Seoul to Finance $13 bn Korean
Projects in Iran
Korea Eximbank (KEXIM) would provide the lion share of the funds at
$8 billion. The rest of the funds - $5 billion - would be provided
by Korea Trade Insurance Corporation.
“Determination and seriousness of the Korean side can pave the
way for implementation of previously-signed agreements between
the two countries,” Tayebnia concluded.
Iran has received a major credit line worth $13 billion from South Korea for
several of its industrial projects.
Negotiations to receive the credit line were almost complete and Finance
Minister Ali Tayebnia travelled to Seoul in mid-June to finalize the
Korea Eximbank (KEXIM) would provide the lion share of the funds at $8
billion. The rest of the funds - $5 billion - would be provided by Korea
Trade Insurance Corporation.
Tayebnia, who was in South Korea to attend the 2nd AIIB Annual Meeting, met
and talked with Lee Duk-Hoon, Chairman and President of Export–Import Bank
of Korea, also commonly known as the Korea Eximbank.
Negotiations were held at the joint meeting over financing Iran’s civil and
infrastructure projects in energy, petrochemical, oil and health sectors.
An agreement was also reached on the final draft of the long-negotiated deal
for opening a Line of Credit (LOC) worth eight billion euros.
The South Korean side also expressed eagerness to supply necessary financial
resources to Iranian projects and called for introduction of projects in
energy, petrochemical, oil and health arenas as well as for presence of
Korean companies in Iran.
The Iranian minister, while pointing to positive economic developments and
abundance of emerged opportunities in Iran, emphasized that great potentials
for collaboration led numerous countries to voice readiness for economic and
financial cooperation with Iran.
“Determination and seriousness of the Korean side can pave the way for
implementation of previously-signed agreements between the two countries,”
On the sidelines of 2017 AIIB meet, the Iranian minister also met with his
South Korean counterpart Dong-yeon where the two sides exchanged views on
economic issues like creating credit lines and opening branches of Iranian
financial institutions in South Korea.
The 2nd Annual Meeting of the Board of Governors of the Asian Infrastructure
Investment Bank (AIIB) was held in the city of Jeju on June 16-18, 2017.
Accordingly, talks with South Korean banks over creation of LOCs are being
finalized though agreements needed to be reached by ministers of the two
countries in order to resolve certain issues.
The huge investment comes following a nuclear deal signed between Iran and
major world powers known as the Joint Comprehensive Plan of Action (JCPOA).
JCPOA or Iran Nuclear Deal, as it is commonly known, was signed on July 14,
2015 between Iran and the five permanent members of the United Nations
Security Council - China, France, Russia, United Kingdom, United States -
plus Germany), and the European Union.
Who Gets What?
Out of the amount, $8 billion will be provided by KEXIM Bank and $5 billion
by KSure Bank of South Korea. Out of the Korean finance, $1.7 billion will
go to the optimization of the Isfahan Refinery. Another $3 billion will go
to construction of gas condensate refineries in Siraf. Part of the finance
too will go to extraction of ethane from South Pars Phase 12. This project
will be implemented by Kangan Petro Refining Complex. Construction of a
modern hospital is among other projects finalized with the Korean side.
This $13 billion is the first big foreign investment entering Iran after the
lifting of the sanctions, a significant portion of which will go to the oil
industry projects. Until now only $320 million had been devoted to the
Persian Gulf Holding in the form of 6-month LC which was supposed to
increase to $640 million in the form of usance within a year.
Now everything is set and everyone is waiting for the Koreans to announce
the news formally.
Isfahan Refinery Project
South Korea’s construction giant Daelim Industrial Company has won the deal
from Iran to expand Isfahan Refinery.
Daelim announced in a statement that the project involves improving and
optimizing facilities at Isfahan Oil Refinery. It is among the biggest Iran
has awarded a Korean builder after the removal of the sanctions in January,
The project, due for completion in 48 months, is to add facilities that will
be used to produce high value-added products to the oil refinery located 400
kilometers south of Tehran, the capital of Iran.
With a capacity of processing 375,000 barrels per day of oil, Isfahan
Refinery is currently responsible for supplying around 22 percent of Iran’s
required oil products.
Under the deal with Daelim Industrial, the South Korean company will be in
charge of design, equipment and material procurement, construction and
Daelim Industrial has been a leading South Korean company in Iran’s
construction business sector since the two countries established diplomatic
relations in 1962.
