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IOR1: A Successful
Gathering |
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The Forum aimed to bring together
leaders of Iran’s refining industry, domestic and international services
companies, and foreign oil companies interested in investing within Iran’s
refining sector. |
Energy has always been the driving force
behind global economic growth. From the invention of fire in the olden days to
the advent of new liquid fuels of present times, mankind has relied on energy
for facilitating its agricultural and industrial development. Today, oil
remains the single most important source of energy within the global arena;
and despite dull forecasts of its diminishing role, this valued commodity is
expected to remain at the heart of global economic activity. Statistics
indicate that the demand for energy, specifically refined oil products, is
increasing at a dramatic rate as great new markets emerge in Asian countries
such as China and India. Experts have indicated that an increase in the global
gross domestic product rate (GDP) positively correlates with increases in
energy demands. Moreover, as the purchasing power potential of countries
increases there is a strong desire for commodities that have a positive impact
on world energy demand rates. Increased vehicle ownership and air travel, for
example, translate into higher need for light fuels that must be converted
from an increasingly heavy world crude reserve.
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Kazem Vaziri Hamaneh, Petroleum Minister |
The above-mentioned factors, along with
stricter environmental regulations and the necessity of achieving full
optimization, have made it imperative for leaders of the Iranian petroleum
sector to seek greater foreign investments within the country and reach out
for technological knowledge that can be essential in developing Iran’s
refining sector. The 1st Iran Oil Refining Forum should be examined and
assessed within this broader framework. The Forum aimed to bring together
leaders of Iran’s refining industry, domestic and international services
companies, and foreign oil companies interested in investing within Iran’s
refining sector. The National Iranian Oil Products Refining and Distribution
Company (NIOPRDC) set out to promote different investment opportunities
presented within the Iranian sector and to seek out financial and
technological support for the implementation of major infrastructural projects
that will increase the capacity of the country’s refining sector.
The NIOPRDC has moved to undertake a
number of initiatives. These include establishing a more suitable pricing
regime with the help of the executive and legislative branches of government,
submitting the shares of subsidiary companies to the private sector, and
undertaking new investments with the participation of domestic and foreign
companies. In the past year, the company has finalized 6 optimization deals
worth $4 billion with foreign and domestic contractors. Deals worth the same
amount are expected to be ratified in the coming months. The company has also
undertaken one major project in terms of domestic and foreign private sector
partnership along with undertaking a number of technical measures aimed at
enhancing the refinery capacity of the country as a whole. It has undertaken
studies regarding a North-South pipeline connecting the vast oil and gas
reserves of Caspian Sea littoral states with the refining hubs of Southern
Iran. It has also examined the viability of upgrading old refineries along
with the feasibility of building new ones and has moved to upgrade the
pipeline system for the transfer of oil and gas. Clearly, there has been a
flurry of activity within the Iranian refining sector with focus on upgrading
equipment and expanding capacity.
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Over the years, it has become very
clear for the NIOPRDC that it needs to undertake major new initiatives in
order to meet the growing gasoline demand and stake out a larger role in
the value-added end product market. |
The Challenge:
One can specify a
number of motives behind such a forum. On the one hand, Iran is facing a
growing gasoline demand which is effectively draining hard currency supplies
and posing a great challenge for the Iranian petroleum industry. In fact, the
ever-increasing rate of energy consumption within the country, which far
outpaces that of semi-industrialized and industrialized countries alike, has
presented a number of new difficulties for the country’s energy sector. The
most discussed and tangible challenge relates to the high consumption of
gasoline. Throughout the last decade, gasoline consumption has increased at a
rate far beyond the domestic production capacity. Iran is the second largest
oil exporter within OPEC and enjoys nearly 12 percent of global oil reserves.
In 2005, the Islamic Republic of Iran produced nearly 5 percent of the entire
global oil production, ranking 4th in the world. It also produced nearly 3
percents of world gas production and 30 percent of Middle East gas production.
Against this backdrop, it is hard to believe that the country has increasingly
relied on imported gasoline to meet its domestic demand.
In 1996, a total
of nine Iranian refineries produced nearly 28.32 million litters of gasoline
daily. Today, the domestic production of gasoline has reached 42.37 million
litters. The Third Five-Year Economic Development Plan predicted gasoline
demand to reach 5.4 percent, while the actual figure reached 11.3 percent.
