------------------------
Foreign Investments Revisited ---------------------------------
A Shell-Style Crisis ----------------------------------------------
Iran-US Oil Platform Dispute … ------------------------------
A Concise Account of Iran's … -------------------------------
Legal Framework for Foreign Participation … ------------
P.O.G.C. Pars Oil and Gas Company -----------------------
Iran Offshore Subscription Form ------------------------------
Crossword Puzzle ------------------------------------------------
Iran Offshore Magazine intends to provide information to the
offshore oil and gas industry, in a format that is easy to read
and also to the point. It is specifically designed in this format
to set it apart from the typical trade magazine.
Information is presented in brief articles and eye-catching
graphics, ensuring that our targeted readership get the news
and data that they want. We want to appeal to the potential
readers in the best possible way.
We have launched this publication in line with the strategic
consideration that offshore industries are of paramount
importance for our beloved motherland given its unique
geopolitical situation and God-given oil and gas resources.
However, we may be rather viewed as an apprentice in this
extensive and sophisticated arena. Therefore, our staff enthu-
siastically welcome all sorts of comments from the reader-
ship worldwide, especially the highly esteemed experienced
professionals who are active in the challenging field of off-
Our primary goal is your satisfaction. Hence, it serves as a
source of encouragement for us when you assess our work.
We believe that we can improve only when the readership
feels we have fulfilled its needs. Our motto is forging a glob-
al interaction and obviously your constructive criticisms and
comments can essentially motivate us to do a better job with
the passage of time.
The magazine will be distributed free of charge for the time
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Let us hope that our endeavors bear fruits and we can ulti-
mately please the readership.
With the discovery of the Lavan Gas Field, which holds 251 which are recoverable. Considering the different factors
billion cubic meters of gas and Yadavaran Oilfield, with oil- involved, we can produce 300,000 to 400,000 barrels of
in-place reserves of 17 billion barrels, Iran has been recog- crude from this field, which has been named 'Yadavaran' in
nized as the second country in the world in terms of oil and commemoration of the martyrs of the Islamic Revolution, on
gas reserves, Oil Minister Bijan Namdar-Zanganeh told a daily basis," he noted.
reporters in early July. The minister recalled that recent years have been exception-
Based on a report by Iran Daily newspaper, the minister al in terms of discovery of oil and gas fields in the Iranian
added, "The gas field discovered in Lavan Island is 8 km history.
long and 34 km wide. The thickness of the gas column is 450 "In view of the new discoveries, Iran's recoverable reserves
m. The field holds 251 billion cubic meters of gas, some 176 will amount to 132 billion barrels. Therefore, Iran is recog-
billion cubic meters of which can be recovered. This field nized as the second country in the world in terms of oil and
also holds 446 million barrels of gas condensate, some 155 gas reserves and we will have oil for another 100 years," he
million barrels of which are recoverable. The daily gas pointed out.
recovery from this field is 20 million cubic meters, which is Zanganeh said that the development of Yadavaran Oilfield is
equivalent to the total output of South Pars Project Phase currently under study.
One." "Related information have been given to France's Total, the
The minister went on to stress that this field is worth $7 bil- Royal/Dutch Shell and reputable companies from China,
lion. India, Spain and Italy," he highlighted.
Zanganeh also referred to the discovery of the new oilfield Asked about the presence of American firms for developing
in the Kooshk and Hosseiniyeh region in the Khuzestan this field, he noted, "If American firms decided to participate
province. in the tender, there would be no barriers in the way of their
"After the discovery of the Kooshk Field (oil-in-place participation. However, we will not give them the valuable
reserves of 9 billion barrels) in 2000 and Hosseiniyeh Field information about the field until we are assured that the US
(oil-in-place reserves of 1.5 billion barrels) in 2002, it was government's restrictions imposed on these companies (for
clarified that these two fields were linked to each other. participating in Iranian undertakings) have been removed.
Ultimately, we reached a huge oilfield with oil-in-place
reserves of 17 billion barrels, some three billion barrels of Source: Iran Daily
output was registered by Doroud fall and to make up for the 15-percent
Iran's offshore oil production stood at Oilfield. Although the field experienced annual production fall through drilling
about 716,500 barrels per day (bpd) slight production fall compared to 2002 new wells and overhauling production
during the Iranian year 1382 (started due to lack of drilling new wells, it con- wells. This could be accomplished by
March 21, 2003). The figure constituted tinued to be the biggest productive off- using special drilling rigs.
about 97.7 percent of the projected fig- shore field. 2. Gradual change of intra-well pumps,
ure for the said year (733,000 bpd), The biggest production falls during the which cause production fall in some
marking an 18.3-percent increase com- said period were registered by Sirri A, cases. This is of more importance in
pared to the corresponding figure of the Norouz and Sirri E fields, respectively. wells where production is being carried
preceding year. Based on the contract signed with out by such pumps. Nosrat, Resalat and
Out of four offshore oil regions France's Total Company, output from Reshadat fields are facing this problem.
(Bahregan, Kharq, Lavan and Sirri), Sirri A and E fields was originally 3. The idea of moving the construction
Lavan region experienced the highest expected to hit maximum 124,000 bpd site of Kharq Gas Refinery to the south-
output rise due to exploitation of Balal during the first few years of production, ern part of the island can be assessed
Field during the last three months of but the target was not realized. technically and economically. Due to
1381 (ended March 20, 2003) and its Production in Soroush Oilfield also implementation of the project for accu-
gradual growth during 2003 compared declined by 17 percent due to the mulating associated gas in Kharq, the
to 2002. In this region, Salman Field increase in water and salt levels accom- location of the refinery has already been
encountered a compressor problem, panying the produced crude oil and determined by the consultant company.
which led to a 4-percent output fall. absence of the equipment needed for After dividing Kharq into industrial as
Sirri region also faced an 11-percent fall exports. well as residential and tourism sections,
in output compared to 2002. The it was decided that the refinery should
decline was mainly related to Sirri A In a bid to improve the overall condi- be moved to the southern part of the
and E fields. Meanwhile, production in tions the following cases are proposed: island. The project will probably
Kharq and Bahregan regions rose by increase costs by 70-80 million dollar. A
over 14 percent. 1. Purchasing at least two drilling rigs report on the cost increase has been sent
For this very reason, the highest oil pro- for the National Iranian Offshore Oil to oil minister. This proposal aims to
duction figure during 2003 compared to Company to be used for drilling devel- encourage revision in the method used
2002 pertained to Resalat, Hendijan and opmental, supplementary and repair for locating the refinery.
Norouz fields. Furthermore, the highest wells in a bid to prevent serious output
Khatami Hopeful of $100b
In Oil Investments Within Next 10 Years
Zanganeh: Iran Hub of a Huge Demand
President Mohammad Khatami, after touring the different
sections of the 9th International Oil, Gas and Petrochemicals
Exhibition in July, said that oil inevitably plays the most
important role in the nationl economy.
Based on a report by the Iranian Students’ News Agency
(ISNA), the chief executive, who was talking to reporters,
added, "We have had great success in the arena of discover-
ing new oil and gas fields and their optimum exploitation. …
In fact, we have managed to increase our national assets."
He went on to stress that the downstream oil and gas sector
has currently been transformed into a recoverable asset with a
higher value added than the past.
"This is mainly due to our advances in the petrochemical sec-
tor," he recalled.
Khatami expressed hope that within the next 10 years, some
100 billion dollars of investments would be attracted in the
oil, gas and petrochemical sector.
"The vital point is that in view of the existing potentials and
capabilities, we attract some 60 percent of the said sum for
indigenous activities and hence take a great step toward
industrialization and improvement of the national economy.
This way we can not only meet our local market's demands,
but we will also become a regional powerhouse, which could
procure the regional needs. If God Almighty willing, we
could even ultimately transcend the region," pointed out the
Khatami described the international oil, gas and petrochemi-
cal exhibitions as the great accomplishment of his govern-
"Let us hope that within the next 20 years, we will become a
powerful country, which could efficiently rely on its own of global recoverable oil reserves are owned by the five
capabilities. Of course, I do Persian Gulf littoral states, he asserted, "Iran is the hub of a
not mean that we become huge demand for development of oil and gas industry. If we
completely self-sufficient," could allocate some 60 percent of the needed investments to
he observed. local manufacturers, then they should increase their capacities
Meanwhile, Oil Minister by three times."
Bijan Namdar-Zanganeh, Elsewhere in his remarks, the minister noted, "Currently, we
addressing the inaugural do not have many local contractors with which we could con-
ceremony of the exhibition, clude contracts in the range of 2,000 billion rials. Therefore,
said that the total invest- we must work on strengthening the small contractors."
ments in the oil industry in Zanganeh emphasized that oil industry would grow further
recent years, inclusive of all when we attracted management, technology and financial
the buy-back contracts, experts.
amounts to less than $20 "The domestic companies and manufacturers should work in
billion. such a manner that their products would be consumed both
He recalled that the country inside and outside the country. We must be able of competing
needs at least 10 billion dol- effectively on the international scene," he highlighted.
lars of investments in the The International Oil, Gas, and Petrochemicals Exhibition
oil, gas and petrochemical was held in Tehran during July 6-9.
sector within the next 10
years. Translation: Iran Offshore News Desk
Underlining that two-thirds
Iranian Crude Delivered Oil Investments
To Purchasers A 4th Plan Priority
Director of international affairs at the National Iranian Iran's first vice president, Mohammad Reza Aref, said in
Oil Company (NIOC) announced in May that all cus- May that increasing investments in domestic oil and gas
tomers of Iranian crude have received as much crude as industry was a priority of the fourth economic develop-
they had demanded. ment plan (2005-10).
Hojjatollah Ghanimifard added that Iran and its cus- "Maintaining and increasing Iran's share of global oil and
tomers had already reached agreement on the amount of gas markets is one of the most important strategies of the
crude oil. country," he added.
"However, since pricing is influenced by crude price at
Addressing the inaugural ceremony of Balal Oilfield's
international bourses, neither party in the agreement is
aware of final crude price before reaching the actual time Development Project, the veep recalled that oil industry
of oil uptake," he opined. accounts for more than 60 percent of the country's forex
Emphasizing that Iran abides by the production quota revenues as well as 98 percent of its needed energy.
set by Organization of Petroleum Exporting Countries He recalled that the ratio of oil and oil products exports
(OPEC), the official stated: "If a domestic or foreign to total exports had decreased during recent years,
contract led to increased crude production for an OPEC adding, "The structural reforms pursued by the govern-
member, it would be added to its production capacity and ment during the Third Economic Development Plan
should OPEC quotas change in future, that capacity (2000-5) aimed to safeguard oil as a national asset."
would be considered a privilege for that country." He stressed that Balal Development Project essentially
Referring to the recent inauguration of Balal Oilfield revealed the success of buy-back deals signed during the
Project, Ghanimifard observed, "Given Iran's produc- past years.
tion quota in OPEC, if output from a domestic field Aref also characterized the drive for replacing natural gas
increased, the country's output from other offshore or
for other forms of energy, pursuit of the issue of LNG
onshore fields would be reduced."
He went on to add, "Unpredictable increase in crude exports via pipeline to neighboring countries, taking
price during a given period of time will boost price of advantage of cutting-edge technology and utilization of
industrial, non-industrial and agricultural goods in the domestic workforce as the positive measures adopted by
world. Therefore, crude producers, which spend most of the Iranian oil industry during the past years.
their revenues on acquiring such goods would be forced Referring to Iran's cooperation with the Organization of
to return their revenues." Petroleum Exporting Countries (OPEC) for keeping oil
Ghanimifard concluded by saying that the upward trend price at a reasonable level, the first vice president opined
in oil prices would stop after a while and take a reverse that producers and consumers of natural gas and oil
course, but reversal of the same trend for industrial should collaborate more effectively.
goods would not occur at the same speed.
Source: Iran Offshore News Desk
Source: Iran Offshore News Desk
US LNG Developer Reports Kazakhstan Keen on
Over $1m Loss on Expenses Building Oil Pipeline Via Iran
Cheniere Energy in May reported a first quarter net loss Kazakhstan President Nursultan Nazarbayev in
of $1,074,959 a reversal of net income of $3,121,309 (23 May said that he would like to construct a pipeline
cts/share) in the first quarter of 2003. through Iran as the main outlet for exports of his
Cheniere, a Houston-based company that is promoting country's natural resources.
the development of several LNG terminal projects in the
"It would be better than Baku-Ceyhan, better than
US, linked the net loss primarily to LNG receiving ter-
China, better than Russia. It would be the best exit
minal development expenses of just under $3.9 million,
along with stock option compensation that hit some $1.8 for us," Nazarbayev recalled in an interview with
million and other non-detailed expenses totalling about the Financial Times.
$1.6-million. Those expenses were partly offset by a He also noted that a route through Iran for the
$1.5-million minority interest Cheniere has in the country's oil and gas was the most attractive both
Corpus Christi LNG limited partnership as well as eim- for his country and for the US companies that oper-
bursement of $2.2 million from its sale of a 60% stake in ated there.
its Freeport LNG Development, a proposed terminal
However, the Kazakh president opined that the cur-
facility in Texas. ConocoPhillips took 50% in the part-
rent level of relationship between the US and Iran
nership in January.
Cheniere currently holds a 30% stake in the project it made such a project impossible at the moment,
first proposed. hoping for an improvement of the situation.
Source: Petroenergy Information Network Source: Iran Offshore News Desk
Iran Finds 21 Oil, Gas Fields
In 6 Years
A total of twenty one that joint studies have led to discovery of 10 billion
oil and gas fields were crude barrels.
discovered in Iran in a The deputy minister also stressed that Iranian contrac-
period of six years to tors can team up to bid for oil projects offered in the
March 2004, a senior country in order to speed up implementation of the
Iranian oil official said projects.
in May. "At the moment, the Ministry of Oil is encouraging
Deputy Oil Minister Iranian contractors, manufacturers and consultants to
Mehdi Mir-Moezzi form consortium with one another or foreign compa-
added that the findings nies and hence boost their financial and management
revealed the "brilliant capabilities," he pointed out. Iranian lawmakers have
achievements" of the ratified part of the country's fourth five-year economic
Ministry of Oil and the development plan (2005-2010), which allows explo-
National Iranian Oil ration companies to develop fields in which they strike
Company (NIOC). oil.
"The oil layer of South Iran will favor firms interested in exploration and will
Pars with a capacity of six billion barrels and the oil focus on finding new fields outside the oil-rich south-
layer of Azadegan with a capacity of 25 billion barrels west. The state oil company will not undertake fresh
were explored in the year to March 2003," he com- exploration
mented during the inauguration ceremony of the Balal work in the southwest under the new five-year plan.
Oilfield. The new legislation also loosens Iran's restrictive buy-
He further commented: "Tabnak Gas Field at Fars, back agreements in which developers of fields are
Bushehr and Hormuzgan borders holds 857 billion compensated with output before the fields return to the
cubic meters of gas and 545 million barrels of gas con- state oil company.
densates. Hosseiniyeh Oilfield was discovered at the
Iraqi border and it conceals 1.5 billion barrels. In the
year to March 2004, we realized that Kushk and
Hosseiniyeh fields were connected. Therefore, six bil-
lion barrels of crude were added to Iran's proven
reserves. We also replaced 1.23 barrels for recovery of
each barrel of oil and more than two cubic meters for
recovery of each cubic meter of natural gas."
Mir-Moezzi, who is also the managing director of
NIOC, recalled that the NIOC had signed 19 buy-
back deals in the same period.
"Foreign companies involved in the buy-back deals
pay more than one billion dollar to Iranian companies
each year and it means job creation in the country. We
have reimbursed around 5.4 billion dollars out of our
31 billion dollars in debts," the official asserted.
He went on to describe cooperation between Iranian
and foreign companies as "constructive" and recalled Source: Iran Offshore News Desk
Qatar, Maersk Oil Review Oil
Sign $30m Cooperation
The outgoing Iranian ambassador to Thailand Rassol Eslami
E&P Deal and Thai Energy Minister Prommin Lertsuridej reviewed ways
of cooperation in the arena of oil, gas and petrochemicals in
Bangkok in May.
The two sides stressed the need to implement the oil and gas
contract signed in January 2004.
The Thai energy minister expressed hope that the relations
between the two nations as important trade partners will be fur-
Given the increasing share of consumption of gas in the
Thailand's energy mix in the next 10 years and its 90 percent
dependency on imported oil, Iran can play a vital role in produc-
ing the energy needs of the country, he added.
Thailand has previously expressed interest to import five mil-
lion tons of Liquefied Natural Gas (LNG) annually from Iran.
The trade ties between the two states have grown. In April, Iran
and Thailand signed on an agreement to boost banking and
Qatar Petroleum signed an exploration and production shar-
ing agreement with Denmark's Maersk Oil providing for $30
million in investment in April.
The deal was signed between Qatar Petroleum and Maersk
Oil Qatar, a subsidiary of the Danish firm and covers an area
of 139 square kilometers in an offshore field.
Energy Minister and Qatar Petroleum chairman Abdullah bin trade cooperation.
The agreement, which is expected to facilitate the trade transac-
Hamad Al Attiyah said Maersk Oil Qatar already operates the tions and banking cooperation between the two sides, was inked
Al Shaheen Offshore Field, which has an output capacity of by Iran's Export Development Bank and Thailand's Exim Bank.
240,000 barrels per day (bpd) and is producing up to 200,000 The agreement was signed at the presence of Eslami and
bpd. Qatar has four other offshore structures, including Al Director General for the Regional Cooperation Office of the
Khalij which came onstream in March 1997 and is part of a Thai Foreign Ministry Sanan Chart.
According to the agreement, the measures should be adopted by
structure that runs along the maritime border with Iran. the two sides to reimburse funds in trade ties and to broaden
The deal is part of a series of exploration and production- economic cooperation in line with the accord inked during the
sharing agreements with Western firms, including France's Sixth Session of the Joint Economic Commission.
Total and Occidental Petroleum of the United States. OPEC Director General of the Iranian Export Development Bank Dr
member Qatar has a production capacity of some 850,000 Kahzadi said the agreement would facilitate the opening of
credits for the export and import of the two states.
bpd and proven reserves of 5 billion barrels.
The banks of the two countries have pledged to open credits for
According to the US Energy Information Agency, recover- their export and import sectors and to disburse the opened cred-
able reserves are higher, at 15.2 billion barrels. its within a period of three months.
Source: Daily Star Source: Petroenergy Information Network
M o u n t i n g Ta n k e r
Te r r o r T h r e a t s
In Persian Gulf
There exist growing concerns that the supertanker Limburg in the Gulf of Aden speedboats armed with rocket-propelled
global energy industry, particularly in the by Al-Qaeda on Oct. 6, 2002, as it was grenades during the so-called "tanker
Middle East, could become the focus of heading for Asia with a cargo of 400,000 war" of the 1980-88 conflict with Iraq,
terrorist attacks. Osama bin Laden has barrels of Saudi crude was a wake-up but the economic impact was minimal.
identified energy facilities as targets in call. A small boat loaded, with explosives The disruption in oil supplies was not
his war against the West. Let us examine was rammed into the tanker by an Al- sufficient to cause major problems. But a
the issue of dangers at sea. Qaeda team. It was the same tactic, first sustained assault on the energy industry
Admiral Thomas Fargo, the top US mili- employed by Tamil Tiger rebels against on a global scale could have serious
tary commander in the Asia-Pacific the Sri Lankan Navy in the 1980s, that repercussions.
region said last month that the Americans Al-Qaeda used to strike the US destroyer Meanwhile, attacking moving ships,
were considering deploying Marines and Cole in Aden Harbor on Oct. 12, 2000. even in confined waters, is much more
Special Forces troops on high-speed ves- Although there have been no known difficult than striking static targets on
sels to protect the strategic Straits of attacks on tankers since the Limburg, a land.
Malacca, which links the Indian Ocean to group of Islamic extremists in Morocco The arrest of Abd al-Rahim al-Nashiri in
the South China Sea. The fastest route were planning attacks on ships traversing November 2002, identified as Al-Qaeda's
around the southernmost tip of continen- the Straits of Gibraltar, the western gate- operational commander in the Persian
tal Asia, it is a vital energy artery from way to the Mediterranean, before they Gulf region and an alleged specialist in
the Middle East to Asia. were arrested in 2002. maritime operations, pointed to plans to
The narrow, 900-kilometer waterway is Geography dictates that the mammoth attack shipping targets. The US Navy's
one of the world's busiest shipping supertankers of today have to use such maritime liaison office in the Persian
routes. More than 25 percent of the waterways, which are often narrow and Gulf had warned several weeks earlier
world's trade and oil and 80 percent of studded with islands in which pirates and that Al-Qaeda was looking to hit ship-
Japan's oil imports go through it. It is terrorists can hide. If one of these lum- ping in the region. The US authorities
already plagued by pirates, but security bering behemoths is set afire, the spew- said that Nashiri had been engaged in
chiefs fear it is also a potential magnet ing crude could block these vital mar- flight training in the tiny emirate of Umm
for terrorists. The maritime chokepoints itime arteries and cause widespread eco- al-Quwain, the first indication that Al-
in the Middle East - the Suez Canal and nomic disruption. Qaeda may have been preparing for new
the Bab el-Mandeb Straits at either end of "Tankers are sitting ducks. They don't aerial attacks, possibly against a tanker.
the Red Sea, the Strait of Hormuz (the have any security, any protection," says Born in Saudi Arabia to Yemeni parents,
only way in and out of the Persian Gulf) Harry Banga of the Hong Kong-based Nashiri played a key role in planning the
and the Bosphorus and the Dardanelles in Noble Group, a shipping company. October 2000 bombing of the USS Cole,
Turkey - are also high-risk zones. Dozens of tankers were sunk or damaged in which 17 American sailors were killed,
The suicide bombing of the French by Iranian Revolutionary Guards using as well as an abortive attack against
cessfully waged anti-shipping cam-
paigns, developing dedicated maritime
commandos with underwater capabili-
ties, including demolition. Those kind of
operations put coastal refineries and oil
loading terminals at risk and the Persian
Gulf states are seeking to develop under-
water surveillance systems to protect
Indonesia, the most populous Muslim
country in the world, the Philippines,
Malaysia and more recently Thailand are
all plagued by Islamic violence - and all
are considered high-risk piracy zones as
well. That could be a deadly combina-
tion. Indeed, militants of the avowedly
Islamic Abu Sayyaf group in the
Philippines have a history of launching
maritime attacks and claim to have blown
up at least two ferries with considerable
another US destroyer, the Sullivans, nine which goes through the Straits of loss of life. Indonesia, Southeast Asia's
months earlier and the bombing of the Malacca, heightens both the threat of biggest oil and gas producer, pumps
Limburg, in which one seaman was such maritime terrorism and the devasta- around 1.1 million barrels of crude daily
killed and the tanker set ablaze. tion it could produce. The IMB's Piracy and exports 23 million tons of LNG a
According to one Western counterterror- Reporting Center also noted another dis- year. Malaysia, which has large oil fields
ism official, Nashiri's interrogation after turbing change in the pattern of pirate in Borneo, is the second largest producer
his arrest produced a lot of information attacks. In the past, marauders tended to in the region. Singapore is Asia's oil trad-
on Al-Qaeda's operational planning for board ships to steal money or ing hub and has four refineries with a
attacks on supertankers, "particularly valuable cargo. Now they often try to total capacity to process 1.26 million bar-
their vulnerability to suicide attacks and steal specific types of ship to order, rels of oil daily. Government figures
the economic impact of such operations". pointing to an emerging collaboration show that the island state has around 25
He observed: "They actually have a naval between criminal gangs and invisible million barrels of refined products in
manual on this. It tells them the best paymasters who may well be transnation- commercial storage at any given time -
places on the vessels to hit, how to al terrorists. Largely Muslim Southeast making it a fat target for terrorists.
employ limpet mines, fire rockets or Asia has become a hornet's nest of
rocket-propelled grenades from high- expanding activity by Islamic extremists Source: Petroenergy Information
speed craft and turn liquefied natural gas in the last couple of years. Some militant Network
(LNG) tankers into floating bombs. They groups like the Tamil Tigers have suc-
are also shown how to use fast craft
packed with explosives and the use of
trawlers, or ships like that, that can be
turned into bombs and detonated beside
bigger ships or in ports where there are
often petroleum or gas storage areas that
could go up as well. They even talk of
using underwater scooters for suicide
Last year, the London-based
International Maritime Bureau (IMB),
which monitors security on the world's
oceans, reported a suspiciously high
number of tugboats were being hijacked
in the Malacca Strait. The agency warned
shipping authorities that these could be
packed with explosives and rammed into
tankers carrying gas or petroleum prod-
ucts or into port facilities close to large
The burgeoning trade in LNG, much of
Sino-Iranian LNG Deal
in the Pipeline
Oil giant Sinopec is in talks over a landmark multi-billion Saudi Arabia, but it is the largest oil supplier to Sinopec.
dollar deal with Iranian firms to import liquefied natural gas Sattarifar visited Beijing in early April to attend the 12th
(LNG) from the Middle Eastern nation, in return for the Meeting of the China-Iran Commission for Economic, Trade,
right to exploit some of the country's richest oilfields. Scientific and Technological Cooperation. Both countries
The move, by China's second-largest oil firm, which would committed themselves at the meeting to promoting coopera-
be one of the biggest LNG purchase transactions in the tion on oil and gas exploration and production, transport,
world, was revealed by Mohammad Sattarifar, currently an electricity, communications, nonferrous metals and project
advisor to the Management and Planning Organization construction.
(MPO), in an interview with China Daily in April. Iran has the world's second largest gas reserves after Russia,
Negotiations on the deal, which would give a major lift to but it trades very little of this on international markets.
trade between the two countries, come after Zhuhai Tehran is seeking to develop its natural gas industry by
Zhengrong - one of China's four State-owned oil traders - exporting more LNG to
signed a memorandum of understanding (MoU) last month to emerging markets such as China, South Korea and India.
import 110 million tons of LNG from Iran over a time span And China is working to develop its embryonic LNG sector,
of 25 years. in an attempt to raise natural gas consumption from the cur-
Sinopec is in talks with the National Iranian Gas Export rent 3 percent in the energy mix to 8 percent by 2010.
Company (NIGEC) and the National Iranian Oil Company Beijing is importing LNG from Australia and Indonesia to
(NIOC) to annually import at least 5 million tons of LNG feed its LNG receiving projects in Guangdong, Fujian and
from Iran, said Sattarifar. Zhejiang provinces.
In exchange, Sinopec will be allowed access to a major More LNG receiving terminals, where imported LNG will
Iranian oilfield, he added. be transformed back to natural gas and supplied to local gas
Senior Sinopec executives will visit Iran next month to con- users, are expected to be built along the coast in the future.
tinue the talks, Sattarifar recalled. More importantly, China also plans to secure foreign oil and
"All Chinese companies are welcome to market Iranian LNG. gas reserves through LNG imports to fuel its galloping eco-
Both China and Iran see each other as long-term partners. nomic growth.
Iran takes China as an energy market while China can take CNOOC Ltd, the third-largest domestic oil producer, has
Iran as a long-term energy supplier," he observed, adding successfully acquired stakes in the Northwest Shelf joint
that both countries are aso hoping to strengthen cooperation venture and Gorgon in Australia as well as in Indonesia's
in exploring and developing oil and natural gas fields and oil Tangguh Field after the parent China National Offshore Oil
refinery. Corp agreed to purchase LNG contracts from these fields.
Sources at Iran's Beijing embassy said Iranian Deputy Oil Embassy sources also said that Iran is seeking international
Minister Hadi Nejad-Hosseiniyan visited the Chinese capital bid for the exploration and production in its three major oil-
last month to push through the LNG import and oilfield fields - northern and southern Azadegan and Kooshk-
development deals. "Hopefully, Sinopec's deal may be con- Hosseiniyeh. Each tender should commit to purchase at least
cluded within this year," said sources. 5 million tons of LNG annually. Sinopec and Zhuhai
Iran is now the second largest oil exporter to China after Zhengrong may join the bidding.
The Azadegan Oilfield, bordering Iraq, is now thought to be Kashan Oilfield. Sattarifar underscored that the oil and gas
one of the world's largest oilfields. A Japanese consortium business will both play an important role in doubling bilater-
signed a $2 billion agreement in February to get a 75 percent al trade between the two countries to $10 billion within two
stake in southern Azadegan, with the National Iranian Oil or three years from last year's total of $5.6 billion.
Company (NIOC) holding the remaining 25 percent. Sources "Although China is a late-comer in the development of
said NIOC may offer part of its 25 percent stake in the Iranian oil, we are ready to support Chinese companies wish-
Azadegan Oilfield to Chinese companies to encourage China ing to invest in Iran.We welcome any Chinese company,
to buy Iranian LNG. The Northern Azadegan and Kooshk- which is willing to cooperate with Iran. China can get a long-
Hosseiniyeh oilfields are currently undeveloped. term energy supply from Iran," asserted Sattarifar. He
Some southern Asian countries are also hoping to clinch sim- stressed that Sino-Iranian cooperation offers great potentials
ilar deals with Iran. and the leaders of the two countries have reached a consen-
Analysts said that if the oil and gas deals are successful, they sus to tap this. The official recalled China's investment in
will help Chinese companies catch up with Japan and Iran will not only help meet Iran's market demand, but also
European companies such as Franc's Total and Royal/Dutch demand from the whole of Central Asia.
Shell, becoming the largest investors in Iran's oil and gas Sattarifar also underscored that the United State's unilateral
industry. economic sanction on Iran would not dampen business ties
Chinese oil companies scored few successes in Iran until last between Iran and China.
December when Sinopec succeeded in drilling a high-yield
oil-gas well during venture prospecting in the country's Source: Iran Offshore News Desk
Total, the French oil company, is conference. British Petroleum (BP),
close to signing a $1.2 billion agree-
ment with the Iranian government to
develop part of Iran's offshore natu-
ralgas reserves. Negotiations are still
Total Italy's ENI and Norway's Statoil had
also been competing for the contract.
However, Total is believed to have
benefited from its already strong pres-
underway, and they are in an
advanced stage. There is no set date
for signing the agreement with Total,
Nears ence in Iran, including in the field of
liquefied natural gas (LNG). Oil
Minister Bijan Namdar Zanganeh had
which is already developing gas
reserves in the country.
Iran, which holds the second global
gas reserves after Russia, has com-
Iran already voiced his desire to see a
company deeply engaged in LNG
operations get the deal, so as to facil-
missioned foreign companies to
develop the South Pars Field. The off-
shore area contains about 12.5 trillion
Gas Gas from Phase 11 is earmarked for
European markets. Aside from South
Pars, Total is engaged in the Sirri A
cubic meters of natural gas. Deputy
Minister of Oil Mehdi Mir-Moezzi
said in April Iran has decided to
award French oil giant Total a 1.2 bil-
Deal and E oil fields, which began produc-
ing in 1998-99, and the already
exploited Doroud and Balal fields.
In February, Total -- together with
lion dollar contract to develop Phase Assadollah Salehiforouz, Managing- Malaysia's Petronas and the National
11 of the massive South Pars Offshore Director of Pars Oil and Gas Iranian Oil Company (NIOC) -- won a
Gas Field. He also observed on the Company, has underlined that the two billion dollar contract for an LNG
sidelines of a conference on gas winner of tender bid for Phase 11 of plant at South Pars.
exports in Tehran that "Total has been South Pars is to be named in two
chosen to develop Phase 11 of South months, but Mir-Moezzi actually pre- Source: Iran Offshore News Desk
Pars." ferred to reveal everything at the gas
Hopes are rising that a breakthrough in long-stalled negotia-
tions on a comprehensive Caspian Sea treaty can be achieved.
Representatives of the sea's five littoral states sounded opti-
mistic notes at a recent Moscow conference on Caspian-related Given the lack of consensus, Russia has worked out bilateral
issues. At the same time, some cautioned that hard bargaining understandings with Kazakhstan and Azerbaijan on the
remained before a comprehensive pact would be ready for sign- territorial division issue.
ing. At the April 6 meeting in Moscow, diplomats from the five The three states support a formula under which Kazakhstan
Caspian states -- Azerbaijan, Iran, Kazakhstan, Russia and would end up with a 27 percent share of the Caspian Sea's ter-
Turkmenistan - explored the feasibility of holding a summit ritory, while Russia would receive a 19 percent share and
meeting later this year on the sea's territorial division. Iran pro- Azerbaijan an 18 percent share. Iran is the most vocal opponent
posed hosting the gathering in late 2004. of the Russian-backed plan. Tehran has held out for all five
No headline-grabbing announcements or agreements came of states receiving an equal 20 percent share. Under the Russia-
the talks. Yet, at their conclusion, participants presented a unit- backed formula, Iran would receive approximately 13 percent
ed optimistic front that a new desire for dialogue had been of the Caspian Sea's territory. Turkmenistan's position on the
found. A joint communiqué issued at the conclusion of the talks Caspian pact has proven hard to pin down.
noted that "the meeting passed in an atmosphere of friendship Before the April discussions in Moscow, Iranian Foreign
and mutual understanding". "There is every reason to speak Minister Kamal Kharrazi pointed to the November accord as
about recent success," the Azerbaijani news agency Bilik the model for agreements to come. "This is an important devel-
Dunyasi quoted Azerbaijan's Deputy Foreign Minister Khalaf opment because it proves that a consensus on one of the most
Khalafov as saying. "The manifestation of political will has important issues affecting the Caspian Sea is not only possible,
allowed the sides to advance more confidently, improve coop- but ... [is] a good model for settling all other issues of the
eration, make contributions, and expand regional ties," the Caspian Sea," the Islamic Republic News Agency (IRNA) quot-
deputy foreign minister was further quoted as saying. The chief ed Kharrazi as saying. Potential stumbling blocks remain con-
source of optimism is a November 2003 environmental pact - cerning implementation of the environmental pact. The agree-
the first such agreement signed by the five Caspian Basin states ment depends primarily on a national action plan to be devel-
since they first began to hold talks on the sea's status in 1996. oped by each Caspian state. As long as disagreements exist
Under the environmental agreement, the Caspian states pledged about the division of territorial waters, little action can be
to tackle such problems as industrial pollution, oil refinery and expected on these plans. As a way around this obstacle, the
tanker leaks and the energy industry's potential environmental United Nations Environment Program and the United Nations
impact on marine life, including the endangered caviar-produc- Development Program - two agencies charged with administer-
ing sturgeon. The pact, some officials contend, shows that ing the environmental protection scheme - have suggested sep-
Caspian Basin states are prepared to set aside eight years of arate protocols that define each country's responsibilities. Even
squabbling in an effort to forge consensus on territorial issues. so, ratification of the convention by all five states and agree-
ment on the protocols could take years to fulfill. Despite the Moscow wants Kazakhstan to primarily use an export network
obstacles, participants in the talks see the agreement as a sign of via the Russian port of Novorossiisk. Kazakhstan, so far, has
cooperation to come. "The signing of the treaty means we can expressed an intent to keep its export options open. Meanwhile,
move to the next stage; work can proceed," UNDP-Tehran rep- Turkmenistan clings to hopes for the construction of a trans-
resentative Frederick Lyons told the UN news agency IRIN. Afghan pipeline, a 932-mile long, $3-billion conduit that would
"This is very important," he added. While agreeing that the transport the country's vast natural gas supplies via Afghanistan
November environmental agreement was "a big breakthrough," to energy-hungry Pakistan and other world markets.
Kazakh Foreign Minister Kasymzhomart Tokayev urged cau- Iran, which contains the least energy-rich part of the Caspian,
tion about the accord's impact on the broader territorial issue. tends to view any oil and gas projects near its borders as a
"[I]t won't be possible to achieve rapid success in the Caspian potential infringement upon its rights. Last June, Iran indicated
settlement as there are many contradictions in the approaches of that competition from the Caspian's four other littoral states had
the five countries," the Itar-Tass news agency quoted Tokayev forced it to abandon a longstanding policy of non-development
as saying. of its Caspian hydrocarbon resources so long as a treaty resolv-
That assessment was echoed by the Russian daily ing the sea's status remained unsigned.
Nezavisimaya Gazeta, which forecast in its analysis of the April Iran plans to begin developing oilfields within its own undisput-
6 conference that "autonomous" energy interests would contin- ed territory in the next two years. At the same time, construc-
ue to hamper progress towards a Caspian Sea pact. The five tion will begin on a pipeline running from the Caspian port of
Caspian states hold divergent views on how the region's abun- Neka to Tehran -- a card that Iran has used in the past to encour-
dant natural resources should be developed. Russia and age Kazakhstan to opt for the Persian Gulf state as a shorter and
Azerbaijan are effectively competing to transport Kazakhstan's more stable route to world markets than the BTC Route.
large energy reserves to Western markets. Azerbaijan wants
Kazakhstan to make a significant commitment to the Baku- Source: Iran Offshore News desk
Tbilisi-Ceyhan (BTC) Pipeline Project.
1st Phase of Caspian Crude
Transfer to Open Soon
The official went on to observe that Kasaeizadeh underlined that crude
The first phase of Caspian crude trans- Iranian specialists accounted for 54 per- transfer capacity of the line would
fer and processing project, with a capac- cent of the project with foreign share increase to 370,000 bpd since the mid-
ity of 170,000 barrels, will be soon standing at 46 percent. dle of the next year and winner of the
inaugurated by President Mohammad "The project cost 2.69 billion rials. The related tender would be determined in
Khatami. cost of transfer phase was supplied from three months. Nine consortiums have
The managing director of Oil domestic sources while that of process- been shortlisted for tender. He also
Engineering and Construction ing phase was undertaken by SVF con- noted that the crude storage capacity in
Company told reporters in April that, so sortium as financer," he recalled. Neka terminal stands at 1.5 million bar-
far, 125,000 barrels crude have reached He further recalled that the cost of con- rels.
refineries in Tehran and Tabriz from structing 120,000-barrel line would be "The National Iranian Tanker Company
Turkmenistan, Kazakhstan, Azerbaijan repaid through oil swap, which stood at has built six tankers according to a con-
and Russia through pipeline. 11-16 dollars for every ton. tract with Russian companies and three
Reza Kasaeizadeh noted that capacity "Project's investment would be returned tankers would be delivered by March
of the first phase of the project has been in less than 4 years. So far, 15 install- 2006," he concluded.
increased to 170,000 barrels per day ments of foreign costs totalling 3-3.5
since January 20 by attaching the old million dollars have been repaid," he Source: Iran Offshore News Desk
50,000-barrel line. pointed out.
Saudi Oil Output
Expected to Double
Saudi Arabia's oil production is far from panies in order to produce 22 million paratively slow population growth,"
peaking, and the kingdom's output will bpd. declared the EIA. These countries are
likely more than double over the next However, he pointed out that the king- also shifting from energy-intensive
two decades, the head of the US Energy dom is already able to produce 10.5 mil- manufacturing to service industries,
Information Administration said in lion bpd "without outside investment". which means slower growth in energy
April. Separately, Caruso noted that the EIA's use, it added. Global oil demand is fore-
Some oil industry analysts believe long-term forecast has Iraq's oil produc- cast to rise from 81 million bpd this
Saudi Arabia's oilfields are near their tion rising from 2.5 million bpd this year to 121 million bpd in 2025, with
peak production and won't be able to year to 6.6 million bpd in 2025. the United States, China and the rest of
supply the crude the world will need in Many analysts believe Iraq's oil output developing Asia soaking up almost 60
the future. Guy Caruso, who heads the could go even higher, because so many percent of those extra barrels, EIA high-
Energy Department's analytical arm, parts of the country have not been lighted.
said Saudi Arabia's current oil produc- explored for oil. The additional barrels "Over the past several decades, oil has
tion capacity of 10.5 million barrels per from Iraq and Saudi Arabia will help been the world's foremost source of pri-
day (bpd) will likely increase to 22 mil- boost OPEC's total oil production to 56 mary energy consumption, and it is
lion bpd by the year 2025. million bpd in 2025, more than double expected to remain in that position," the
Speaking to reporters on the release of the group's expected average output of agency recalled. To meet that demand,
the EIA's long-term international ener- 27 million bpd this year, according to global oil production capacity would
gy forecast, Caruso said Saudi Arabia the EIA's forecast. have to rise by 44 million bpd over cur-
will be able to reach the 22 million bpd Meanwhile, the global demand for all rent levels, it added.
production level based on its current forms of energy is expected to grow by Organization of Petroleum Exporting
proven oil reserves of 264 billion bar- 54 percent over the next two decades, Countries (OPEC) is expected to be the
rels - one-fourth of the world's total. with oil consumption alone jumping by major supplier of the extra oil.
"The existing (Saudi) resource base, 40 million bpd, the US government Additional non-OPEC barrels will also
crude reserves...are sufficient to get to agency said. come from offshore wells in the
this production capacity," Caruso The EIA's long-term forecast to 2025 Caspian Sea, Latin America and West
recalled. Saudi officials have main- projects the strongest growth in energy Africa.
tained that their country's crude oil pro- use from developing countries, espe- Average annual oil prices are expected
duction will not go into decline any cially China and India, where buoyant to decline after this year to $25 a barrel
time soon and that they expect the king- economies will boost demand. in inflation-adjusted 2002 dollars and
dom's recoverable oil reserves to actual- Energy use in developing countries is then rise slowly to $27 in 2025, which
ly increase over the next two decades as forecast to soar by 91 percent over the would be $51 a barrel in nominal dol-
new deposits are discovered. next two decades. lars, the agency asserted.
Caruso would not speculate on whether "Generally, the nations of the industri-
the Saudis would need to open their oil alised world can be characterized as Source: Reuters
sector to investment by foreign oil com- mature energy consumers with a com-
biodiesel a year, which would meet nearly 5 percent of
Scotland's diesel needs, when it opens at the beginning of
But, the only reason Ward can operate at a profit is because
Gordon Brown has given a 20p tax concession on a liter of
biodiesel until 2007. The customer at the forecourt does not
see any of the saving; however, and there is no guarantee
that the concession will continue after 2007, meaning biofu-
el could become more expensive than conventional fuels.