Thus, by the end of the Third Plan the country faced a deficit of 22.6 million
litters of gasoline required for daily consumption. This led the government to
import gasoline in 1996, since increasing domestic production capacity failed
to meet growing demand. At that time Iran imported nearly 2.7 million litters
of gasoline per day. At the present time, the country imports 31 million
litters per day which costs government coffers nearly five billion dollars.
Increases in oil prices in recent years have provided the country with greater
foreign currency reserves. Yet, those same reserves had to be drawn upon in
order to purchase imported gasoline at higher prices. The gasoline demand rate
has also impacted the national petroleum infrastructure as the industry has
moved to ensure the flow of imported gasoline on a daily basis.
A Motivated
Drive: Over the
years, it has become very clear for the NIOPRDC that it needs to undertake
major new initiatives in order to meet the growing gasoline demand and stake
out a larger role in the value-added end product market. Exporting any raw
material is not the most economically logical action a country can take since
there is a much higher price associated with refined end-products. The Forum
reflected a new vigorous approach undertaken by the NIOPRDC to overcome the
challenges the industry faces and to play a greater role in the global
refining industry. The Forum provided the NIOPRDC and other subsidiary
companies within the Iranian Petroleum Industry a platform to present the
future outlook for Iran’s refining and oil sectors.
With the implementation of some of the
infrastructural projects that were delineated at the Forum, the total capacity
of Iran’s crude oil refineries will reach 2 million barrels per day from a
current level of 1.3 million barrels per day. The country is also looking at
expanding its activities outside Iran with an aim of eventually reaching a
refining capacity of nearly 3.2 million barrels per day by 2021. As such, new
refineries will enter the production line in places like Bandar Abbas,
Malaysia, Indonesia, and Shiraz. The NIOC has impressive goals for the future
as well. According to its forecasts, the rate of new discoveries along the
20-Year Development Plan will be nearly 11 billion barrels of oil and 3.4
trillion cubic meters of gas. The production rate of crude oil will increase
from 4 millions barrel per day in 2005 to 5.3 millions barrel per day in 2014
and 4.2 millions barrel per day in 2024. A great number of the discovered
crude will be used by the domestic refining sector.
In order to achieve these objectives,
the Iranian refining sector must not only upgrade existing refineries but also
build new ones specified for the Iranian crude type and with the aim of
meeting the domestic gasoline demand. In this light, the Iranian Ministry of
Petroleum has maintained that it wishes to carry out policies such as
expanding the country’s refining capacity, undertaking the conversion of heavy
crudes into lighter products with higher value-added potential, meeting the
domestic demand, and cooperating with other countries. Fulfilling these
objectives requires close cooperation with foreign companies that enjoy the
financial and technological assets required for the implementation of such
projects. Iranian officials are cognizant of this factor and used the Forum as
a platform to ensure foreign companies that the country is committed to
ensuring the safety of foreign investments and is moving to create an
investor-friendly environment.
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Davoud Danesh Jafari, Minister of Economic Affairs and
Finance |
A Clear Message:
In his address to
the participants, Iran’s Minister of Petroleum, Vaziri Hamaneh, clearly
pointed out this policy. He stated that "the investment policy for these new
major projects hinges upon the participation of domestic and foreign private
sectors, and this is yet another opportunity for mutual collaboration amongst
Iranian and foreign companies in our long-term and world-scale project." He
also mentioned that the Ministry of Petroleum "welcomes the presence of all
those who are present and willing to join us in meeting our goals." The
Minister of Economic Affairs and Finance, Davoud Danesh Jafari, also
underscored Iran’s willingness and openness to attract foreign investments. In
a clear effort to promote the investment potentials of the country, officials
pointed out that the country has undertaken new legislative measures that
safeguard investments within the country along with providing a suitable
environment.
A Rare
Opportunity: A
consorted effort was undertaken at the Forum to present the capabilities and
capacities of the Iranian refining industry. In an open effort to provide
investors with a coherent view of all the potential opportunities for
investment, Iranian officials put forth detailed figures and statistics
regarding intentions and predictions. Mohammad Reza Nematzadeh, Deputy
Petroleum Minister & President of NIOPRDC, whom many participants credited
with the success of the Forum, estimated that between 15 to 20 billion dollars
is needed in the coming years for the fulfillment of the objectives outlined.