But, when asked if, without the tax break, biodiesel would
ever be competitive with petroleum-based fuels, Ward
Biofuels are decades away from benefiting the public as an replied "yes".
alternative to petroleum-based fuels and the UK "will come He went on to observe: "The EU (European Union) are seek-
nowhere near" meeting European Union targets on renew- ing that from 2005 two percent of all transport fuels should
able transport fuel, the head of a London-based company be renewable. They are also asking that the target is
making the products claimed in June. increased by 0.75 percent each year to 2010 and eventually,
As the menace of terrorism continues to destabilize fore- by 2020, they would like to see 10 percent of all transport
court fuel prices, threatening to break the pound-per-liter fuels being renewable. That is not mandatory and certainly
barrier, experts acknowledge that renewable fuels are not the the UK will come nowhere near it.
panacea that many believed. Biofuels are manufactured Roy Holloway, the director of the Petrol Retailers
from plant oils, waste cooking oil and animal tallow. They Association, agreed. He noted: "The public's notion that
are classed as renewable, because they originate from non- biodiesel will at some point contribute to the reduction of
finite resources and are much better for the environment; fuel prices at the pumps is apparently a bit of Gordon Brown
typically producing less carbon, sulphur and particulate kidology. It all began with the fuel protests of 2000 where it
emissions than fossil fuels. was messaged that the new biodiesel that would replace fos-
However, Doug Ward, the managing director of Argent sil-fuel diesel would be allowed a 20p reduction in tax
Energy's £15 million biodiesel plant under construction near because it was a cleaner fuel. That does not mean a reduc-
Motherwell, told The Scotsman he had no idea when his tion in the forecourt prices."
product will become competitive.
The plant will be able to produce 50 million liters of Source: Petroenergy Information Network
A Source of Worry
For Global Economy
Accelerating energy prices are a threat to the 0.3 percentage point off global growth.
health of the world economy and oil pro- Prices have been driven higher by OPEC
ducers should not staunch supply, production cuts, the dollar's decline,
finance officials from the Group of higher-than-expected demand from the
Eight industrial Nations (G-8) United States and China and delays
announced in April. in restoring Iraq's production.
In a statement released after "The oil price in dollar terms has
talks in Washington, the G-8's been relatively high," said
central bankers and finance British Chancellor of the
ministers singled out energy Exchequer Gordon Brown.
costs as a risk to global He went on to add, "That's
growth. Crude oil prices are obviously one of the issues that
up about 37 percent from a will concern people."
year ago and have risen 11 Bundesbank Vice President
percent to nearly 11-year highs Juergen Stark noted that while
around $37 per barrel since the the current oil price didn't "rep-
officials last met in Florida in resent a significant risk," problems
February. for the world economy will emerge
"It is obvious that rising oil prices if a price over $34 per barrel is sus-
can have a negative effect on world GDP tained.
growth," said U.S. Treasury Secretary John Snow. German Meanwhile, Russian Finance Minister Alexei Kudrin told
Finance Minister Hans Eichel said the Organization of reporters after that Russia would not participate in OPEC's
Petroleum Exporting Countries (OPEC) must "live up to planned production cuts.
their responsibility for the "Russia at this time
global economy". increases its oil produc-
OPEC, supplier of one- tion," Kudrin observed,
third of the world's oil, will suggesting $27 per barrel
probably reduce oil output would be an optimal price.
by 3.2 percent this month He also asserted, "We hope
following a March pledge prices will be stabilized.
designed to bolster prices We've been saying that all
on the basis of figures along. We are not champi-
released by PetroLogistics ons of super-high prices."
Limited. Kudrin was in Washington
The International Monetary for meetings of the IMF
Fund (IMF) recently said and World Bank.
that the outlook for oil
prices is "volatile" and that Source: Bloomberg
a $5 increase would shave
A Glance at a Challenging Task
rels per day to 60,000 bpd.
The existing facilities include Production Platform, Living
Quarter Platform, Multi Wellhead Platform as well as 6
Wellhead Platforms in Bahregansar Oilfield and 5 Wellhead
Platforms in Hendijan Oilfield (installed in 1959 by the
Italian company AGIP and commissioned in 1962). These
two oilfields, which are among the oldest in the Persian Gulf,
were damaged during the Iraqi imposed war (1980-88). The
National Iranian Oil Company (NIOC) has awarded this
project to IOEC. The undertaking started on April 21, 2002
based on the new amendment, execution plan and the 25-
According to the contract, this project will be exe-
cuted in two sections: onshore and offshore.
Mohammad Reza Mortazavi B.Sc., M.E., PhD Main activities Are as Follows:
Senior Lecturer of Civil Engineering Islamic Azad Management & Logistics (Onshore & Offshore).
University, Tehran Central Branch. Basic & Detailed Design (Onshore & Offshore).
Introduction Procurement and Supply of Equipment & Bulk Material
Bahregansar Oilfield is located northwest (about 56 km) of (Onshore & Offshore).
Bahregan Oil Center, which is located some 35 km west of Construction Including Civil, Structure, Equipment
Ganave in the north of the Persian Gulf. Hendijan Oilfield is Installation, Piping, Instrumentation, Electrical Work and
located about 10 km northeast of Bahregansar Oilfield. Commissioning (Onshore).
The onshore plant is situated in Bahregan Oil Center, in the Fabrication Including Structure, Mechanical, Piping,
northern section of the Persian Gulf coastline. The map Instrumentation and Electrical Work, Load Out,
above shows the locations. Transportation, Installation, Removal, Hook-up and
Bahregansar Project intends to reconstruct and renovate Commissioning (Offshore).
Bahregansar and Hendijan oil fields facilities (offshore) and
install new facilities in the onshore plant in order to increase The following chart shows more details about the organiza-
the production, refining and storage of oil from 20,000 bar- tional behavior of the project:
The design life of the facilities is 20 years from the commis-
sioning date and includes the following activities:
Basic Design Endorsement
Inspection of Facilities
Engineering activities consist of different engineering disci-
plines such as Structural, Mechanical, Process, Electrical,
Instrumentation and Piping. The engineering activities are
split among the three Iranian engineering consultant compa-
nies Sazeh, Nargan and Tarh Andishan.
Technip Engineering Company will carry out the task of
reviewing the technical documents.
These activities include supply, inspection and transportation
of all required equipment and bulk materials and are carried
out by IOEC Procurement Department through its various
Platform Module Dimension (m) Weight (t)
Offshore Fabrication Activities Jacket (4Legs) 28"(6m x 6m x 16m) 48.6
The following new facilities are fabricated by IOEC in its Topside Deck (12m x 12m) Height=8.5m 54
fabrication yards in Khorramshahr: WHP 5
Jacket (4Legs) 28 (6m x 6m x 16m) 48.6
Topside Deck (12m x 12m) Height=8.5m 54
One Production Platform PP (including Jacket, Piles & Jacket (4Legs) 28" (6m x 6m x 14.7m) 41.03
Deck). Topside Deck (12m x 12m) Height=8.5m 54
Jacket (4Legs) 28" (6m x 6m x 15m) 104
One Living Quarter Platform LQ (including Jacket, Piles & WHP 7
Topside Deck (12m x 12m) Height=8.5m 54
Deck). Jacket (4Legs) 4m x 4m x 13.7m 36.25
Four Wellhead Platforms (WHP). PLATFORM Deck Deck (4m x 4m) Height=6.1m 11.5
Flare Stack Height=30m 59
One Multi Wellhead Platform (MWHP).
THREE SUPPORT 3 Jackets (4Legs) 4m x 4m x 13.7m 108.75
One Flare Structure with associated supporting platform. PLATFORMS
3 Decks Deck (4m x 4m) Height=5.5m 30.387
Four Bridges with three associated supporting platforms. Bridge No. 1 43m x 4.0m x 4.0m 47.65
Bridge No. 2 43m x 4.0m x 4.0m 47.65
One Manifold Platform (MP). FLARE BRIDGES
Bridge No. 3 43m x 4.0m x 4.0m 47.65
The existing and future layouts of Bahregansar Offshore Bridge No. 4 43m x 4.0m x 4.0m 47.65
Jacket (6Legs) 30" (19.5m x 9m x 12.5m) 78.54
Future Status Present Status PLATFORM Topside Deck (15m x 28m) Height=5.7m 92.97
MP-PP (new) 40.6m x 4m x 4m 76.46
Jacket (4Legs) 13.716m x 9.144m x 11.9m 75.234
MULTI WHP Topside Deck (13.716m x 9.144m) Height=7.19m 71.7
MWH-MP Bridge 41m x 4m x 4m 57.5
Jacket (6Legs) 28m x 16m x 12.5m 266.7
Topside Cellar Deck (30m x 26.8m) Main Deck
(30m x 26.8m) Height=25.94m 2022
Jacket (4Legs) 13.71m x 13.71m x 16.4m 138
L.Q. PLATFORM Topside Deck (29.08m x 20.07m) Heli Deck
(17.39m x 17.39m) Height=10.00m 1033
PP - LQ Bridge 40.4m x 4m x 4m 55.5
Oilfield are depicted schematically here below. very light draft derrick barge with a minimum lift capacity of
The offshore section of the project involves over 6,600 tons
Load-out of the PP and LQ decks will be accomplished by
of steel structure fabrication work. In the following table gen- skidding, using 2 skidshoes for each leg point with a capaci-
eral information such as weight and dimensions of modules ty of 500 tons each. Each skid shoe is equipped with a 500 ton
of all platforms is illustrated. hydraulic jack. The total installed jacking capacity for each
Load-Out and Installation deck is as follows:
The main concern of this project is the installation of heavy Production Deck: 12x500=6,000 tons
LQ and PP decks in shallow water, which in itself requires a Living Quarter Deck: 8x500=4,000 tons
The skid shoes will be arranged in three lines for PP and two The onshore production plant will receive crude oil from the
lines for LQ. Push pull system will be installed and utilized Production Platform through a 16-inch submarine pipeline.
for the horizontal movement. There will be at least two Following operations will be carried out in the onshore
standby push pull systems for the contingent retrieval oper- plant:
Separation (2 Stages)
The skid shoes will be arranged in three hydraulic groups to Distillation / Stripping Column
provide a statically determined supporting system under the Desalting (2 Stages)
platform and the coupling beams during skidding. Thus, a Cooling and Transfer to Storage Tanks
system is designed, which requires minimum level adjust- The capacity of the process plant facilities is based on
ments during the movement. 60,000 STBPD entering the stock tanks.
Load-out of all jackets and light decks will be handled by The pictures below show the construction, fabrication and
self-propelled trailers. installation works in the Bahregansar onshore site.
As stated before, the main concern of the project is installa-
tion of heavy decks in shallow seawater. For the lifting activ-
ities of these heavy decks the proposed method is to use the
floating sheer leg to act as the heavy lift vessel.
The lift for LQ deck is assumed to be single hook regarding
the nominated sheerleg barge but for the PP deck, due to
barge lift capacity, it might be more practical to lift the deck
using two cranes (or hooks) on a single vessel to avoid any
additional imposed consequence weight factor due to using
two separate cranes on separate barges.
For the other platforms a conventional small crane barge
with a minimum capacity of 300 Mtons will be used.
For pile hammering/driving regarding the soil investigation
report, which has been completed by the third party, it is pro-
posed to use an IHC-S90 (IOEC owned) hammer. For con-
tingency reasons, another hammer with more energy will be
Onshore Construction Activities
The Bahregansar Onshore Production Complex is erected in
an area located in the Bahregan Oil Center.
Oil, a Regional
Securit y Factor
joint fields? Many contractors are working in South
Akbar Torkan is a well-known figure in Torkan: The most important of such Pars Project in addition to France’s Total
the field of domestic industries during fields is South Pars Gas Field, which is and Italy’s Agip. Norway’s Statoil also is
the post-Islamic Revolution years. He shared with Qatar. As you said, Qatari there. Phase 1 of South Pars Project was
gained lots of experience during his officials have signed contracts with independently carried out by Petropars.
service terms at the ministries of road Exxon Mobil for production of LNG and The company cooperated with Agip on
and transportation and defense and with Shell for production of GTL. We phases 4 and 5 and also is responsible for
logistics of the Armed Forces as well as have likewise signed contracts for devel- phases 6, 7 and 8. It shares the marine
Industrial Development and Renovation oping up to ten phases of the field. Tender part with Statoil and has won the tender
Organization (IDRO) and Petropars bids for phases 11 to 16 are planned and bid for onshore refinery to be constructed
Company. He is currently deputy oil we hope the winners will be announced by a consortium led by Japan's Toyo
minister for planning and research by the end of the year. Phases 11 through Corporation. Many companies are mem-
affairs. His views can reflect the present 14 are specific to GTL and LNG produc- bers of the consortium including IDRO.
and future situations of the Iranian oil tion while phases 15 and 16 are special to However, with regard to the criticism
industry from the viewpoint of large- about the delay incurred in implementing
scale planning. Using oil as a leverage Oil bourse to be Phase 1 of South Pars Project, I must say
for making a link among the interests of that the refinery is fully operational now
Middle East countries, establishing launched in the and the work on the marine section is
security interaction in the region, the future complete. Also, laying pipeline from the
need for reviewing how to use oil rev- sea to the land has been finished and test-
enues, oil industry's special viewpoints producing sweet gas. So far, the Majlis ed.Petropars started its work one year
on the country's economic development has issued the required permits for devel- after Total and will deliver the project
and establishment of an oil bourse in the oping these phases. Permits for further about one year after Total. It is a pity that
near future form the crux of a recent phases of the field up to phase 24 will be some people do not care about the delay
interview conducted with Torkan by issued by the parliament during the by Total, but prefer to focus on the delay
Iran Offshore. Full text follows: implementation phase of the fourth eco- incurred on behalf of Petropars. Those
Iran Offshore: An issue, which nomic development plan (2005-10). who came to loss as a result of the pres-
requires special attention at the cur- However, the fourth economic develop- ence of Petropars in the project are mak-
rent juncture, is the issue of joint oil ment plan is bound to focus on phases ing the ballyhoo.
and gas fields. Contracts signed by 17-22.
Qatar with Exxon Mobil for produc- Does the Oil Ministry have any specif-
tion of LNG and with Shell for produc- Petropars was a contractor of South ic plans for balancing oil products
tion of GTL as well as Kuwait's deci- Pars Project Phase 1. This company dealings inside the country?
sion for developing Arash Oilfield all was; however, criticized for delay in Oil Minister Bijan Zanganeh recently
overlap with Iran's interests. What is fulfilling its commitments. What is ordered Mr. Asemipour to launch an oil
your plan to take better advantage of your opinion? products market inside the country as a
prelude to a forthcoming oil bourse. The during a visit to Iran. If Iran received The first being the Ba'athist regime in Iraq,
bourse is to cover such oil products as Iraqi oil at Abadan Refinery and which caused many crises including two
diesel, gasoline, mazut, kerosene and other exported an equivalent amount of oil wars with Iran and Kuwait. This problem
products. That is, it means to give Iranians from Kharq Island on behalf of that has been partly solved with the toppling of
control over oil products dealings. country, it would be a great contribu- Saddam's regime. The second problem is
tion to that country and provide it with Israel, which is causing instability and
What is your opinion about oil research adequate financial resources for recon- insecurity in the region. Of course, we
inside the country? struction. Swap deals with Caspian lit- think that the elimination of Saddam has
Many oil sectors, including research, are toral states also require due attention. paved the way for growth and develop-
still incipient in Iran and we hold no How do you assess such deals and what ment of West Asia and to accomplish this
licenses in any oil-related field. Due to 100 is your plan for developing them? growth we must make a link among
years of experience in oil activities, we are I have to elaborate in more details. We national security affairs of all regional
entitled to hold some licenses, but we lag have four major categories in this regard. countries through implementation of big
behind other countries in this regard. We We believe that the national economy oil and energy projects. This is an idea,
must hold licenses in chemical industries, must become independent of oil revenues which incorporates such projects as con-
catalysts as well as downstream industries. through efficacious planning schemes. It is struction of gas pipeline to Pakistan to
We have highly specialized and experi- a mistake to think that an economy with- help the economy of that country grow
enced engineers. Oil industry nationaliza- out oil would be beneficial for Iran. and to ensure the national security of both
tion process started as of 1953, but is not Budget must be made independent of oil, countries. Another example is the gas sup-
complete yet and we are dependent on for- but oil is the main advantage of our coun- ply pipeline to Turkey or the issue of buy-
eigners in many sectors, including try.An economy without oil for our coun- ing oil and gas from Central Asian coun-
research and oil engineering. We must try try would be similar to an economy with- tries. We have already started swap deals
to become self-sufficient in these arenas. with Central Asia and purchase as much as
The huge Azadegan Oilfield, which
The truth is that 370,000 barrels crude from them. This fig-
ure has the potential to increase to 500,000
holds 26 billion barrels of reserves, has Japan is the loser barrels. We buy Central Asian oil, use it
been a focus of attention during past and Iran has not lost and then give these countries an equiva-
months. Japan failed to take advantage lent amount in the south. We can greatly
of its exclusive negotiation rights for anything. increase the capacity of the project.
developing the field, so Iran invited Therefore, we have defined the conception
other countries. However, Japan has out electronics for Japan or an economy of joint project with Caspian Sea littoral
maintained interest in the field. Which without agriculture for Australia or an states. We also pursue joint oil and petro-
countries are expected to take part in economy without dairy for Denmark. chemical projects with Saudi Arabia,
the upcoming tender bid for the field? Therefore, oil is our advantage and we Qatar and Kuwait and we hope that one
With which country the negotiations cannot separate it from the economy. The day we would construct a joint oil plat-
have been more serious? Iranian economy must be planned on the form with Qatar in South Pars region and
Japan had exclusive rights over other com- basis of oil, but in four categories: oil as subsequently start joint production. We
panies before expiry of the agreement. energy; oil as forex earner; oil as the feed pursue the same idea with Saudi Arabia
That is we had decided to give the field in for downstream industries and oil as a too. Petrochemical industries of Iran and
due time without formalities. Japan, unfor- source of national power.With regard to Saudi Arabia can get a big share of global
tunately, lost the opportunity. At present, oil and the national power, we think in markets through a strategic cooperation.
the Oil Ministry is under no commitments terms of national security. Due to Iran's Now if you consider this big basket, Iraq
with regard to Japan and can hand the strategic location (between the Caspian could be a part of it. We have had a long
project over to any other country. Many Sea and Persian Gulf), our oil rich neigh- history of insecurity and tension with Iraq,
companies have been invited to take part bors need us because they lack our scien- but we must reach stability and security
in the bid and we will give the job to the tific and technological capacity. In addi- because the main obstacle; namely
best bidder. The truth is that Japan is the tion to being an oil-rich country, Iran is Saddam, has been eliminated. Now we
loser and Iran has not lost anything. blessed high industrial and technological pursue security and implementation of
capacities. Therefore, we must define our security projects. Furthermore, we must
It seems that Iran's proposal for partic- joint energy and oil projects with our think of joint projects on border rivers to
ipating in the reconstruction of Iraq put neighbors. It means that we must make a boost border trade between Iran and Iraq.
forth during Madrid conference on the link among national security concerns of Finally, we must think about joint oil proj-
basis of oil swap with that country has various countries. To develop, we need ects, production from joint fields and oil
drawn the attention of the Iraqi stability and security.Today, East Asia is swaps with Iraq because Iraq has little
Governing Council. Jalal Talabani, as secure and stable and has started to grow marine border and limited access to free
the then chairman and other members significantly. However, West Asia has waters. We can purchase Iraqi oil and give
of the council discussed the swap deal been grappling with two major hardships. Iraq equivalent amount in the Persian
Gulf. We can buy oil in the north, use it in over 500 billion barrels. Another term is the government in three ways: royalty,
Tabriz Refinery and give them an equiva- 'recoverable oil', the volume of which is special tax and stock dividend. Moreover,
lent amount in the south. These are big estimated in view of recovery factor of it must pay a kind of tax that all compa-
security measures that we can take by our reserves. The factor for Iran was pre- nies pay. Royalty is the indigenous value
using oil and connecting the destinies of viously low, but due to technological of oil that should be paid for production of
Middle East countries through oil. In this advances, it has reached 25-26 percent, every barrel of crude. Based on our esti-
way, security and stability in the Middle which means 130 billion barrels of crude. mate, the indigenous value of oil is 25
East would ensure interests of all coun- The figure can further be increased and percent in sea and 35 percent on land,
tries and West Asia would be relieved of we are trying to increase it to 28 percent averaging 33 percent. It is share of the
its 20-year backwardness. The main fac- and then 30 percent during the next five- reservoir, which should be paid to the
tors for backwardness of this region were year economic development plan.
government and the government settles
Saddam and Israel and now, after elimina-
the sum to a fund, which was previously
tion of Saddam, security can be partly On the sidelines of conference on max-
known as Forex Reserve Fund and is cur-
achieved. imizing oil revenues you told reporters
that Iran has so far consumed one- rently called Investment and
As you know, gas consumption is on third of its oil revenues and two-thirds Development Fund. This money should
the rise in the world and countries with have remained. Would you elaborate? exclusively be used for investment in the
more access to gas are more inclined to The volume of oil produced during 100 country's development ... and nobody
use it. Do you think that gas could years of Iran's oil activities has amounted would be allowed to use it for other pur-
replace oil in the future? What are to about 50 billion barrels and 130 billion poses. The second sum taken from the
your plans for developing Iran's gas NIOC by the government is a special tax,
reserves as a country that has the which changes in proportion to increase
world's second gas resources? We still lack or decrease in oil price. Since special tax
Gas accounts for 25 percent of the global specialized academic is a tax after all, it can be used as part of
energy and the figure is expected to reach the general budget. The third part is the
28 percent in the near future. Meanwhile,
courses in our revenues earned through stock dividend
share of oil in supplying global energy universities and the NIOC's ordinary taxes, which will
demand is 40 percent and will remain be paid to the government. Therefore,
unchanged. Therefore, share of gas in barrels remain. I neither like pessimism according to the fourth economic devel-
supplying global energy demand will nor do I like to exaggerate things. We opment plan (2005-2010), the NIOC will
increase. However, with regard to gas must tell the truth only. The truth is that be a tenant who pays the government a
exports, we give priority to using gas for we have used one-third of our reserves royalty. However, the government will be
ensuring a national level of prosperity and two-thirds have remained. Of course, forced to pay a large part of the special tax
with exports being our last concern. That as you know, our gas reserves are two
it takes from the NIOC as fuel subsidy.
is, if we couldn't use gas for our own times our oil reserves.
The government has come to the conclu-
developmental projects, then we would
sion that it should phase out fuel subsidies
export it. Of course, economic develop- The fourth economic development plan
ment plans have paid heed to gas exports has projected a method for using oil and spend them on infrastructural proj-
and we are planning exports to Kuwait, revenues according to which 50 per- ects.
the United Arab Emirates, Pakistan and cent of price of every barrel of oil at the
Turkey through a pipeline. We are also export rate would be paid to the gov- As the last question, would you explain
considering gas exports to farther destina- ernment by NIOC. Can this policy help about employment of specialized and
tions in the form of liquefied natural gas develop oil industry? On the other experienced manpower in the oil indus-
(LNG). I personally believe that we must hand, would tax revenues be capable of try?
use gas for domestic purposes and get on replacing oil revenues and contribute Although Iran has had a university system
with oil exports. to overall development of the country? fort some 70 years now, we still lack spe-
In the course of the fourth economic cialized academic courses in our universi-
It was recently announced that Iran's development plan (2005-2010) a new ties. Specialties related to oil industry are
producible oil reserves amounted to relationship will be defined between the taught in Oil Industry University, which is
130 billion barrels. Does it mean that government and the NIOC. The govern- affiliated to Oil Ministry. This indicates a
Iran has the world's second biggest oil ment will own oil reserves and the min- great oblivion on the part of our higher
reserves after Saudi Arabia? If so, the istry will represent the government in this education modus operandi. We are trying
country would rank second in terms of regard. The Oil Ministry is the producer to recruit elite university graduates and
both oil and gas reserves. Would you and takes oil from the reservoirs and, in use them for technological development
explain? return, will pay a loyalty to the govern- of the oil industry.
We have certain terminologies in this
ment. On the whole, the NIOC must pay
regard. 'Oil in place' which amounts to
One living quarter platform
Brief Details The initial production complex throughput capacity was
150000 barrels per day. Abouzar offshore production complex
Of a was badly damaged during the Iraqi imposed war (1980-88).
Iranian Offshore & Oil Company (IOOC) awarded Abouzar
Project to the Iranian Offshore Engineering and Construction
Renovation Company (IOEC) in 1992.
Scope of Work: Reproduction Complex Throughput
And Capacity of 150,000 BPD
Basic engineering endorsement
The damaged sections renovation
Pro j ec t The badly damaged sections removal
New facilities fabrication
Transportation and installation
Mohammad Reza Mortazavi Pre-commissioning and commissioning
PhD in Civil Eng. Project start date was Dec. 1992 and offshore renovation start
Mostafa Booraghi date was June 1993. Abouzar Project was completed in April
Member of IOEC 2001.
Introduction Three New Production Platforms (AA, AC, AB)
Abouzar Field is located in the Persian Gulf, some 75 km to the The IOEC has fabricated three production platform decks (AA,
west of Kharq Island in the water depth of approximately 40 AC, AB) at SADRA Yard in Bushehr. The decks have been
installed about 77 km from Kharq Island in the Persian Gulf,
owned and operated by IOOC.
Three six legged structures were installed to form production
platforms for the purpose of gathering, separation and transmis-
sion of crude oil to Kharq Island. These platforms have equal
producing capacities and the production facilities installed on
each platform are similar.
Production Platform AA
The produced fluids from multi- wellhead platforms A9 and
A10 enter platform AA.
Production platform AA is connected by interconnecting
bridges to platform A10 and flare structure via its associated
supporting platforms. The dimensions of AA platform are 40.5
m x 25.5 m and the total dry weight is 1,750 tons.
Production Platform AC
The produced fluids from multi-wellhead platforms A12 and
A14 enter platform AC. This platform is connected by intercon-
meters. Abouzar Oilfield location is shown below: necting bridges to platform
The field was initially developed and put on production in 1976 A12 and to flare structure via
by Iran-Pan American Oil Company. its associated supporting plat-
Initial Facilities: forms. The dimensions of AC
Three production platforms platform are 40.5 m x 25.5 m
Five multi-wellhead platforms and the total dry weight is 1750
Three flare structures with associated supporting platforms tons.
Fig.1 Abouzar Offshore Production Complex
and is owned and operated by IOOC. The dimensions of the
Production Platform AB platform are 32 m x 28.5 m and the dry weight is1,400 tons.
The produced fluids from multi-wellhead platform A11 and flu-
ids transmitted from platforms AA and AC enter platform AB. Jackets
This platform is connected by interconnecting bridges to plat- In Abouzar Project, two new jackets were fabricated for the pro-
form A11, LQ living quarter platform and to flare structure via duction of platform AB and LQ platform. The specifications of
its associated supporting platforms. The dimensions of AB plat- these jackets are shown in the following table:
form are 42 m x 26.5 m and the total dry weight is 2,100 tons.
Jacket Number Total Dry Dimensions (m) Height
Five Multi-Wellhead Platforms of Legs Weight (m)
The five multi-wellhead drilling platforms have been installed
AB 6 480 28.8 x 15.3 (top)
in a satellite configuration over Abouzar Field. These platforms 37.2 x 27.5 (bot)
were A9, A10 (renovated), A11, A12 and A14. The first four
platforms were 28-well slant conductor well platforms and A14 LQ 15.3 x 15.3 (top)
is a 9-well vertical conductor well platform. Jacket 4 27.5 x 27.5 (bot)
Three Flare Structures (One New) With Associated
Abouzar Offshore Production Complex Renovation
Facilities: Five New Multi-Wellhead Platforms Plus Jackets
Five new multi-wellhead platforms are A15, A16, A17, A18
and A19 (Refer to Fig.1). The dimensions of each platform are
11.7 m x 10.7 m and the dry weight is 179 tons. The dimensions
of the platform jackets are 6.5 m x 6.5 m (top) and 13.7m x
16.9m (bot). The height of the jackets is about 47.40 m and the
dry weight of each jacket is 215 tons.
Scope of Work: Increase in Oil Production From 150,000 BPD
A15 Jacket Installation
to 200,000 BPD
Supporting Platforms Technical Inspection
Each production platform has an independent flare system, Detail Engineering
which comprises a flare structure, a gas line to the flare struc- Procurement
ture and three pieces of interconnecting bridges passing over New Facilities Fabrication
three supporting platforms. Transportation and Installation
Pre-commissioning and Commissioning
One New Living Quarter Platform Abouzar Extension Project start date was Oct. 1996 and it was
This platform has been fabricated at SADRA Yard in Bushehr.
completed in Dec. 2001.
The module has been installed about 77 km from Kharq Island
A15-A19 Platforms Jackets Load Out ansporn
A16 Jacket Transportation A17 Deck Installation
Load Out and Installation the rest of the decks Abouzar 1200 Crane Barge.
The main concern of load out and installation of Abouzar
Project was the heavy LQ & PP decks. Load out of PP and LQ Abouzar Project execution was the first experience of IOEC.
decks were carried out by skidding and using two skid shoes for The main advantages of this project were as follows:
each leg point with a capacity of 500 tons each. Each skid shoe Localizing offshore technology of Engineering, Fabrication
was equipped with a 500 tons hydraulic jack. The skid shoes and Installation.
were arranged in three lines for PP decks and two lines for LQ Transmission of technical knowledge and utilizing all avail-
deck. Push pull system was installed and utilized for horizontal able local capacity.
movement. Provision and compilation of offshore industrial hardware and
For lifting activities of heavy PP and LQ decks (480 tons & 360 software requirements.
tons, respectively) Stanislav Yudin crane barge was used and for
P a i n s t a k i n g E ff o r t s P r o d u c e Re s u l t s
Report on Completion of Phases 6, 7 & 8 of South Pars EPIC-1-Jackets
party, marine warranty surveyor, load-out transportation and
By Nemat Nematollahi installation subcontractors were evaluated and selected in
ISOICO Project Manager wake of pertinent studies. The policy of Offshore Division of
ISOICO was to subcontract most of the work to pre-approved
On July 1, 2002 a contract was awarded to Iran Ship Building subcontractors and also build one of the three jackets itself. In
and Offshore Industries Complex Company (ISOICO) for tandem with this policy, the first and third jackets were con-
engineering, procurement, construction and installation of structed by Iranian subcontractors and the second jacket was
three jackets weighing a total of 9000 tons, worth about handled by internally established groups for welding, fit-up,
32,000,000 USD. etc. within the Division itself.
The client was Petropars of Iran and the Norwegian company
Statoil was named as the operator. This company also took
over the management side of the project.
It was the first EPIC contract for the offshore division of
ISOICO after completing the construction of phases 2-3 with
Total as client and NPCC as contractor. This undertaking
began in 1978 and finished in 2001. The job consisted of one
wellhead platform with related ancillaries such as jackets,
bridges and flares.
This Division has also completed the construction of the
largest jacket in Iran, a 3500-ton jacket called SPP1. All con-
struction work was carried out in Bandar Abbass Site, which
has a capacity of almost 35,000 tons per year and has a spa-
cious workshop and construction halls with 2 computerized
Muller machines, heavy cranes and the equipment needed for
completing offshore projects. This site is newly mobilized
with Q-Wall and Skidway with capacities of 4,000 and 8,000
tons respectively. The third offshore contract as mentioned
above was phases 6, 7 and 8 of EPIC jackets. After conclud-
ing the contract, a British company based in London called
SLP started the detail engineering work. The basic design
was performed by Foster-Wheeler and SLP incorporated
some new concepts into it, as it was originally proven to be
insufficient. The total jacket weight had to be increased con-
siderably by almost 20% per jackets. As a result the diameters
of legs and piles increased from 60" to 68" and 54" to 60"
respectively. To order the material, MTO from the
Engineering Department was needed for the main steel struc-
ture as early as possible. Therefore, some six weeks after the
start of the engineering phase of the undertaking, this MTO Since it was a fast track project with a duration period of 14
was prepared and orders were placed with some European and months (before the installation phase), the work began for all
Japanese companies like Thyssen and Mitsubishi for the con- three jackets in a concurrent manner at our new Bandar
struction of the major steel structure. The engineering work Abbass Yard. In is worth mentioning that 70% of leg main 68"
finished within the first six months of the contract and concur- tubes were rolled and constructed at ISOICO Yard for the first
rent with this most of the primary and secondary materials time in all South Pars projects. By April 2003, all primary and
were also ordered. In the meantime, several national and most of the secondary structures were at site except for minor
international subcontractors active in construction, third items such as anodes, fenders, grout packer, etc.
In May 2003, a contract was signed for load-out of all three installed and the two first add-ons were in the middle of weld-
jackets by trailers through ALE Company (Abnormal Load ing process (to the load section) when unexpected heavy
Engineering). This was based on four point load-out. storms (6.5 meter waves) ruined all the work and caused the
Considering the weight of each jacket (1550 tons extra weight jacket to sink in mud from two legs (the jacket was 4 legged)
compared to basic design), the riser materials were handed for about 3 meters.
over to us by the client some 3 months later than expected. The crane barge had to be moved away from the jacket and we
The first jacket was loaded out to a barge on Dec. 27, 2003 had to wait for more favorable climatic conditions in order to
and transported to South Pars Field. Installation was complet- assess the extent of damage. After a few days when the sea
ed on Jan. 19, 2004 by SHL Company. was calm, the assessment showed that the jacket had gone
The installation subcontractor came on board about middle of down into mud from legs A4 and B4 by 2.5 m and from legs
Oct. 2003. However, our Engineering Department was offi- A2 and B2 by 1.5 m, putting almost a weight of 1000 tons
cially in contact with them well before the contract was of mud on the Mudmat. The Installation subcontractor pro-
signed to rectify and clarify some technical issues. The instal- posed different remedial measures for bringing back the
lation plan considered two options; one option was to install jacket to its leveled position. Finally, it was decided to lift
the jacket from legs A2 and B2 by a 2500-ton crane. The
engineering calculations revealed that a max force of 1000
tons could be applied to the mentioned legs. However, the
operation was unsuccessful and the jacket could not be lift-
ed sufficiently. Hence, the remedial work was called off.
Despite all ISOICO efforts to continue with the work, our
installation subcontractor left the field for another commit-
ment in India. After completing its job in India, SHL
returned to the SPD8 position and remedial work was
resumed on the basis of the pre-planned alternatives. The
mud was removed from the Mudmat by means of suction
and the jacket was lifted without any piles or B/Tank
installed and moved away from its current position to
allow another contractor to fill out the holes created in the
seabed created by drilling rig spud can or pits, which were
filled with mud and needed to be replaced by sand.
After the seabed improvement phase, the jacket was moved
to its original position and installed on the appraisal well and
subsequently the pile installation phase started. The jacket
installation operation was finally completed on May 12,
After installing this jacket, POGC decided to install the
SPD5-SPD6 decks prior to ISOICO work.
The SPD9 Jacket was loaded to ISOICO Barge (TONDGOY-
AN 105) on April 21, 2004 and was transported to the field
on May 31, 2004.
At the time this report was being compiled, the jacket was
secured with piles and hopefully the work would be complet-
ed within a period of one week. Despite all the difficulties,
all three jackets in one campaign and the second option we completed the project successfully and naturally learned
implied that the job should be completed in two campaigns. many lessons in the process.
Everything was progressing in a desirable manner and it I would like to extend my appreciation to the project team,
seemed that it was possible to install the three jackets in one ISOICO management, all subcontractors, Petropars and espe-
campaign until problems occurred during installation of the cially Statoil, which has done an excellent job as the operator
second jacket. (SPD8). and has proven to be very cooperative all angles considered.
In early Feb. 2004, the second jacket was loaded out success-
fully and moved to the area. The jacket was lifted and upend- Source: Iran Offshore Engineering Desk
ed according to the plan. Two lead sections of piles were
Drive for Democracy
The swift changes within the Iranian poli- highly valued resource has proliferated which stands at 3.6 million barrels per day,
ty, state structure and economy are all Iran's regional importance. The conse- half of which is consumed domestically,
indicative of the unprecedented impact of quent saga of episodes have shown what a the task of generating the required amount
petroleum on our society. As the trends black cloud this 'black gold' has indeed of cash appears to be a long haul.
have demonstrated, Iran, a country with a been and how it has instigated the out- Meanwhile, the bulk of Iran's non-oil
tremendous industrial capacity apart from break of the century's notable events in the exports are still composed of hand-woven
petroleum, has never had enduring stabili- past 50 years. carpets, pistachio, dates, raisins and caviar
ty since the discovery of petroleum. This Given the extent of convulsions, which whose percentage in the share of exports
miraculous product, often referred to as have plagued us due to being blessed with saw a steady increase. However, given
black gold, has been in use for thousands one of the most precious resources of the Iran's immense economical and social
of years. Oil is recorded to have been in 20th century, the question arises, potentials, the fact that petroleum incomes
use by the Chinese for about 2000 years. could we have done better in the absence have always formed the kernel of the
Subsequent to the invention of the com- of petroleum? export revenues is indeed a great shame.
bustion engine and later the first motorized Ever since drilling petroleum in Iran dur- Yet, the Islamic system's seeming reluc-
car in the last portion of the 19th century, ing the first quarter of the 20th century, the
the usage and value of petroleum culmi- revenues, which were shared between the
nated profoundly. Consequently, the British and the ruling Iranian dynasty,
newly independent Middle Eastern coun- have constituted the backbone of the
tries, which had long been suffering from Iranian economy. This contingency on
exploitation by colonial forces, started fos- petroleum reached immeasurable levels
tering their economy and state structure during the reign of Mohammad Reza
through petroleum. Pahlavi, who increased the production rate
The discovery of oil in 1908 in Masjed
Soleyman by the British Petroleum marks The post-Islamic
the beginning of the quest for petroleum in
Iran. Iran was followed by other Persian Revolution period
Gulf states and Iraq. saw a steady, but
These discoveries gradually intensified the
voracity of the British, who undertook the insufficient growth
task of extracting petroleum from Iran and in the percentage of
other Persian Gulf states. The discovery of
petroleum in Iran, where the main liveli- non-oil products
hood of people used to be agriculture and
farming and in the Persian Gulf States, in order to finance the grandiose projects
where the populace lived on pearl fishing, he had launched. However, throughout his
created a new era in the history of the reign, despite an unprecedented boost in
Middle East. This historical piece of land, industries to meet the internal demand
which had forfeited its importance gradu- such as cement, automotive and food-pro-
ally after renaissance in Europe, shifted cessing, petroleum and its by-products still
into a new focus of geopolitical attention. constituted 99% of the export revenues,
Meanwhile, the immense wealth brought which equaled the ratio in such countries tance, bequeathed from the preceding one,
about by the discovery of petroleum was as Saudi Arabia, Qatar, Oman and Kuwait. to focus on the country's non-oil potential,
amongst the main reasons delaying the The post-Islamic Revolutiona period saw is an outright invitation to havoc. Iran isn't
independence of such states as Kuwait, a steady, but insufficient growth in the per- a desert kingdom like Saudi Arabia, where
United Arab Emirates and Qatar, which centage of non-oil products. While the 95% of the country is littered with deserts
achieved independence only in the last country's population almost doubled with- and only a tiny percentage of the country
half of the twentieth century. in the two decades following the Islamic is arable and inhabitable. Nor can Iran's
Despite the assertions of many that the Revolution, there occurred a sharp unutilized potential can be juxtaposed
lack of petroleum would have plunged us decrease in GDP (gross domestic product) with a country like Kuwait, whose exis-
into abject poverty, the truth is that it has per capita from $2,200 to $1,640, which tence is attributable to petroleum.
undermined our political and social stabil- was instigated by the dwindling petroleum However, when one investigates the por-
ity since the presence of the country's production. At the current production rate, trait of the foregoing countries' export
records, it will be rather easy to remark on er and more environmentally friendly, is in auspicious developments in the realm of
the similarity of their economies: depend- seldom use despite the fact that Iran is sec- tourism in Iran, whereby the total number
ence on oil. Iran, at current production ond to Russia in natural gas reserves. The of visitors visiting the country has risen to
rate, will have run out of its petroleum high incidences of petroleum in urban 1 million (generating some $800 million
resources within the next 70 years. areas and its easy availability have been for the country), not many Westerners
Considering the fact that petroleum in Iran the instigators of another large-scale disas- would sanction the idea of paying a visit to
has been extracted since 1912 (namely for ter: air pollution. Cities like Tehran and Iran due to the unstable political condi-
90 years now) and that the Iranian econo- Mashhad have been experiencing the tions of the country and the rules imposed
my has been totally contingent on petrole- direct effects of this curse cast by petrole- on tourists themselves. On the other hand,
um throughout this lengthy period, who um, and this trend is only exacerbating due even when Iran was supposedly being
can guarantee that the same trend will not to the government's uncaring attitude to conceived as an island of stability by the
persist within the next 70 years? At its cur- improve these cities' air quality, which former US President Jimmy Carter during
rent growth rate, 1.2 %, Iran's population should bring in entrenched rules about the the reign of the shah, the total number of
will have exceeded 152 million within 70 usage of petroleum. tourists visiting the country and the bed
years. If a viable and self-sufficient econ- As we are all aware, Iran has never had a capacity of Iranian hotels were appallingly
omy is not created and if the long-lasting distinguished ranking in any industry. Our low. This could be imputed to the shah's
inadvertence that has been displayed over textile industry (centered in Isfahan), excessive emphasis on the generation of
the decades still continues, then chaos will food-processing, automotive and cement revenues purely from petroleum incomes,
ultimately set in. have always been designed to meet the while totally ruling out the other more
Iran's long neglected industrial potential, internal demand. However, due to the important potentials Iran possessed.
which could have been advanced through ubiquitous nature of smuggling, the coun- Iran, on the grounds of the different exten-
the extensive usage of copper, iron ore and try's industries, currently operated by sive climactic regions it is blessed with,
chromium, all of which are highly abun- state-owned foundations, are on the brink presents one of the most splendorous and
dant within the confines of the country, of collapse. Moreover, the lack of compe- unique experiences for tourists. It is not
tition inside the country has made industry unusual for one to feel the apogee of
more susceptible to fluctuating trends in spring on the Caspian Coast, while some
the world. While Iran's dependence on other person could be skiing on the slopes
petroleum seems to have retarded the true of the Alborz Mountains and at the same
development of industry throughout the time it would be possible to get soaked
entire century, Iran's neighbor, Turkey, under the sun of the desert. What is more,
which has always been noted for its bleak given the remnants of Iran's thousands of
economical state, has been aspiring to years old historical treasures scattered all
come up with new ways of encouraging over the country, Iran's cultural heritage
the flow of capital inside the country to could have been used to generate billions
of dollars while, simultaneously, introduc-
ing our rich history to the global commu-
Iran has never had a nity, whom we often excoriate for mistak-
distinguished ranking ing us for Arabs.