Drawing upon the experiences of seven similar forums organized during his time
as the head of Iran’s petrochemicals industry, Mohmmad Reza Nematzadeh pointed
out the necessity of holding such events given their positive outcomes. He
also mentioned that a similar forum will be held either annually or
bi-annually in Tehran henceforth.
The 1st Iran Oil Refining Forum enabled
the organizers to elaborate their positions and concerns and also familiarized
the actors within the field with a wide array of new technological measures
that were presented by the different participants. According to Nematzadeh it
provided an opportunity for the "exchange of views with interested countries
and investors." The Forum, and other initiatives undertaken by Nematzadeh
since he was charged with leading the NIOPRDC, reflects a desire on the part
of Iran to actively seek out joint partnerships and to shift the dynamics of
Iran’s refining reality. There is also a desire on the part of Iran to focus
on emerging Asian markets for attracting investments and selling end-products.
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Mohsen Alagheband Hosseini, The Chairman of the Forum |
The Chairman of the Forum, Alagheband
Hosseini also outlined the Forum’s goals, with attracting foreign investment
and technological "know-how" topping his list which also included receiving
licensing for "applying the world’s most advanced technology." The nature of
the infrastructural plans that have been outlined by the Iranian refining
sector throughout the years require assets that should be drawn from capital
pools and knowledge basis outside the country. The Forum, as both participants
and organizers pointed out, succeeded in taking the first step in expanding
the joint initiatives between Iran and domestic and foreign companies willing
to cooperate on different projects. The number of foreign and domestic
participants at the Forum reflected that success with 253 registered Iranians
and 44 foreign guests taking part in the sessions spread out during the
two-day event. Moreover, an exhibition of industry-related technologies and
services was held on the sidelines of the forum with 44 Iranian companies and
4 foreign companies being present. Alagheband Hosseini also pointed out that
345 Iranian individuals were invited to attend the Forum along with 64 foreign
guests. These figures indicate a strong domestic private sector and
international presence at the Forum which reveals the level of interest for
taking part in Iran’s developing refinery sector.
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The number of foreign and domestic
participants at the Forum reflected that success, with 253 registered
Iranians and 44 foreign guests taking part in the sessions spread out
during the two-day event. |
The gathering also provided potential
investors with the opportunity to realize the coordinated efforts undertaken
by all actors that are related to Iran’s petroleum industries. From the clear
message sent out by the two cabinet members present at the Forum to speeches
put forward by other leading actors, investors were left with a clear sense of
looming opportunities, and a motivated sector looking forward to greater
development. Mohammad Javad Asemipour, Vice President, NIOC, Iran presented
the different initiatives undertaken by the NIOC and how they compliment the
goals set out by the refining sector. Oil refineries represent a significant
objective for Iran’s oil industry and as such the complimenting companies will
be moving to support its development and expansion. As Asemipour maintained,
there is a coordinated policy within the Iranian petroleum industry that aims
to synchronize resources with the overall objectives and plans put forth.
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The 1st Iran Oil Refining Forum was
an ideal platform for investors and industry leaders to exchange
information and communicate on subjects of common interest. |
In conclusion, the 1st Iran Oil Refining
Forum was an ideal platform for investors and industry leaders to exchange
information and communicate on subjects of common interest. At a time of
heightened political pressure imposed on the country, the Forum indicated that
there is a strong interest by many foreign companies to play a leading role
within the Iranian refining industry, and officials also indicated Iran’s
willingness to work towards attracting greater foreign capital. Remarks made
by Deputy Minister Nematzadeh and other related officials moved to assure
participants that Iran is following a strategy of joint cooperation with any
company that meets the demands of the Iranian refining sector and is willing
to cooperate on a mutual basis. Given the huge investment requirements the
industry will be facing in the coming years, the Forum took a positive first
step towards establishing the communication links that are vital to greater
cooperation. Organizers of the Forum have indicated their optimism about the
pace of these developments and have pointed to Iran Oil Refining Forum 2007 as
a logical continuation of this process. |