Has petroleum shown its disastrous facade
in any industry only in our economy? Absolutely not. The
curse cast over us by petroleum has been
help the country's ailing economy. more widely felt in politics and society. It
Interestingly enough, despite being devoid was our petroleum that lured the British
of petroleum, Turkey's recent export into the area causing them to orchestrate
records, which stood at $37.6 billion com- secret stratagems that left substantial
pared to Iran's $22 billion, manifest the social and political effects on Iran. Despite
endeavors made by our neighbor trying to having commenced our pursuit for democ-
stay alive. Whether Turkey will be suc- racy much earlier than many nations, we
cessful in its crusade or not is imponder- Iranians' intense and enduring quest for
able. However, one thing is certain: The democracy has still not reached fruition.
Turkish economy, which has been (and Almost every single Iranian discerns that it
could have been pivotal at turning the still is) suffering from the lack of cash, has was our petroleum that instigated the
country into an industrial giant, given grown more adaptable unlike the Iranian demise of Iran's fleeting democracy in
Iran's educated potential. As the decades- economy, which has invariably been 1953.
long lax stance of the state has continued, dependent on petroleum. At least, Turks It may sound rather outlandish, but had we
we Iranians have gradually grown lazier have already started to compete with not had petroleum, we would have had
and consequently the petroleum byprod- Europe in their textile industry while we much more time to concentrate on a better
ucts started to occupy greater space in our cannot even properly refine our God-given future rather than opting for the easiest
daily lives. Today, 94% of Iran's energy petroleum. option: laziness.
production comes from fossil fuels, In the meantime, tourism, an area in which
notably, petroleum while other alternatives Iran boasts considerable potential, has
such as solar and even natural gas (anoth- never been bestowed the importance Source: Petroenergy Information
er fossil fuel), which is known to be clean- it deserves. Of course, despite so-called Network
Iran Enters Indian Ocean
Oil and Gas Market
IOEC to Deploy a Very Modern Pipelay Barge
After years of presence in oil industry, the pipelay/offshore construction/ Russia, Sudan, Iraq, Iran, Libya and
the creative strategies adopted recently accommodation/ barge deployed in the Syria. ONGC has managed to improve
have especially helped this industry undertaking. In the next section we have the index of exploitation from 28% to
progress and improve. These strategies interviewed the RSPPM project manager 40%. The company also aims to increase
are in line with the general guidelines of at IOEC, Mehrdad Sabbaghi and oil recovery in 15 oilfields in Mumbai.
the Islamic system and have been ratified ONGC's Executive Director Mr. Rayna.
by the State Expediency Council (SEC)
and the Leader of the Islamic Revolution ONGC's Offshore Capabilities
Ayatollah Seyyed Ali Khamenei based on ONGC's History
Article 110 of the constitution. 131 well platforms
Consequently, the national industrialists ONGC is a state-run Indian company 5 well injection platforms
have endeavored to pursue the spirit of active in the arena of oil and gas. It was 28 processing platforms
self-sufficiency and implement oil and established in 1960 when oil was discov- 18 jack-up platforms
gas projects. ered in Asam. This company has man- 3,200 kilometers of pipeline
The South Pars Gas Project serves as a aged to discover huge offshore oil 32 barges
great example of how the indigenous reserves in Mumbai and hence change 4 special vessels
industrialists have been working diligent- around the Indian oil industry.
ly towards this cause. At some instances In 1994, ONGC underwent a major
we were even witness that local firms change. Some 10 percent of the compa- ONGC's Onshore Capabilities
have been active in the regional market ny's shares were sold to IOC (another
thus ending the monopoly exercised by state-run Indian company), 2.5 percent to 225 cases of installation of production
foreign firms in regional undertakings. Gail company and 2.5 percent to ONGC's systems
Our firms, which wholeheartedly belong staffers. The remaining 85 percent was 7,900 kilometers of pipeline
to our motherland, have played a major retained. In wake of this change, ONGC Water sweetener
role in lowering expenditures and facili- engaged in investments in Vietnam, 75 drilling platforms
tating industrial ventures. The industrial- Sudan and Sakhalin island. The first 66 control platforms
ists of the country have managed to show hydrocarbon project of the company that 33 seismological units
their capabilities on the international generated revenues was completed in
scene in light of the support of the senior Vietnam.
officials of the Oil Ministry. ONGC is the first E&P company in the Technical Specifications
Recently a momentous development took world in terms of profit-making and the JASCON-5
place and that being that an Iranian com- second in terms of size. This company is P i p e l a y / O f f s h o r e
pany succeeded in beating American and the only Indian member of international Construction/Accommodation/ Barge
South Korean firms in the Indian off- engineering societies such as USA's PI,
shore oil and gas market. This Iranian Financial Times Global and Forbes. The hull of this vessel is 140 meters in
company was awarded the responsibility ONGC is currently viewed as the most length with a width of 40.6 meters and a
for implementing one of the most impor- valuable Indian company with an origi- depth of 8.75 meters. The
tant Indian oil projects. nal capital of about 20 billion dollars. Accommodation Deckhouse, fitted out
The name of this project is RSPPM. It is This company handles over 80 percent of with every modern comfort possible, is
situated in Mumbai oilfield. This under- India's oil and gas production. This com- suitable to accommodate up to 350 per-
taking is handled by ONGC, one of the pany is also the largest producer of LGP, sons.
most important companies affiliated to pipelines and refineries in India. Singapore's Sembawang Company con-
the Indian Oil Ministry. The Iranian com- ONGC has utilized state-of-the-art tech- structed the barge. It has a Huisman 800-
pany that won the tender bid is the nology. It has carried out oil exploitation ton heavy lift crane, a 36-ton pedestal
Iranian Offshore Engineering and activities at 3 kilometers below the sea crane and a 25-ton TTS/Norlift pedestal
Construction Company (IOEC). level. It has dug 47 oil wells since its crane.
We have compiled a report on the occa- establishment. This barge is a particularly flexible and
sion of this unique accomplishment. We One executive arm of ONGC is OVL, sophisticated offshore work vessel
first present a brief account of ONGC's which is currently working on lucrative specifically designed for most sea state
history and the technical specifications of projects in countries such as Vietnam, conditions and a major variety of work
scopes throughout the world. RSPPM project includes 33 pipelines transported to the refining platform via a
The pipeline stinger of the barge can lay measuring a total length of 154 kilome- riser.
pies varying in diameter from 4 inches to ters and 31 oil platforms, which must be
48 inches (maximum coated pipe diame- rebuilt, optimized and prepared for pipe Did you encounter a tough competition
ter 60 inches). The stinger is fixed and laying. This project serves as a link to 12 in ONGC's tender?
can lay 3,000 meters of pipe per day. other undertakings, which are currently Some 8 international companies partici-
The barge is equipped with a Kongsberg underway. Therefore these pipelines and pated in this tender. They were all strong
Simrad Dynamic Positioning System, platforms are very important for ONGC. competitors. I must mention here that
which features 8 Azimuth type thrusters The contract is worth $163 million, firms from countries like the US, South
type HRP 700, powered by 8 x which has the potential to rise up to $200 Korea, Singapore and Russia as well as
Caterpillar 3516B diesel engines of 2,100 million in view of the contingent increas- strong Indian companies, which typically
brake horsepower (BHP) each, controlled es in capacity and the overtime involved. dominate the Indian contracting scene,
by a DP-3 class Kongsberg Simrad The period of the contract is two years. participated in this tender All the compa-
dynamic positioning system. The operations will be carried out in two nies possessed the means and facilities
In addition to the DP-system, this vessel phases. The first phase is completed needed for the implementation of the
is equipped with 8 anchors, which are before the beginning of winter in the project. In fact, the good part was that all
used when necessary. Indian Ocean and the second phase must participants in the tender, including the
Jascon-5 has been ranked as a distin- be completed before 2006. In view of the US-based Mc Dermot and South Korea's
guished vessel by ABS. vast capabilities of IOEC, we predict that Hyundai, which dominate the Indian off-
all the engineering phase would be com- shore market, had some previous experi-
Interview With Sabbaghi pleted in this current Christian year. ence and the capacity to lay pipes off-
Iran Daily: Tell us more about this Where do the pipes come from and IOEC put up a tough competition by
contract and your position. where are they coated? using facilities such as Assalouyeh yard,
Sabbaghi: I am Mehrdad Sabbaghi, the As mentioned before there is 154 kilome- the coating factory in Khorramshahr,
manager of project RSPPM for Mumbai ters of pipeline involved in this undertak- Abuzar barges 110, 114 and 1200 and
oilfield, India at IOEC. ing. There are various phases at stake, Jascon-5 pipelay barge. We ultimately
IOEC became involved in this undertak- such as design, coating, optimization of broke the monopoly exercised by
ing after declaring its qualifications and platforms and so on. All these phases are American and South Korean firms over
winning the ONGC's tender bid. I wel- carried out inside the country by utilizing Indian undertakings.
come this opportunity and congratulate the existing capabilities of IOEC.
the leader and the nation on this auspi- However, in a bid to improve the quality Which companies dominate the Indian
cious occasion. and precision of the project, pipelines undertakings?
will be purchased from abroad. Firstly, I must refer to Mc Dermot, an
You mentioned that IOEC participat- American firm, which usually partici-
ed in the tender after it declared its Will you use your existing means and pates through two channels, namely the
qualifications. Elaborate further. facilities for offshore pipelaying? UAE and Australia and which has good
The Indian Oil Ministry first assessed This is a pipelaying project in which we pieces of equipment. Next there is South
IOEC. After it was ranked excellent, it cannot use anchors. We decided to use Korea's Hyundai, which has good vessels
participated in ONGC's tender and was Jascon-5 pipelay barge, which has been because South Korea has shipbuilding
awarded project RSPPM. made available to us recently. This vessel industry. This company is among the
In order to win this project, we compiled is equipped with the latest state-of-the-art largest offshore engineering companies
the necessary documentations required technology. in east Asia and it has constructed and
by ONGC during a period of two years. installed huge oil platforms all over the
This documentation included informa- Tell us more about Jascon-5. world, ranging from the Gulf of Mexico
tion on projects already completed by This barge is capable of laying pipes in to Kuwait. The third company is Larsen
IOEC, such as Abuzar, Behrgansar and both shallow and deep waters. It has a & Turbo, which is an Indian general con-
the 31-inch and 18-inch pipelines for large hull and can easily be stationed in tractor. This company has undertaken
phase one of South Pars Gas Project. areas like Mumbai and Salman. It can various offshore and onshore projects in
RSPPM project is very important for also remain fixed by virtue of 8 anchors India. The fourth company is India's EIL,
ONGC. IOEC was exactly evaluated as a when necessary and carry out the task of which has the experience of implement-
general contractor. In this period of two pipe laying. A powerful 800-ton crane is ing engineering projects worth 200 mil-
years, we gathered a great amount of installed on the hull. This barge is among lion dollars. The fifth participant was a
documentations. After examining them, the most modern pipelaying vessels of Russian company. The sixth company is
ONGC verified IOEC as a general con- the world. Singapore's Sembawang Company,
tractor and allowed us to participate in another huge offshore engineering com-
Indian tenders. Give us more information on the issue pany in east Asia. This company has
of increasing the capacity and rebuild- already been a partner of IOEC in Balal
Tell us about the volume of the project, ing the platforms for this project. project. The seventh company was
as well as the period and amount of the 33 pipelines and 33 platforms must be France's Technip, which is quite rep-
contract. rebuilt and optimized. Oil and gas is utable at the international level.
We faced a very tough competition from production capacity. RSPPM project is
these companies. We beat the runner-up How will IOEC approach the issue of linked to the undertaking for building 9
with a little margin. ONGC announced equipping the subcontractors? new oil platforms and can help increase
that the offered prices all fell within the Our regional strategy stipulates that we their overall capacities. We must use a
project's estimates. ONGC carried out a use the services of subcontractors. We great amount of pipeline in this project to
close examination of the tender docu- intend to form a group of subcontractors, increase the existing capacities for pump-
ments and naturally IOEC abided by all which would operate under the supervi- ing oil and gas. The project that IOEC is
the necessary standards in presenting the sion of IOEC. I must also say here that handling is very important and connected
needed documentation. many good Iranian firms are not yet pre- to 10 other projects, which are being han-
India's Larsen & Turbo ranked second in pared to participate in international dled by multinational firms. IOEC coop-
the tender. Of course I must mention that undertakings. We tried for 2 years to erates with all other contractors involved
Indian companies have an advantage of prove that we are capable of participating in this project. This is why this undertak-
10 percent in local undertakings. In other in international projects. Naturally, we ing is quite challenging.
words, in case their offer is 10 percent will also show the subcontractors what to
higher than the winner of the tender, they do to become successful on the interna- Tell us more about the tender.
can actually win the tender. However, tional scene. Many important firms participated in the
ONGC's project appraisal team declared tender. It was a tough competition. IOEC
that IOEC has access to more modern Did the Iranian Oil Ministry or the managed to win the tender by declaring
pieces of equipment than Larsen & Turbo Industrial Development and the price range that ONGC had in mind.
and hence the latter cannot benefit from Renovation Organization (IDRO)
the 10 percent advantage business. The assist you in winning this tender? How do you see the future in terms of
American and South Korean firms were The Oil Ministry and IDRO own IOEC Iranian companies participating in
eliminated because they had offered high and hence provided us with the necessary Indian undertakings?
prices. advice for becoming involved in the Iranians and Indians are friends for a long
undertaking. However, none of them period of time. There are many oil and
Is ONGC considered a state-run interfered directly. In fact, their spiritual gas fields both in India and Iran. We hope
Indian company? Who are its manag- support led to our success. that this cooperation would be two way
ing director and chairman of the and that both companies can contribute to
board? Who finances the project? the undertakings in the other country. Of
ONGC is, in fact, viewed as one of the The Indian tenders are different from course ONGC has carried out a great
largest state-run Indian companies. We other countries. The Indian government amount of investments in the commercial
can compare this company to the itself procures the necessary funds. sector and has participated in many for-
National Iranian Oil Company (NIOC). eign undertakings. We hope to continue
Of course, it is only natural that NIOC is This contract is viewed as an under- our cooperation with IOEC.
larger and more reputable at the interna- taking for exports of engineering and
tional level. ONGC is quite credible and technical services. Have the Export Do you foresee any delays?
powerful in India and is vastly supported Promotion Center of Iran (EPCI) and One reason we assigned the job to IEOC
by the Indian government. In the past the banking system supported you? is that we know this company has the
couple of years, this company has man- It is obvious that we need financial sup- ability to finish the project ahead of
aged to hold two billion dollars worth of port in implementing the project. Thank schedule.
tender in the region. God Almighty the EPCI and Bank Tejarat
The managing director of the company is have offered us certain facilities, which In view of the fact that an Iranian com-
Mr. Rama and its executive director is we hope we can use in due time. pany has for the first time ever partic-
Mr. Rayna. I wish to thank all colleagues who helped ipated in an Indian tender, how do you
us accomplish this great success. I must see the link between the employer and
IEOC acts as a general contractor in convey this message that Iranian compa- the contractor?
this project. Has the company used any nies possess the capability to successful- We trusted Iranians and thus awarded
subcontracting? ly participate in international tenders if them a project. We shall do everything
This is a huge project and it is thus natural they abide by international standards. possible to ensure the success of this
that the general contractor shares the work undertaking. We hope that the project
with subcontractors. Our company has Interview With Rayna will finish on time so that the Iranian side
also shared the work with subcontractors would maintain its credibility. This way
on the basis of international standards. Iran Daily: Introduce yourself first we are also rewarded for the trust we
Some of the subcontractors are Iranian and also give us more information placed in Iranians.
and some are foreign. Our motto is to about this contract. I must say that ONGC is currently active
facilitate the participation of Iranian sub- Rayna: I am Rayna. I am the executive in Vietnam, Sudan and Syria and we hope
contractors in such undertakings. We are director of ONGC. I am very happy that to become active in the Persian Gulf
trying to implement this project the best this contract has been concluded. This region.
possible way and hence win the trust of project is very important for expanding
India Oil Ministry for future undertakings. the Mumbai oilfield and improving its Source: Iran Daily
Oil And Conflict
A Natural Nexus
The Japanese attack on Pearl Harbor Kuwait and Abu Dhabi to counter an not just produce outside intervention. It
had its origins, at least in part, in a deci- Arab oil embargo against the West. can produce internal abuse of power.
sion by the United States to limit oil One recent study paper by an American Saddam Hussein himself is a prime
exports to Japan in 1941 in response to military analyst even suggests that one example: it was oil that gave him the
the Japanese invasion of China. Japan day the United States and Europe might resources with which to arm himself.
was almost totally reliant on imported be in conflict over dwindling Middle Looking ahead, new areas of interest
oil, mainly from the United States, and East oil supplies. The analyst, Major are opening up, especially the Caspian
it needed oil for its navy. Chris Jeffries, assistant professor at the Sea where a new "Great Game" is
It concluded that if the American tap US Air Force Academy, wrote: "Is it developing to mirror the rivalry
was going to be turned off, it would unthinkable that the US might enter between Russia and Great Britain in
have to get its oil elsewhere. This was a into an agreement with the Middle East Asia in the 19th century.
factor in its decision to invade the oil- to secure its supply over the interests of One of the countries at the heart of
rich Dutch-held Indonesian islands. the other industrialized nations - Caspian Sea development is Azerbaijan
including Europe?" and it is instructive perhaps to recall
Coups and Power-Play that its capital, Baku, was once the cap-
Persian Gulf Wars ital of the world's oil exports.
Japan still relies on imported oil, but That was back in the early 20th
this now comes substantially from the The intervention by the United States Century. Baku became an international
Middle East, another part of the world and its allies over Kuwait in 1991 was city, with grand villas built by locals
where oil has long played a vital role. in large part motivated by a need to who had got rich and foreigners who
Britain first became interested in the secure oil and also to prevent Saddam came to get rich. The city even put up
Persian Gulf, because of its maritime Hussein from expanding his access to an ornate opera house to mark its pres-
interests, long before oil was discov- it. tige.
ered. And, although the more recent war with
Then, when oil extraction was devel- Iraq had other motives as well, oil was The New Black Gold
oped in the 1930s, the strategic value of a factor as the US Vice President Dick
the region increased significantly. Cheney, warning of Iraq's ambitions, Baku's oil was a target for the German
Other powers began to get interested, said in August 2002: "Saddam Hussein army in World War I and the city was
especially the United States. The West could then be expected to seek domina- briefly occupied by a British contin-
was determined to secure the Persian tion of the entire Middle East [and] gent. It was then taken by the Soviets,
Gulf as the main source of its energy. take control of a great proportion of the equally keen on getting at the black
Oil played its part in a 1953 coup in world's energy supplies..." But, oil does gold.
Iran - organized by the US and Britain. Hitler aimed for it again in World War
They managed to overthrow an elected II and predicted that if Germany did not
prime minister, Mohammed get oil from the Caucus Mountains it
Mossaddeq and installed Shah would lose the war.
Mohammad Reza Pahlavi, whose reign Looking even further ahead to when
came to an inglorious end upon the vic- the oil runs out or at least significantly
toryof the Islamic Revolution in 1979. runs down, it may be that the world
Mossaddeq's main sin was to have turns again to nuclear power. In which
nationalized the British-owned Anglo case those countries with uranium
Iranian oil company. deposits would become among the
Just how far the United States was pre- most attractive. The top ten are:
pared to go for oil was shown by the Australia, Kazakhstan, Canada, South
recent release of documents from the Africa, Namibia, Brazil, Russia, USA,
British National Archives. Uzbekistan and China.
An intelligence assessment by the
British government in January revealed Source: Petroenergy Information
that in 1973 Washington drew up a plan Network
to seize oilfields in Saudi Arabia,
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University students and professors as well as researchers in related fields
investment of $799 million. The wells B) EPIC M Section: The contract for this
The development project for Soroush from which the contractor has pledged section has been concluded between
and Norouz oilfields is one of the impor- production include 27 oil wells and two Shell and NPCC and includes the follow-
tant undertakings currently underway water injection wells.Preliminary pro- ing items:
in Iran's continental shelf, which is duction from Soroush and Norouz fields * Construction of NPP-2 production plat-
nearing completion and has so far pro- has started since Dec. 2001 at 60,000 bar- form to be installed at Norouz Field,
gressed 88 percent. The 799-million- rels a day and at present the contractor is which is projected to be manufactured
dollar project the preliminary stage of drilling other wells, completing structure and installed according to schedule.
which became operational in fall of and installing the needed equipment for * Construction of NLQ residential plat-
2001 by producing 60,000 barrels of reaching the next stage of production, form to be installed at Norouz Oilfield,
crude oil, aims to increase production that is, 190,000 barrels per day. which would accommodate 25 people.
from Soroush and Norouz fields to What roles do Shell and NIOC play in * Construction of NWP-1 wellhead plat-
190,000 barrels of oil per day (bpd). The renovation and development of both form at Norouz Field.
following interview with director of fields? * Construction of SPP-2 production plat-
Soroush and Norouz fields development Shell is the imp lementer of development form at Soroush Field.
project, Mehdi Atrianfar, sheds more projects for Soroush and Norouz as well * Construction and installation of SWP-2
light on the specifications of this vital as the main investor in the project. Iran wellhead platform at Soroush Field.
venture. The Persian text of the inter- Oil Engineering and Development * Construction and installation of SPP-1
view appeared in the October issue of Company, as supervisor, is responsible production platform at Soroush Field.
Mash'al, a magazine published by the for the fulfillment of the contractor's Construction and installation of SLQ
Oil Ministry. Full text follows: commitments for achieving the project's platform for 55 people.
Mash'al: First, would you explain
about the characteristics of Soroush
and Norouz fields and their history?
Atrianfar: The contract for developing
Soroush and Norouz
Soroush and Norouz fields was signed
between the National Iranian Oil
Company (NIOC) as client and Shell
Fields to Produce
contractor.Soroush oilfield was discov-
ered in 1962 and was made operational
after drilling the first well that yielded At the moment, the * Laying various kinds of pipelines.
14,000 barrels of crude oil from Burgan On the whole, progress of this part of the
oil layer. The approximate area of the project is complete project has been 79 percent.
field is about 260 square km and it is 88 percent C) Drilling Section: All the 29 wells
located some 82 km southwest of Kharq related to the project have been drilled
Island.Norouz Oilfield was discovered in goals as well as management of and and completed. The contractor has
1966 and came on stream after drilling supervision over the project. National achieved a reasonable output with regard
the first well. Its area is approximately Iranian Offshore Oil Company (NIOOC), to drilling wells due to choosing the
300 sq. km and it is located some 93 km which is the main owner of Soroush and chain method.
northwest of Kharq Island and some Norouz fields, will be the final imple- Has Shell observed conditions related
53km from Soroush Oilfield. Before the menter of the installed equipment. to domestic manufacturing in buyback
renovation phase, the field produced Would you explain about the progress agreements?
5,000 barrels of crude oil per day.Based of the development project of the two Based on the contract signed between
on the contract for developing Soroush fields? Shell and NIOC, the contractor has
and Norouz fields, the contractor has The progress of the project, in view of pledged to supply at least 30 percent of
pledged to start preliminary production the executive problems, has been satis- services, equipment and raw materials
from the field at 60,000 barrels a day factory and at the moment it is complete through domestic manufacturing, which
within 24 months after signing the con- 88 percent. The project includes various also includes engineering services.
tract. The contractor has also promised to parts such as: According to the existing documents, the
start primary production from both fields A) EPIC-1 including manufacturing and latest situation is as follows:
at the daily rate of 190,000 barrels of installation of SWP-1 wellhead platform With regard to telecommunications and
crude maximum 21 months after the pre- as well as SWP-2 and NWP-1 jackets and IT (information technology), some 15
liminary production stage.Total period laying about 10 km of 16-inch pipes, all percent of the budget has been disbursed
for implementing the contract has been of which have been constructed and to Iranian companies. This figure is fore-
projected at 45 months through a ceiling installed. cast to increase to 91 percent.
With regard to the sub-surface section, signed between the NIOC and the con- performance during the education or
surface facilities as well as drilling and tractor.The working committees include: training period.
operational costs, about 15, 31 and 28 * The committee for taking delivery of * The HSE committee, which is responsi-
percents of the total budget have been the plan, which is the highest ranking ble for verifying the performance of
transferred to the Iranian companies and working group related to project's devel- employees in compliance with interna-
the first two figures are expected to reach opment and which supervises agreements tional standards for observing health con-
44 and 33 percents respectively. among the working committees and their cerns and protecting the environment.
On the whole, about 29.4 percent of the decisions. The decisions of other work- * The oil engineering committee, which
project has been handed over to the ing committees must be confirmed by is responsible for monitoring perform-
Iranian companies through signing con- this committee. ance of the contractor with regard to opti-
tracts in 2003 and the figure is expected * The committee for taking delivery and mal and protected production from
to rise. confirming installations, which is respon- Soroush and Norouz fields.
Would you explain about FSU floating sible for studying documents and papers Precautionary measures have been taken
reservoir and its transport time? presented by the contractor, confirming so that transfer of all documents and
At the beginning of the negotiations, a the commissioning method and start-up papers related to the project from con-
contract was signed between Shell and as well as supervising the method used tractor to producer would only be possi-
the NIOC for the supply of storage sys- for implementing tests on machinery and ble when producer and MATN Company
tems for early production. It was decided on the whole confirming all documents are assured that the project has been car-
that one of the VLCC tanker ships the related to installations. ried out according to the contract signed
operational life span of which had ended * The operations and logistics commit- between NIOC, as client and Shell, as
What are your plans for using gas in
The NIOOC has reached the conclusion
through extensive studies that if gas were
injected instead of water, productivity of
Soroush reservoir would increase consid-
erably.Given the high costs involved, to
implement the gas injection project the
concerned officials must have assurances
about its feasibility. Therefore, it was
decided that joint studies be carried out
by Shell and the Reservoirs Department
of NIOOC. If the final result verified the
previous reports about the continental
shelf, it would be reported to officials at
the NIOC because implementing gas
injection project to increase recovery fac-
tor of Soroush Field would be too exten-
be used as a storage tank for oil due to tee, which is responsible for supply of sive to be defined and implemented as an
conditions of its hull. Now, FSU floating needed workforce for managing installa- independent project. Under the current
tank has become operational. tions (from companies other than circumstances, the result of joint studies
Has the phase for transferring the NIOOC), supplying consumer materials carried out so far has been very promis-
project to the NIOC started yet? When and chemicals needed for the continua- ing and we hope that after completion of
would it be completed? tion of production operations, evaluating the studies the appropriate decision is
To transfer the project from contractor to problems faced during production opera- taken by the NIOC.
producer, and in line with optimal tripar- tion and eliminating them as well as What role has Shell played in observ-
tite cooperation among Oil Engineering assessing contracts signed for providing ing health, safety and hygienic regula-
and Development Company as responsi- services to employees residing at the tions in the region where the project is
ble for supervising implementation of the installations.
Such regulations are observed quite
project, National Iranian Offshore Oil * The education committee, which is closely by Shell with regard to Soroush
Company as producer and Shell as the responsible for holding educational or and Norouz Project. Basically, the HSE
contractor, working committees in vari- training programs for production records achieved during the project or
ous fields were set up since early employees for efficient management of other projects carried out by Shell have
November 2002. These committees are installations, is planning to achieve the been excellent. This is, in fact an issue
responsible for development of the proj- preliminary goals of the contract related that can be effective in increasing the
ect according to the needs of the produc- to specialized and general education of productivity and credibility of the inter-
er within the framework of the contract employees and will ensure their correct national contractor.
Director General of Foreign plans merely contained cursory referrals took an upward trend. During the second
Investments Bureau at the Ministry of to foreign investments. This type of half of 1993, Greece and Italy were the
Finance and Economic Affairs Seyyed approach in itself led to a 14-year post- first countries to announce their pre-
Ahmad Mortazavi, in an interview with ponement in attracting foreign invest- paredness for making investments in
Eqtesad-e Iran monthly (October ments. However, since 1993 and after Iran. In 1994, requests came in from
issue), discussed the past and present experts and officials reached an under- Singapore, Cyprus and South Korea.
developments in attracting foreign standing on Article 81 of the constitu- Requests for foreign investments
investments, differences among foreign tion, according to which establishment reached seven cases in 1995, 12 cases in
investment approaches adopted in the of foreign companies is not regarded as 1996 and 21 cases in 1997, marking a
course of the first, second and third monopoly and hence not unconstitution- significant increase compared to the pre-
economic development plans as well as al, the then High Council of Investment ceding years. However, in 1998 the
the impact of domestic and foreign issued a ratification for the elimination trend of foreign investments slowed
politico-economic affairs on attraction of foreign investment obstacles. down and the number of cases of foreign
of foreign investments. Full text fol- How did this ratification change the investments suddenly dropped to five.
lows: trend of foreign investments during Then the figure increased to 18 cases in
EQTESAD-E IRAN: Would you 1993-2003 (a 10-year period)? 1999 and 22 cases in 2000. However, the
explain about the history of foreign Ever since this ratification came to the number of cases decreased again in 2001
investments in Iran before and after fore, foreign investments in the country and reached 11. The highest number of
the victory of the Islamic Revolution, foreign investment cases was registered
the differences in the type of contracts at 38 in 2002. During the first quarter of
as well as the plans made and methods
The highest the Iranian year 1382 (started March 21,
used for attraction of foreign number of foreign 2003), we had six cases of approved for-
resources. eign investments in the country.
Mortazavi: The history of foreign
investment cases What was the total value of the 38
investments in the country goes back to was registered at approved foreign investment plans in
the time when the first foreign contracts 38 in 2002. 2002?
were signed in Iran. In fact, although the Following the ratification of the new
country's Trade Law was approved in foreign investment laws, about $4.5 bil-
1931, we had no concrete laws on for- lion of foreign participation in domestic
eign investments till 1955. In this year, projects was approved, $3.3 billion of
the law for attraction of and support for which has so far been realized. In other
foreign investments was approved. The words, 80 percent of projects have been
number of foreign investment projects completed or are being implemented.
reached 250 during 1955 to 1978, 90 What factors affect the approach
percent of which were concluded in the taken by foreigners and enhance their
production sector. The total value of incentives for investing in Iranian
these 250 projects was $850 million, undertakings?
about $300 million of which pertained to The issue of multiple foreign exchange
petrochemical projects carried out by rates and the very characteristics of the
Iran and Japan. In the early days of the national economy during the past years
1979 Islamic Revolution, the dominant led to a situation wherein no potential
revolutionary atmosphere in the society investor was willing to make an invest-
led to nationalization of some foreign ment through utilizing its own resources
assets. In wake of the emergence of the and the main concern was to obtain inex-
Iran-Iraq War (1980-88) and due to pensive foreign exchange from the
absence of new laws or policies for the Ministry of Industries and Mines. For
attraction of foreign investments, the this reason, there prevailed no firm will
first and second economic development for attracting foreign investments. On
the other hand, when there arose a dis- mentioned that the third plan, for the first
cussion about technology and industrial Expatriates no time, paved the way for foreign invest-
developments in advanced nations, the ments in such sectors as telecommunica-
dominant viewpoint was that purchasing longer view Iran as tions, energy, road and transportation and
technology from abroad would essential- an unsafe place for also facilitated the establishment of private
ly curb the need for presence of foreign banks and non-bank credit institutes as
investors in Iran. Meanwhile, the issue
investments well as other infrastructural projects.
of exports was not considered seriously the risk of foreign investments. In other These factors, along with the ratification
at the time either. All in all, these factors words, during the first and second devel- of the new laws for attraction of foreign
led to a 14-year postponement in attract- opment plans reaching a conclusion on investments, eventually prepared the
ing foreign investments. The phenome- government's revenues and expenses ground for expansion of investments in
non of absence of coordination between was only a dream and there was no plan- general and foreign investments in partic-
our management system and methods ning or policymaking to provide the suit- ular. Hence, since the beginning of 2002,
and global developments actually started able ground for the attraction of foreign 44 cases of foreign investments have been
from this time. In fact, neither was the financial resources. In absence of the approved, which are equal to one-third of
subject of exports heeded nor was any suitable ground, the presence of foreign the past 10-year performance of the sector.
attention paid to the country's share in financial resources was not possible. It is generally believed that the capital
the global markets. During the First Economic Development owned by the expatriates stands at $400
Do you mean that managerial, techni- Plan (1989-94), outward stress on for- billion. What plans have been made for
cal, political and culture parameters eign investments was used as an excuse the attraction of this capital and have
and even the attitudes of policymakers for borrowing $30 billion, but no foreign the expatriates been enthusiastic about
played a considerable role in relation to investments were made. However, the investing in projects in their mother-
the presence or absence of foreign third plan took a considerable turn with land?
investors? regard to foreign trade in the form of lib- I am not sure about the authenticity of this
Yes. All these factors played a role. eralizing foreign commerce and chang- information. I have even heard that the fig-
However, from the outset of the Third ing the system's approach from non-tar- ure is as high as $600 billion. Of course,
Economic Development Plan (2000-5), iff obstacles to tariff-based obstacles. figures are not an issue here, but the main
the viewpoint of the officials changed, Before that, certain laws were approved problem is that Iranians prefer to invest
thus leading to adoption of specific poli- under the pretext of supporting domestic their money in places other than Iran. If we
cies for attraction of foreign investments production that impeded imports or come up with a suitable solution and suc-
by the government and the Majlis, which other economic activities. Furthermore, ceed in redirecting the expatriate capital
were ensued by a sudden influx of foreign more attention was paid to the topic of into the country, investments in Iran would
investments. privatization during the Third Plan. increase considerably. I personally think
Why did the Second Economic Unification of the foreign exchange par- that due to recent developments, expatri-
Development Plan (1995-2000) ignore ity rate and improvement of direct taxes ates no longer view Iran as an unsafe place
the issue of promotion of foreign invest- were among the most important eco- for investments. The conditions at the
ments? nomic infrastructures that eventually Tehran Stock Exchange (TSE) are suffi-
It made some cursory referrals to the issue, paved the way for the appraisal of feasi- cient proof for this claim. When foreigners
but the main stress was on finance and bility studies on various developmental bring their money here without any fears,
buy-back schemes and the government projects. Reduction in the rate of income then Iranians should have no fears either.
was under no obligation with regard to tax, on the one hand, and establishment Of course, we must strengthen the infor-
adoption of a policy vis-à-vis foreign of self-declaration system, on the other, mation system and hence publicly
investments. In fact, the term 'foreign par- were other basic developments that announce that the related governmental
ticipation' was taken to mean borrowing affected the increase in the number of policies have changed.
from other countries rather than accepting foreign investments. It should also be
Legal Framework forForeign
In Nat’l Oil, Gas Undertakings
By Reza Pakdaman essentially ignored the US Iran policy and has increasingly
It cannot and should not be doubted that the oil and gas sec- been participating in Iranian oil and gas undertakings.
tor has been the most appealing category for foreign invest- The second reason for the very slow attraction of foreign
ments in Iran in the past 50 years. investments in the national oil and gas projects is the preva-
However, due to different reasons, such as the victory of the lence of an inadequate legal environment in Iran.
Islamic Revolution and the Iraqi-imposed war (1980-88), the After the 1979 Islamic Revolution, a general conservative
flow of foreign investments in this sector has declined sig- attitude was adopted toward natural resources, mainly oil
nificantly during the past 25 years or so. reserves, and even private investments by Iranian companies
Despite the growing demand for development of foreign in this sector were limited to the lowest levels. This tenden-
investments in oil-related projects, mainly offshore under- cy has been actually reflected in the Iranian Constitution.
takings, in Iran and the rapidly declining investment oppor- Article 44 of the constitution stipulates that a wide range of
tunities in the global oil industry, foreign investments in the major industries and services, such as mines, banks, insur-
national oil industry have been very much lower than ance companies and power plants are nationalized.
expected. Interestingly enough, oil, gas and petrochemical industries
The main reasons behind this situation from the legal point are not mentioned in this article, but the general attitude is
of view can be categorized into two groups. that this sector is somehow subjected to the implications of
Firstly, the US has been imposing economic sanctions on this article.
major and vital services and industries in Iran and hence pre- Due to the above-mentioned constitutional restriction, up to
venting other independent countries now the methods utilized for concluding
from pursuing normal economic rela- contracts with foreign oil and gas com-
tions with Iran, through diplomatic panies have been limited to either buy-
efforts as well as making legislations back contracts, with their special terms
such as Iran-Libya Sanctions Act (I and conditions or normal service con-
LSA) of 1996. tracts, which may take various forms,
This US policy is still in effect despite including EPC, EP, E and EPDC.
the fact that the US is the pioneer of the The main projects in the oil and gas sec-
notion of free market economy in the tor, especially the offshore undertak-
world. Although America claims to pro- ings, are in the form of buy-back or
mote international business, it has EPC.
shown on several occasions that, for (An outlook of current offshore proj-
political reasons, it is ready to ruin the ects in Iran is annexed to this article).
social and economic achievements of The plain truth is that the other
others and also force the other countries methods of contracting, which are wide-
to unconditionally follow its policies. ly practiced worldwide, are prohibited
This policy of the US to restrict invest- in Iran. These methods are: concessions,
ments in the Iranian oil and gas projects production sharing contracts and profit
blatantly contradicts the guidelines set sharing contracts.
by the UN and also its own commit- During the last few years, it has been
ments towards the World Trade endeavored to further develop the gen-
Organization (WTO). eral framework of doing business with foreigners and a great
The good omen is that except the two conservative countries deal of attention has been paid to industrial projects, espe-
of Japan and Canada the rest of the industrial world has cially in the oil, gas and petrochemical sector.
The major breakthrough was the ratification of the ‘General antees provided by the government are not viewed as com-
Policies of the Islamic Republic of Iran’ by the Leader of the mercial-oriented.
Islamic Revolution Ayatollah Seyyed Ali Khamenei in March Article 11, which is the last item of this resolution, instructs
2000. This ratification has paved the way for further develop- Iranian companies that “if possible”, they should choose
ments, within a legal framework, for foreign involvements in Iranian laws and Iranian courts as the governing set of laws
the national oil industry, more notably in upstream projects. and the authority for arbitration of disputes when they arise.
The section on ‘General Policy for Oil & Gas Sector’ under- The phrase “if possible” essentially considers the alternative
lines efforts for organizing the framework of plans for of choosing foreign laws and foreign courts in international
absorbing the required domestic and foreign financial contracts, which is indeed a major change in the attitude of
resources in the oil and gas sector. Moreover, other clauses of the Iranian decision-makers toward international contracts.
this major policy–making document explicitly give signals Another law, which deserves a mention here, is the law
for attraction of more foreign involvements. For example, passed in 1997 permitting registration of branches and repre-
clauses two and three underscore enhancement of oil and gas sentative offices of foreign companies in Iran. In addition to
capacities while Clause 4 specifically highlights upgrading the general rules and regulations concerning foreign invest-
technology in the oil, gas and petrochemical sector as the ments, the oil sector is privileged with the benefits of a spe-
main policy of the country. cific legal framework.
In wake of the compilation of the ‘General Policies of the The law on Statute of National Iranian Oil Company (NIOC),
Islamic Republic of Iran’, the overall attitude of the decision- as ratified in 1977, consigns special authority to the NIOC’s
making bodies of the country vis-à-vis the issue of foreign General Assembly, which comprises seven ministers who
involvements in oil & gas projects has changed dramatically. pass regulations in relation to the oil industry. Therefore, the
The good case in point is the general rules & regulations on
replacement of the previous Iranian state companies do not
laws on foreign investments, govern the oil industry, unless
which was in force for around expressed otherwise. This has
50 years, with a new set of in itself facilitated a more flex-
regulations, which was passed ible legal environment in the
by the parliament in March national oil industry.
2003. The latest development within
According to Article 3 of this the legal framework of eco-
law, the acceptable foreign nomic activities in Iran is the
investments will be provided ratification of the ‘General
with the needed facilities and Leadership Policies’ on Dec.
protections. Such foreign 2, 2003. This ratification has
investments may be attracted also been considered in com-
by virtue of two methods: piling the outlines of the
* Direct foreign investments
in sectors in which the activities of the private sector are per-
fourth development plan.
It is worth mentioning that the Third Development Plan
mitted. (2000-5) is currently in its fourth year and next year will be
* Foreign investments in all sectors in the forms of ‘part-
nership’, ‘buy-back’ and ‘B.O.T’ while capital recovery is
its final year and hence the fourth development plan will
commence in 2005 if ultimately ratified.
guaranteed by government, banks or state companies. Article 44 of the ‘General Leadership Policies’ underlines
The Council of Ministers passed a resolution with regard to promotion of economic activities in which the country has a
modes of investment on July 9, 2003. According to the sec- comparative advantage; specifically in the oil, gas and petro-
ond item of this resolution, the state-run companies can uti- chemical industry. Article 24 of this ratification stipulates that
lize partnership, buyback and B.O.T methods for procuring promotion and attraction of foreign investments and
the required financial resources. resources as well as high technology is the other main nation-
Based on Article 3 of this resolution, the government has no al policy in the domain of economy.
obligations to provide guarantees for the following cases: Overall, the legal framework for participation of foreign com-
A) Losses caused by the failure of the foreign investor in ful- panies in Iran’s oil and gas projects seem to be suitable
filling its contractual obligations. enough although some lengthy administrative procedures
B) When the responsibility of the investor in exploitation of have caused inefficacies in the tender stage as well as the exe-
the project has been fulfilled. cution phase of projects on behalf of various decision making
C) Force majeure losses incurred by investor. authorities and need to be rectified urgently.
Meanwhile, according to Article 4 of the resolution, the guar-
Annexation: An Outlook of Current Offshore Projects in Iran extension of Dubai´s Fallah Oilfield covering an area to the
southern boundaries of Sirri A Field. Similar to Farzam
Projects in Iran Field, Nosrat Oilfield is adjacent to the UAE´s marine bor-
South Pars Gas Field derline and is located some 22 km south of Sirri Island.
South Pars Gas Field is located in the Persian Gulf near the PetroIran Development Company (PEDCO) is the general
sea border with Qatar. It is the major offshore development contractor.
project in the country, which so far has been divided into 16 Soroush & Norooz Oilfields
phases. Most phases are under execution and at present phas- Soroush has an estimated oil-in-place of 7.5b barrels, some
es 15 and 16 are tendered by the NIOC. 6.5% of which will be recovered, upon utilization of
Salman Oil & Gas Fields enhanced production techniques, Norooz Field has oil-in-
The remaining oil reserves of Salman Field are estimated to place and recoverable reserves of 1.9b and 550 million bar-
stand between 450 to 570 million barrels. Based on further rels respectively.
studies and reservoir modeling, the oil-in-place reserves and The objective of the development operation is to reach a
the recoverable reserves will be determined. The gas–in- final combined output of 190,000 bpd from the two fields—
place of Dalan formation is estimated about 7.7 trillion cubic 100,000 and 90,000 barrels from Soroush and Norooz
feet. Based on a 56.2% recovery factor, some 4.3 trillion respectively. The initial production from Soroush in the first
cubic feet of the said amount will be recovered. 24 months following the effective date of the contract will be
By completing the reconstruction of and other works on the 60,000 bpd.
existing wells, crude oil production from the fields will Soroush Oilfield is some 50 km west-southwest of Kharq
increase by 50,000 bpd and the gas output from Dalan Gas Island.
Reservoir will increase to 500 million cubic feet per day. Norooz Field is situated in the northwest of the Persian Gulf,
Salman´s combined oil and gas reservoirs are adjacent to some 50 km north of Soroush Field.
Iran´s marine border with Abu Dhabi at Abul-Bakhoush Shell Exploration B.V. is the general contractor of this proj-
Field, some 142 km from the Lavan Island. ect.
PetroIran Development Company is the general contractor Doroud Oilfield
of this project, which comprises 3 phases. The main contrac- The oil-in-place of Doroud reservoir is estimated to be
tors of phases 2 and 3 are SADRA and IOEC, both of which around 7.6 billion barrels. Because of 33 years of continuous
are Iranian companies. production (from 1964 to 1997) without a timely injection of
Balal Oilfield water and gas, only 1.5b barrels of the total reserve may be
Recoverable crude oil from Balal reservoir is estimated at recovered at the current production rates. With the imple-
117 million barrels, which will be accomplished by the injec- mentation of the development scheme, the figure will
tion of 50,000 barrels of water per day. Balal Oilfield is increase to 2.6 billion barrels. By drilling new wells and
located about 100 km southwest of Lavan Island at the geo- injection of water and gas, the average daily production will
graphical coordinates of 26 degrees 19 minutes north and 52 increase to 85,000 barrels.
degrees 32 minutes east in the Persian Gulf in the vicinity of Doroud Oilfield is located in the vicinity of Kharq lsland,
marine border with Qatar. northwest of the Persian Gulf.
Elf Petroleum Iran (46.75%), Bow valley Iran Ltd. (15%) The project is a joint operation of TFE (55%) and Agip
and Agip Iran B.V. (38.25%) are the general contractors. (45%), with Elf Petroleum Iran acting as the contractor.
Farzam & Nosrat Oilfields Forouzan and Esfandiyar Oilfields
The oil–in-place volume of Farzam Field, within the bound- Forouzan and Esfandiyar fields, both sharing reserves with
aries of Iranian waters, is estimated to be around 259 million Saudi Arabia, are located some 95 km southwest of Kharq
barrels. With the implementation of the development opera- Island.
tion, the total output of Nosrat Field will be augmented by Petro Iran Development Company is the general contractor.
38.7 million barrels and will reach 58.7 million barrels while Others
its daily output will increase from 5,000 barrels to 16,500 Other important offshore activities in Iran are exploration
barrels. Moreover, production at Farzam Field is expected to projects in Hormuz Block, Farsi Block, Qeshm block,
increase to 15,000 barrels per day. Hendijan and Sirri C&D.
Farzam Field, with an estimated area of 15×12 km, is the
PARS OIL AND GAS COMPANY
A Shell-Style Crisis
It was Benjamin Disraeli who first coined the famous phrase most damning aspect of the report is that the cover up has been
"There are three kinds of lies: ies, damned lies and statistics". going on for years. Watts emerges as villain-in-chief, with the
But the mantra did not become part of the popular lexicon until then exploration head Walter van de Vijver as his unwilling
American author Mark Twain got hold of it. He used it to sum accomplice, desperate to come clean about the problem but
up the persuasive power of authoritatively made numeric pre- somehow held back - either by fear of Watts himself or by his
sentations to a largely innumerate public. If the whole Shell ambition to one day replace him.
debacle has taught us anything, it could be that the power of the In one e-mail Van de Vijver told his boss: "I am becoming sick
glib over the gullible still holds sway a century later. First off, and tired about lying about the extent of our reserves issue and
Shell's lies. There are any number to choose from, but consider the downgrade revisions that need to be done because of far too
one contained in Shell Transport and Trading's 2002 annual aggressive/optimistic bookings."
report and accounts by former chairman Sir Philip Watts. But much of the original report, drawn up by the US law firm
"In times of uncertainty, what counts is being trusted to deliver. Davis Polk and Wardwell with the help of Shell staff, was sup-
As the long-standing slogan said, we want people to know they pressed at the bequest of the US investigators. The full report
'can be sure of Shell'. I believe that our performance last year will show that the nightmare foisted upon the company by
helps us earn and keep that trust." Watts could still have some way to run.
Now for the damned lies, one handily provided by a Shell Although the bulk of the blame for Shell's current problems is
press officer following a shattering downgrade of the com- laid at the door of its old management, the new band of execu-
pany's proven oil and gas reserves. "No one is going to lose tives do not escape censure. New group chairman, Jeroen
their van der Veer and the company's new exploration head, Malcolm
jobs and there is no need to panic." And finally the statistics. Brinded, were both aware of the reserves issue for a consider-
In its 2002 annual report and accounts, Shell stated it had able time. As early as February 2002, Van der Veer was sent a
19.4 billion barrels of proven oil note saying 2.3 billion barrels of
and gas reserves. In the same year, the company's reserves might have
Sir Philip took home £1.79m, of been booked in breach of the US
which £874,000 was 'perfor- securities law. But it didn't stop
mance-related'. Following a dev- him, as chairman of the Dutch half
astating series of downgrades, of Shell, signing off the accounts
reserves now stand at closer to 15 for that year.
billion barrels; Sir Philip along with According to the published report,
Chief Financial Officer Judy in July of the same year, Brinded,
Boynton have been kicked out of the in a meeting with Shell's committee
company and Shell is facing numer- of managing directors, outlined a
ous lawsuits from outraged the US strategy to manage the problem of
investors. over-booked reserves. Despite the
The UK's financial Services obvious failings of the command
Authority got into the act recently chain, there still appears to be
Friday. reluctance at the top to alter the
The watchdog said it is formally investigating oil giant Shell company's management structure. Lord Oxburgh, the chairman
following the shock downgrade of its reserves. Simon Culhane, of Shell Transport and Trading, told analysts last week it was
the new head of the Securities Institute, a leading organization due to "human failings, not structural deficiencies".
for promoting ethical behavior, has also criticised Shell's cover- Unfortunately for Shell, nobody believes him.
up of its oil reserves shortfall and claimed it could be a "water- Ratings agencies Moody's, Standard & Poor's and Fitch have all
shed" in British corporate ethics. kicked the company down a notch, depriving it of its treasured
The company has lost the trust of shareholders and the fallout AAA credentials.
has sent the oil and gas industry reeling. The price of crude is Analysts critical of Shell's bloated management structure high-
edging ever higher beyond the symbolic $30 per barrel mark light comments made by Van de Vijver in the DPW report. He
and the reputation of the UK and Dutch business has taken a claimed he couldn't blow the whistle because of an "unspoken
kicking. rule within the company that you are not supposed to go direct-
The executive summary of Shell's internal investigation ly to board members or to the group audit committee".
revealed the full extent of the concerted attempts by senior It also transpired that the group's reserves auditors answered to
management to hide the reality of the company's reserves. The the head of exploration and not Shell's group chief financial
officer - the director responsible for the company's regulatory have to work hard to win back investors' trust, whether with
filings. To muddy the waters further, the unnamed individual regard to future performance, governance or its corporate struc-
employed to check the company's reserves was a part-time ture.
retired employee who checked each field only once every four In terms of performance, Brinded has a long road ahead to bring
years. In the report he claims he would have been sacked if he the exploration and production department up to the standard of
had raised the importance of complying with US securities its peers. "Disclosing the facts and circumstances behind the
guidelines. disaster and the reserve problem doesn't solve it," recalled
The pressure Shell evidently felt to massage its reserve figures Irene Himona, an analyst at Morgan Stanley, adding: "The oper-
stemmed from before Watts was appointed. Peter Nicol, an ational problem is very serious. To stay still they have to replace
analyst at ABN Amro in London, said: "They made a hell of a 100% of production. Over the past five years their average has
lot of poor decisions in the early 1990s." While BP, Total and been 60%."
others were opening new offshore areas, Shell was focusing It's easy to overestimate the company's problems. As Shell's
more on finding smaller fields near existing ones. It missed out first quarter results demonstrate, it is still capable of generating
on the mega-mergers of the 2000-2001, meaning it dropped cash on a vast scale - somewhere between $3-$4bn this quarter,
from first to third place among the super-majors. according to analysts. Production levels are set to be flat this
Analysts point to other ways Shell was also failing to react to a year, sinking into a decline in 2005, but Brinded said he was
changing global market. For example, it started developing an confident the company had set up long-term projects, such as
alliance with Russian gas giant Gazprom seven years ago. The Russia's Sakhalin, that were as good as any in the industry.
two are still talking. BP, meanwhile, has done two Russian Even if performance does start to improve, investors will
deals. still try and force through major structural change at Shell.
Watts was supposed to streamline Shell's decision-making But the company is already implementing change. Van der
process. The company's directors had gone out on a limb to Veer has rolled out a long list of reforms designed to
appoint him in 2001. Watts had made his name in the company improve the way it assesses reserves and tighten up its
ruthlessly driving down costs of the exploration arm while still reporting lines to prevent a similar scandal occurring again.
getting the exploration results. Reserves auditors will be independent of the exploration
Jon Rigby, an analyst at Commerzbank, asserted: "He was company's management, reporting instead through the group
punchy and I think a lot of people were fairly relaxed about him CFO to the audit committee. Internal guidelines for reserves
as the new chairman." bookings have been brought
But within months, the holes into line with those of the
started to show, both internally SEC and staff will be trained
and externally. Shell missed a in the new rules.
string of targets for oil and gas In addition, more resources
production and then continued will be employed for evaluat-
to underperform its peers in the ing reserves. Each field will
upstream. now be assessed every other
Soon after Watts took the top year, major ones annually and
job, the new exploration head, external experts will double-
Van de Vijver, realized he had check decisions. But, so far
been passed a poisoned chalice. there are few signs that Shell's
By late 2003 he was lambasting dual board structure will be
Watts for his "far too aggres- reformed and investors will
sive/optimistic booking", have to wait until the compa-
which made it impossible to ny's AGM on June 28 for fur-
match the upstream perform- ther proposals.
ance of its peers and forced him to lie to investors about the rea- Institutions want to aolish the firm's dual listing, the colle-
sons behind it. Analysts were in the dark. "The truth is disclo- giate nature of the CMD, where the chairman is only first
sure was so poor that we didn't suspect anything," noted JJ among equals and the semi-independence of different divi-
Traynor at Deutsche Bank. "We knew something was wrong," sions within the group. But, the noises coming from the com-
argued Fadel Gheit at the Oppenheimer pany suggest it is unlikely to follow its Anglo-Dutch peer
brokerage in New York, "but we didn't think the numbers were Unilever and unify its two boards.
exaggerated, embellished or overstated." If Shell turns down investors' ideas, it won't be the first time.
Shell's non-executive directors fared little better at unravelling When the management consultancy McKinsey recommend-
the web of deceit spun by the executive management. ed in 1959 that two parent companies should share one chief
Lord Oxburgh observed: "The audit committee was indeed executive and one chairman, Shell turned it down in favor of
seeking to probe the question of reserves. I'm sorry to say it keeping the CMD. Whether it can afford to ignore advice
seems to have been given incomplete answers by the execu- this time, is much less certain.
tives." Investors are unlikely to accept that as a decent excuse.
Even with Shell's new levels of disclosure, the company will Source: Petroenergy Information Network
Iran-US Oil Platform Dispute
St i l l L i n g e r s
On October 17, 1987, the US attacked Iran's Resalat and PIN: In its defense at the Hague International Tribunal,
Reshadat oil platforms in the Persian Gulf. Six months the US described its military action against the Iranian
later, the US missiles hit Iran's Salman and Nasr oil plat- platforms as legal on the basis of Article 51 of the UN
forms also located in the Persian Gulf. In Oct. 1992, the Charter. America argued that it had legitimately defend-
government of Iran filed a complaint with the Hague ed its fundamental rights and hence rejected Iran's claims
International Tribunal, which is the sole competent source about the attacks being illegitimate and the Iranian-
to attend to Iran-US disputes in accordance with the American Governments Friendship Accord. Would you
Iranian-American Governments Friendship Accord signed elaborate more on this issue?
in 1955. On Nov. 6, 2003, the tribunal issued its final ver- Zeinoddin: During the 11 years that have elapsed so far and
dict. In view of the technicalities involved in this verdict and especially since the last hearing held at the tribunal in March
also the impact of this issue on the future Iran-US relations, 2003, the US, in its official defense and also informally, has
Petroenergy Information Network (PIN) conducted an insisted that it legitimately defended its interests against Iran's
interview with Dr. Seyyed Mosatafa Zeinoddin, Head of attacks on ships that carried US flags or were owned by the
Legal Affairs Bureau of the National Iranian Oil Company. US in the Persian Gulf.
What is Iran's reaction? due to the economic sanctions imposed by the US against
The Islamic system has endeavored to reject this claim and Iran. Therefore, the US attacks against the Iranian platforms
also clarify that tension prevailed in the region at that time cannot be interpreted as the breach of freedom of trade on the
because Iraq had invaded Iran and occupied some Iranian ter- basis of the friendship accord, which in itself stipulates that
ritories. In its defense, Iran has specially referred to the the tribunal is the only competent source to attend to Iran-US
advanced equipment that the US made available to the Iraqi disputes. Therefore, the tribunal rejected Iran's compensation
regime at that time. claim in compliance with Article 1 of the friendship accord.
America has argued that based on Article 20 of the Could you tell us more about Iran's defense at the tribu-
Iranian-American Governments Friendship Accord, the nal in relation to attacking the American ships in the
attacks on the American ships implied that its interests Persian Gulf?
had been endangered and that the destruction of the Iran has argued that at that time it was a matter of expedience
Iranian oil platforms was a move to uphold the US brand for Iraq to threaten freedom of shipping in the Persian Gulf
of interests and hence the US had not breached the waters while Iran solely relied on Persian Gulf for its oil
accord. Could you explain? exports. Of course, the US rejected a large bulk of informa-
The US claimed that its military action was in line with the tion and pieces of evidence, including the remarks made by
concept of upholding its brand of interests and hence could senior Iranian officials. At any rate, after three weeks of hear-
not be interpreted as a breach of the friendship accord, on the ings in 2003, the tribunal declared that the US claim against
basis of which the Hague International Tribunal is qualified to Iran was insufficient on the basis of satellite pictures and
attend to Iran-US disputes. other documentations.
Can Iran claim compensation through means other than
Did the tribunal accept this line of reasoning? the Hague International Tribunal?
Based on the verdict issued, the US military action is not Yes. In view of the fact that the US has reported to the UN
viewed as a move for upholding its security interests and Security Council that its military action against Iran was an
hence contradicts the interna- act of legitimate defense, it is
tional notion of legitimate possible that Iran officially file
defense. a complaint with the council
and also stress that the Hague
The tribunal did not charac- International Tribunal had
terize the US military action viewed the US move as con-
as legitimate defense but it tradictory to international
also rejected Iran's claim of laws. Iran should argue that
compensation. Why? based on international norms
According to the tribunal, and standards it deserves pay-
Iran's claim of compensation ment of compensation. It is
on the basis of the friendship also possible that Iran request
accord is not valid. The US that the dispute be handled by
attacks on the oil platforms another legal source that both
was not legitimate, but free- the US and Iran agree on.
dom of trade between the two Furthermore, the US courts
countries was not violated have in the past years issued
either. Let me explain. In many verdicts against the
1987, the US attacked Islamic system and hence we
Reshadat Platform, which was could and should discuss the
under repair and had no oil issue of compensation for our
output at the time. When the oil platforms in our contingent
US attacked the Salman and talks with the US officials.
Nasr platforms in 1988, the Translation: Iran Offshore
US and Iran did not trade oil News Desk
A Concise Account
Of Iran’s 20-Year Development Outlook
Based on Iran's development outlook for 2005-2025, in ing goals and policies within the framework of the national
2025 Iran will be an advanced country with a superb eco- macro policies:
nomic, scientific and technological status in the region, also 1 Upgrading oil, gas, petrochemical and refining compa-
known for its revolutionary and Islamic nature and will nies and promoting them to the level of international corpo-
engage in constructive interaction at the international level. rations, which would be capable of withstanding global
Although the general outlines of the outlook have been pub- competition as well as clarification of the financial relation-
lished as a document, it is important to have a brief glance ship between the government and oil and gas sector on the
at its salient features. basis of trade principles.
To realize the projected goals for the said period, the opti- 2 Maximizing domestic oil and gas industry's value added
mal picture of Iran's oil and gas sector is presented as fol- through synergism of relative advantages by developing
lows: investments in oil and gas resources and industries, refining,
Ranking first in producing petrochemical products in petrochemical industries, energy-intensive industries as well
the region in terms of value. as maintenance industries and engineering services.
Ranking second among OPEC crude producers with 3 Supporting domestic private sector's activities in oil
the capacity to meet 7 percent of global demand. industry, especially in oil trade and downstream industries,
Ranking third among gas producers worldwide maintaining oil industry as well as offering contractor, tech-
accounting for 10 percent of global gas deals. nical and engineering services with the goal of further pres-
ence of the Iranian companies at the regional and interna-
Goals and Policies
4 Creating a center for attraction, production, transfer and
Hydrocarbon resources are promotion of new technolo-
the major assets of the coun- gies regarding oil, gas, refin-
try. Oil and gas industries are ing and petrochemical indus-
considered the backbone of tries in the Persian Gulf region
national development as they through constructive interac-
create new opportunities for tion with countries influential
the country's senior man- in oil and gas technology at the
agers to diversify national global markets and bolstering
economy and also to bolster research, scientific, technical
national security. Therefore, and development centers and
oil production capacity is the research and development
most important factor for (R&D) departments engaged
upgrading the country's in oil, gas, refining and petro-
strategic capabilities. chemical affairs through utiliz-
Oil, gas and petrochemical ing information technology
industries must increase their while expanding cooperation
potential and strategic capa- between companies and inter-
bilities by relying on rev- national scientific and
enues earned through value research bodies.
added of oil resources, 5 Protecting foreign invest-
through pursuing the follow- ments aimed at developing oil,
gas and petrochemical industries and production of oil prod-
13 Iranian Investments by Iran in oil, gas and petrochemi-
cal sectors of other countries.
6 Supporting joint investments by regional countries or
merging companies active in petrochemical or downstream
oil industry with the ultimate goal of establishing major First Step
companies at the global level.
7 Creating a center for financial services, money, capital, Realization of the following goals by 2015 is the requisite
insurance, stock, commodity as well as oil and gas equip- for achieving the long-term objectives of the abovemen-
ment markets and providing the necessary services to tioned outlook:
regional countries through such markets as well as establish- 1 Increasing crude oil production capacity to 5.5 million
ing a center for attracting investments and providing the barrels per day by the end of the fourth economic develop-
needed financial resources from global markets through ment plan (2005-2010) and to 7 million barrels per day by
establishing joint financial institutions. 2015.
8 Participation in and development of regional and inter- 2 Daily production of 900 million cu. m. natural gas by
national cooperation in exploration and exploitation of oil 2015.
and gas reservoirs as well as upstream and downstream 3 Realizing the annual production of 20 billion dollars of
investment plans in other countries, especially regional and petrochemicals by 2015 through developing petrochemical
Asian states, in order to guarantee the market and bolster
industries, which consume gas as the main feed.
4 Paying special attention to energy-intensive industries
9 Replacing export of oil, gas and petrochemical products
(with projected energy consumption of at least 100 million
for crude and natural gas exports and supporting down-
cu. m. per day) to earn more value added.
stream production links in oil, gas and petrochemical indus-
tries. 5 Attracting foreign investments and financial resources
10 Active presence in the global oil and gas markets, tak- to guarantee the market and bolster international interaction
ing advantage of the country's unique geopolitical situation to support them and use them for development of oil indus-
for transfer of crude oil, its products, natural gas and petro- try in line with the realization of 100 billion dollars of
chemical substances and swapping crude oil to be refined by investments in oil industry by 2015.
domestic refineries. 6 Increasing the country's refining capacity to about 1 mil-
11 Concentrating on establishment of the needed infra- lion barrels a day by prioritizing refining gas liquids and
structures for development of oil, gas and petrochemical super-heavy oil with the ultimate goal of reaching a total
industries and energy-intensive industries in suitable regions refining capacity of about 2.3 million barrels per day and
of the country prioritizing northern coasts and islands of the optimizing existing refineries to produce lighter products
Persian Gulf. and reduce mazut production.
12 Optimizing energy consumption along with reducing
intensity of consumed energy by all economic sectors of the
Source: Iran Offshore News Desk
History Offers Com labor and capital are used up, but numbers wrong. The now revised data
For oil, previous spikes in price have employers then start hiring more labor show that employment has been rising
been followed, in time, by price reduc- and investing in new capital equip- for some time and the March 2004
tions as demand and supply adjust. ment. The recovery can then continue increase in employment is the highest
This may happen again. Indeed, is like- at a slower but more sustainable pace. monthly rise since April 2000. Total
ly to happen again, in the short and It becomes less "productivity rich", but payroll employment has risen by
medium term, if the political situation more "jobs rich". 750,000 since last summer.
in Iraq and the Middle East can be sta- Was there anything different about the The fly in the ointment is that the
bilized. recent US experience? Well, no cycle revised employment figures strongly
However, even in this benign scenario, suggest that the Federal Reserve is
history may not be a good guide to the behind the curve that it should have
longer oil price trend. This is because begun raising interest rates earlier to
oil is a depletable resource and, after a slow down the growth rate of the US
century of crying wolf on future oil economy. In short, the new concern is
supplies, the wolf may be closer to our that such is the speed and the scale of
door than we think. the US and the global recovery and that
Can we make sense of all this? the real danger is a resurgence of infla-
Possibly not, but let us consider the tion.
natures of the employment and oil mar- At this very juncture, we now experi-
kets to see if this can help us face the ence the current spike in oil prices and
future. the continued instability in Iraq and the
The recent marked recovery in the US Middle East. For oil importing nations,
jobs market was entirely predictable. It an increase in the oil price is the eco-
has long been a dominant viewpoint nomic equivalent of an increase in
that the American recovery is robustly taxes.
based. In such a recovery, employment The UK remains, but only just, a net oil
is usually a "lazy" indicator -- it lags exporter.
behind the growth of output. Nonetheless, what is bad for the US
The reason for this is that the previous and other oil importing, advanced
recession left employers with substan- economies is bad for us. So where does
tial spare capacity, both in terms of this leave the recovery of the world
physical assets and in terms of hoarded economy?
labor. Hence, when the recovery got mirrors exactly previous experience First, a sense of perspective, this being
underway, productivity growth was and the length and severity of the pre- particularly necessary for those of us
very rapid, as increased demand was vious US recession were greater than who can readily recollect the traumas
met largely from the existing reserves in many recent cycles. of the 1970s. The Arab oil embargo of
of capital and labor. Hence, because US employers had the early 1970s and the price hike of
Many commentators worried about very substantial spare capacity, they 1979 followed on from a very long
whether this rate of productivity were able to increase output rapidly period of rising oil consumption and
growth could be maintained and, when demand improved. The accom- falling oil prices. We had become com-
simultaneously, worried about panying increases in productivity were placent about the supply situation and
whether consumption demand would greater than those usually associated our dependence on Organization of
remain robust with employment rising with the early stages of an economic Petroleum Exporting Countries
so slowly. Well, of course, productivi- recovery and employment was an even (OPEC) suppliers. So the shock of the
ty growth always slows down when the lazier indicator than usual. rapid increase in oil prices was huge,
existing reserves of under-utilized Finally, the US authorities got their especially as it then seemed that the
mfort Over Oil Surge
demand for oil was not very sensitive from the Middle East. So far, so encouraging. Yet, we econo-
to price. Nobody can predict with any certainty mists are notoriously short-sighted. It
Higher oil prices seemed to imply a what the immediate future will hold. was, after all, Keynes who told us that
substantial and permanent shift in However, it must be evident that if the "the long-run is only for undergradu-
income from the oil importing to the coalition forces were to withdraw from ates". But our undergraduates might
oil exporting nations. Iraq without leaving behind a stable reflect that we have slipped back into a
Well, they did not. That great econo- political situation, then future oil sup- greater dependence on the OPEC cartel
mist Milton Friedman predicted that plies from Iraq and other oil producing than appears sensible.
the response of supply and demand to countries would be at greater risk. Latest studies suggest that the annual
large increases in price would be very growth rate in non-OPEC oil produc-
different to their response to stable or tion has been falling from the second
falling oil prices. That is, high prices half of the 1960s onward. This is
would encourage new supplies of oil against a background of record levels
and alternative energy supplies while of exploration and production expen-
ensuring less oil consumption per unit diture in non-OPEC areas.
of output. These factors would eventu- Moreover, although oil demand from
ally force down the oil price. China has been increasing, it has, to
He was right. Available data shows that date, been largely offset by rising
the real price of oil, even after its latest Russian production and falling Russian
increases, is less than half the level consumption of oil. This will not hold
reached in 1979. And oil is much less in the future. Russian oil consumption
important in the world economy, is now rising again and the cost of
accounting for only just over 2 per cent additional Russian oil production
of the global gross domestic product seems to be rising.
(GDP). According to the latest esti- So, if political stability returns to Iraq
mates, if the higher oil price is now and the Middle East, then it is quite
maintained, it will knock only some possible, in the short and medium term,
0.6 per cent off the rate of growth of that the real price of oil will fall back
US GDP. from present levels.
So why the extravagant stock market Yet, though many previous predictions
reaction? In part it is because we did of an oil shortage have been disproved
not expect to be here. After the end of by events, we should never forget that
the second Persian Gulf war it was Further increases in oil prices would be a depletable resource will eventually
anticipated that Iraqi oil production likely and the likelihood of a continued get depleted. We should revisit our
would rapidly recover. It desperately global economic recovery would be energy policies to ensure that they are
needs the income to finance its recon- much reduced. better attuned to a future in which we
struction. However, it is now clear that On the other hand, if the political and will have to reduce further our depend-
substantial new investment in Iraq's economic situation in the Middle East ence on oil.
infrastructure will be necessary to can be stabilized, then oil prices are Keynes also talked about " the eco-
enhance its exporting capacity and this likely to fall back in the short and nomic possibilities of our grandchil-
is difficult to achieve rapidly given its medium term. In these circumstances, dren" and, given sensible policies, they
present political instability. the US economy has the potential to are better than our own.
The higher price of oil and the fragility continue growing and growth can be
of the stock market reflect the concern expected to be significantly faster in Source: Petroenergy Information
that there may be ongoing disruption of the emerging economies of China, Network
the supply of OPEC oil, particularly India and Russia.
Asia's New Thirst
China has overtaken Japan to become the from the Middle East to the import-
world's second biggest consumer of oil dependent economies of Asia.
after the US. Indonesia's presidency of Another worry is that competition for
the Organization of Petroleum Exporting scarce supplies of energy has begun to pit
Countries (OPEC), the exporters' cartel, Asian governments against each other.
has been undermined by news that the China and Japan are locked in a diplomat-
country became a net oil importer in ic tussle over rival pipeline projects for
February and March. the import of Siberian oil and Beijing's
Behind the drama of high prices and the hunt for oil and gas has strengthened its
struggle to increase the global supply of resolve to control the atolls of the South
crude oil lies a story of inexorably rising China Sea.
demand: Asia's fast-growing economies A third risk is financial. Oil industry ana-
are increasingly thirsty for energy. lysts believe that Chinese oil companies,
China plans to build as much new elec- under orders to buy foreign production
tricity-generating capacity in each of the and exploration assets for the benefit of
next two years as the UK has today. This national security, will inevitably overpay,
will put immense strain on the world's just as Japan did in the past decades.
energy infrastructures and on the global environment. Short-term tightness in the energy markets might give an
In the two decades to 2020, Asia will more than double its undeserved luster to grandiose projects such as the multi-bil-
electricity use and nearly double emissions of carbon dioxide, lion dollar pipeline from eastern Siberia to the Russian port
according to the Institute of Energy Economics in Japan. The of Nakhodka or the "land bridge" to carry oil across
number of vehicles on China's roads will increase sixfold to Thailand's Kra Isthmus, a route that avoids the Strait of
120m. Asian oil consumption will rise to 35 million barrels a Malacca.
day; the 16 million bpd increase in 20 years is three times the Yet Asia's dependence on energy imported from the Middle
current level of consumption in Japan. East does make it vulnerable to supply disruptions and price
These are tempting prospects for makers of cars, nuclear reac- shocks. The solution is to spread risk by diversifying into dif-
tors and turbines. Rising Asian demand; however, has risks as ferent energy sources, promoting efficient technology and
well as opportuni- energy conservation
ties. and perhaps cooper-
Southeast Asia in ating on running oil
particular is becom- stockpiles along the
ing more vulnerable lines suggested by
to terrorism. The Japan. What does
US is so concerned not make sense is to
that it has proposed sacrifice common
joint naval patrols sense or cost-bene-
in the Strait of fit calculations on
Malacca, the nar- the altar of energy
row waterway security.
and Indonesia that Source: Iran
funnels shipments Offshore News
of oil and liquefied Desk
natural gas (LNG)
General Information To find a site on which to drill an exploratory well, surveys of
1. Introduction various kinds can be conducted. Magnetic surveys involve the
2. Exploration use of a magnetometer that measures the magnetic forces in
3. Drilling the rocks situated in the earth's crust. By measuring and
4. Drilling a Well recording magnetic anomalies, explorations can result in find-
5. Development Drilling and Well Completion ing arches and folds that might serve as hydrocarbon traps.
6. Production Gravity surveys measure and record the density of underlying
7. Transportation rocks. Positive and negative gravity anomalies may indicate
the presence of folds and domes that could serve as hydrocar-
1 Introduction bon traps.
Oil and gas are hydrocarbons, which are primarily made up of Seismic surveys measure and record the time it takes for loud,
only two elements, hydrogen and carbon. low frequency sound, which bounces off subsurface rock lay-
The simplest hydrocarbon is methane, CH4 , which is the ers, to reach the surface. Potential traps are identified by ana-
main component of natural gas. Methane is an odorless, col- lyzing seismic survey data, but whether they contain oil or gas
orless gas that is lighter than air. won't be known until a drill bit penetrates the structure.
Crude oil is often called petroleum, which means "rock oil." Directing the drill bit to a precise location - perhaps several
Although crude oil varies widely in appearance, it is usually kilometers away - requires sophisticated computer technolo-
a liquid with a density that is less than the density of water. gy. A navigation device installed above the drill bit feeds back
Locating an oil and gas "trap" - as it is known - and extract- information, which makes possible measuring and monitoring
ing the oil and gas is difficult enough on land. But offshore, the exact position of the well. A steer able motor within the
in deep and often stormy waters, it becomes a very tedious drill pipe can be remotely controlled to adjust the direction of
undertaking. the drill.
Both oil and gas are found in the pores of buried layers of A seismic section is a cross sectional view of the rock layers
rock. If the pores of the rock are connected, then the rock is under investigation. A geological structure in which accumu-
permeable and any oil and gas can flow from the pores into a lations of hydrocarbons are present can be found from a seis-
well. The rocks in which oil and gas may be present are usu- mic section.
ally sedimentary. Sandstone and limestone are two common Even though surveys help pinpoint the possible existence of
types of sedimentary rocks in which hydrocarbons can be hydrocarbon traps, the only sure way to confirm their pres-
found. ence is to drill a well. However, before a well can be drilled,
Oil and gas were probably formed from the remains of micro- the company must obtain the rights to do so from the country
scopic plants and animals that were buried below the surface in whose waters the proposed drill site lies.
of the earth in the distant past. Once formed, the hydrocar-
bons were forced out of their place of origin and hence moved Fig. 2- A special air gun produces sound that is reflected from
upward. In some cases, they were trapped in underground for- rock layers. Detectors pick up the sound reflections.
mations. Mobile offshore drilling units are either bottom-supported
Many different types of traps exist. In general, folding, fault- units or floating units. Submersibles and jack ups are bottom-
ing, unconformities and domes and/or a combination of them supported units. Submersibles include posted barges, bottle
can cause permeability changes in traps. types, and arctic submersibles. Jack ups may have either
columnar legs or truss-type legs, and the rig may be mounted
Anticline Trap Fault Trap on a cantilever or over a keyway. Furthermore, the legs may
either be supported by a mat or supported by spud cans.
Fig. 1- A combination of folding, faulting and unconformities 3 Drilling
can cause permeability changes in hydrocarbon traps. In the early days of offshore drilling, explorers simply fitted
a derrick to a barge and towed it to their site. Today, four types
2 Exploration of offshore rigs are used to drill wildcat or exploration wells.
addition to a circulating system, a rotating system is needed
Submersibles. These are rarely used. They can be floated to to turn the drill stem and bit.
shallow water locations then ballasted to sit on the seabed. Since most of a rig's equipment requires a source of power to
operate, several diesel engines are used to provide power. The
Jack Ups. They are usually towed to a location. Their legs are engines turn generators to generate electric power. Cables
then lowered to the seabed and the hull is jacked up clear of from the generators carry electricity to motors that are mount-
the sea surface. Jack ups are used in waters to about 160 ed on or near the equipment to be powered.
meters deep. The hoisting system consists of the draw works, crown block,
traveling block and drilling line. The hoisting system sus-
Drill ship. These look like ordinary ships, but have a derrick pends the drill stem and bit in the hole and makes it possible
on top, which drills through a hole in the hull. Drill ships are to trip the drill stem and bit in and out of the hole.
either anchored or positioned with computer-controlled pro- The operator is an oil company that buys or leases the right to
pellers along the hull, which continually correct the ships' explore for, drill for and produce hydrocarbons. The operator
drift. They are often used to drill "wildcat" wells in deep usually hires a drilling contractor; a firm whose specialty is
waters. drilling wells and which owns drilling rigs, to drill a well.
Many service and supply companies are also hired by the
Semi submersible. These are mobile structures, some with operator to provide additional equipment and services needed
their own locomotion. Their superstructures are supported by to drill a well.
columns sitting on hulls or pontoons, which are ballasted Drilling an exploration well is the only sure way to confirm
below the water surface. They provide excellent stability in the presence of hydrocarbons in a suspected reservoir.
rough and deep seas. Drilling is usually accomplished with a mobile offshore
Inland barge rigs, ship-shaped barges, drill ships and semi either a bottom-supported unit, such as a submersible or jack
submersibles are floating units. Swamp barges are designed to up, or a floater, such as a drill ship or semi submersible.
work in waters close to shore such as inlets and bays or in Sophisticated and reliable blowout prevention systems (BOP)
large inland bodies of water such as Lake MaracaIbo. Ship- are used in every production well to minimize the possibility
shaped barges and drill ships differ only in that a drill ship is of a blowout - where uncontrolled fluids flow from a well.
self-propelled and barges must be towed from one location to The weight of the drilling fluid acts as the first line of well
another. Ship shapes are best suited for drilling in deep and control by keeping underground pressure in check. If an
open waters far removed from shore. Semi submersibles are influx of pressurized oil or gas dose occurs during drilling,
also capable of drilling in deep waters but are able to with- well control is maintained through the rig's blowout preven-
stand rough weather such as that which occurs in the North tion system (BOP). This is the set of hydraulically operated
Sea or in the North Atlantic. valves and other closure devices (rams) which seal off the
well and route the well bore fluids to specialized pressure
Fig. 3- A column-stabilized semi submersible rests below the controlling equipment.
waterline when in the drilling mode. Trained personnel operating this highly reliable equipment
minimize the possibility of a "blowout" or an uncontrolled
Fig. 4- In this dynamic positioning system, hydrophones on flow of fluids from a well.
the vessel's hull receive signals from a subset beacon. The sig- Therefore, drilling from floaters usually involves the use of
nals, in addition to information from a taut wire and a wind subset BOPs, a marine riser system and motion compensators.
sensor, are transmitted to onboard computers. The computers Drilling from bottom-supported units usually does not require
process all data and activate the thrusters to maintain the a subset system; instead, the BOPs are supported by casing
floating unit on station. above the water's surface.
And since bottom-supported units are in firm contact with the
Fig. 5- When flooded, the bottles cause a bottle-type sub- seafloor, no motion compensation is required.
mersible to submerge to the seafloor. Formation evaluation is used to determine whether sufficient
amounts of hydrocarbons exist in the reservoir. Whether or
4 Drilling a Well not the first wildcat well yields hydrocarbons, it is usually, but
The primary job of any drilling unit is to put a drill bit into the not always, plugged and abandoned.
ground and rotate it. To accomplish the task, drilling fluid Should evaluation reveal promising results, more wells will
must be circulated so that the cuttings are cleaned from the probably be drilled to confirm the findings. If all goes well,
bottom of the hole and are carried up the hole for disposal. In full-scale development drilling will be undertaken in order to
produce the hydrocarbons. completion. If the equipment is placed on or below the
seafloor, the completion is a subset completion.
5 Development Drilling and Well Completion
In offshore development drilling, several wells are often
drilled from a fixed, self-contained platform. These develop- Fig. 7- The relatively lightweight of a guyed-tower platform
ment wells are usually directionally drilled so that each well is supported by several guy wires and clump weights.
bore is curved into various parts of the reservoir.
Some rigid platforms consist of steel jackets that are support-
ed on the seafloor by piles; other platforms are made of con-
crete. Usually, concrete platforms do not require piles,
because they are so heavy. In the Arctic, special caisson-type Fig. 8- Concrete cylinders arranged around the base of a con-
platforms are used to prevent the destruction of the platform crete gravity platform provide storage space for oil.
by moving pack ice.
When the well has been drilled to its target depth, production
casing is set and cemented. Tubing is lowered into the hole 6 Production
together with "packers", which seal the space between the Natural energy is usually present with hydrocarbons in the
tubing and the casing. Finally, at the end of the well, the cas- reservoir. This natural energy is often associated with gas and
ing is performed at predetermined depths by small explosive water that exist with oil. Gas, water or both drive oil into
charges detonated remotely. The small holes in the casing wells that are drilled into the reservoir.
allow the oil or gas under its natural pressure to flow to the Water and other impurities like sediment must be removed
surface. from oil and gas before they can successfully be put into a
When wells are drilled and completed in deeper waters, com- pipeline or tanker for transportation to refineries and process-
pliant platforms that move to a limited extent with wind, ing plants on land. Several special tanks often located on a
waves and currents are employed. One design is a guyed production platform are used to separate and remove water
tower, in which several guy wires are attached to a relatively from oil and gas. In some cases, especially where subset com-
lightweight jacket and to the seafloor. Another is the tension- pletions are used, a processing and storage ship is moored to
leg platform; in which tensioned steel tubes are firmly a buoy. Well production flows up a production riser to the
anchored to the seafloor and platform, keeping the floating buoy. Separation and treating occur on the ship.
platform on the site. If free water exists in the fluids produced from the well, a
Sometimes, a mobile offshore drilling unit (MODU) may be free-water knockout may be used. A free-water knockout is a
used to drill development wells. In such cases, the MODU is tank into which well fluids are piped. It serves as an enclosed
placed next to a small platform jacket and the wells are drilled space in which the free water is given time to settle out of the
through it. If necessary, a small additional platform can be produced fluids.
erected next to the original platform to house equipment that Emulsified water requires additional treatment for it to be
cannot fit onto the original. removed from oil. Chemicals, electricity, heat or all three are
In some instances, satellite wells are drilled to exploit a reser- applied to the emulsion inside vessels known as theaters, or
voir. Satellite wells are drilled one at a time with a MODU heater theaters if heat is used.
and are often used to supplement development wells drilled
from nearby platforms. Through the use of subset templates Fig. 9- Gas lift involves the injection of gas into a well to
and directional drilling, floating rigs can be used to drill sev- lower at the bottom of the well. A) Since the well is not pro-
eral development wells without having to be moved from well ducing, no liquids are flowing; B) Injected gas forces liquid
site to well site. The template provides a way for the floater to out through tubing; C) Gas enters top valve and lighters liq-
drill, complete and produce several wells in the small area uid in tubing, causing level to fall further; D) well is produc-
occupied by the template. ing fluids from reservoir.
Well completion usually involves perforating the well to
make perforations or holes in the casing and cement. The per- 7 Transportation
forations provide a way for reservoir fluids to enter the well. Moving oil and gas to shore is an essential step in offshore
Usually, tubing with a packer is placed in the well and reser- operations. Often, oil and gas are injected into a pipeline that
voir fluids flow up the well through the tubing. is laid from a platform or group of platforms to an onshore
Completions may be either surface or subset. If equipment facility. In cases where laying a pipeline is not feasible, oil
placed on top of the well to control the flow of fluids from it can be transported to shore by means of tankers.
is placed above the waterline, the completion is a surface Laying a pipeline is usually carried out from a lay barge. A lay
barge is a large floating vessel that carries people and equip-
ment needed to construct and lay the pipeline on the seafloor.
The pipe joints are welded, inspected, wrapped and placed on
bottom from the barge. Several anchors, and sometimes tug-
boats, keep the barge on station and pull it along the route as
the pipe is laid.
Sometimes, the pipeline may be constructed on land, reeled
onto a large reel, the reel mounted on a barge or ship and the
whole reeled pipeline carried on the reel vessel to the site. The
reel vessel simply pays out the pipe onto the ocean bottom.
Unreeling pipe shortens considerably the time spent offshore
in laying the pipe. This procedure can be an advantage when
weather conditions on the route are bad enough to cause
delays in conventional construction techniques. The bottom-
pull method of laying pipe also shortens the time needed to
lay pipe on the route. In this method, the pipe joints are con-
nected at a shore facility and the long section of pipe is towed
to the site. If flotation devices are used to allow some of the
weight of the pipe to be taken up by the water, then the bot-
tom-pull method can be used in deep as well as in shallow
If necessary, the pipeline can be buried by a bury barge. The
bury barge pulls a special jet sled over the already laid
pipeline. The jet sled, by means of high-pressure jets of sea-
water, scours out the soil from underneath the pipeline. As the
trench is dug, the pipeline falls naturally into the trench.
Burying a pipeline may be necessary to protect it from dam-
age if it lies in an area where various kinds of marine work are
Where pipelines cannot be laid, crude oil tankers are often
used to move oil to shore. Frequently, oil from the wells flows
into a single-point buoy mooring (SPBM) system. The tanker
ties up to the system, takes on oil and transports it to shore.