It has clinched 26 projects worth $4.5 billion in total over the past 40
“The latest order is the outcome of being recognized as a credible company
by Iran’s state-run firms and private companies based on (Daelim’s) long
experience in Iran,” said a Daelim Industrial official, as quoted by The
The new deal will likely lead to additional orders, said the company, which
has carried out various projects in Iran ranging from oil refining, natural
gas and petrochemical plant construction.
Kangan Gas Processing Deal
Industrial giant Hyundai has won a contract worth €3 billion to develop a
key gas processing unit which is primarily planned to produce natural gas
liquids (NGL) from natural gas in southern Iran.
The contract – which Hyundai signed with Iran’s Ahdaf Investment Company –
involves the development of Phase Two of Kangan natural gas processing plant
in the country’s southern energy zone of Assalouyeh.
The plant would be constructed at Phase 12 of South Pars gas field which is
described as the country’s biggest gas project.
A key section of the contract with Hyundai involves the development of a
major ethylene cracking unit which would produce what is technically known
as natural gasoline from natural gas, Iran’s Shana news agency reported.
Natural gasoline – or pentane plus (C5+) – is primarily used by refineries
in gasoline blending, but has a lower economic value than gasoline due to
its lower octane value and somewhat higher vapor pressure.
Other products that would be produced at Kangan project would include
olefin, propane, ethane and ethylene.
The contract marks one of the biggest investments since the nuclear accord
with world powers lifted global sanctions on Iran.
The South Korean firm will have nine months to secure financing for the
Securing the financing through Korean banks will be “the most important and
most difficult step,” Shana quoted Asghar Arefi, head of Ahdaf Investment
Company, as saying.
“The start and execution of this project relies on 95 percent of the
project’s financing coming from Korean banks with full support from the
Hyundai Engineering Company in securing those funds,” Arefi told Shana.
A Hyundai Engineering spokesman told AFP that 85 percent of the funding
would come from Korean lenders, including Export-Import Bank of Korea and
the Korea Trade Insurance Corporation.
The second phase of the deal, involving the construction of four production
plants at the Kangan site, is expected to take four years.
Siraf-Eight Refinery Project
Siraf Refineries Infrastructure Co. has overall responsibility for managing
and building infrastructure for the project which will process as much as
480,000 bpd of condensates.
The project includes eight private refineries and, once fully operational,
will have the capacity to produce about 270,000 bpd of naphtha, 140,000 bpd
of gasoil, 30,000 bpd of LPG and 40,000 bpd of kerosene.
The eight private local Iranian firms will individually invest funds to
build the processing plants, each with a capacity of 60,000 bpd. They will
also be making their own export decisions.
Early production will start in 2018, but final production and trading will
take place in 2019. Site preparation has been nearly completed for the
According to the International Energy Agency, Iran’s condensate exports
doubled to about 200,000 bpd in 2014, accounting for total Iranian oil
shipments of about 1.3 million bpd.
Once the Siraf project is fully operational, condensates exports out of Iran
would disappear as the country was keener to export value-added products.
Refineries from the project would be aiming to sell bulk of their products
in the spot market, rather than venturing into numerous long-term contracts.
There is a big spot market for these products.
Siraf was expecting to see buoyant demand for its naphtha in countries with
strong economic growth, such as India.
It would eventually stop exporting naphtha once its own petrochemical
project — for which feasibility study is currently being carried out — is
constructed under Siraf’s second phase of development.
A consortium of South Korean companies comprising industrial giant Hyundai
and construction giant Daelim together with Chiyuda Company will build the
eight refineries. Hyundai will take a share of 34 percent, Daelim 33 and
Chiyuda 33 percent.
Construction operations are expected to start in October.
A Win-Win Accord
The Korean project is expected to break a big barrier. Those banks which are
afraid of working with Iran would be encouraged to finance Iranian projects.
The Japanese and European banks would feel more comfortable to work with
Iran after the Korean finance project goes into effect. The project will
create employment and this is a blessing for the government which says is
committed to reduce unemployment and generate jobs.
But this is one side of the coin. On the other side, the Korean companies
too will benefit from these deals.
In South Korea, Japan, and the EU the inflation rate is almost zero
(negative). The interest rate is also close to zero. Therefore, there is no
new demand for economic growth in their countries.
Economists believe that as high inflation is harmful negative inflation too
is damaging. These countries need new demands to boost their economies. In
the meantime, Iran is a best choice and there is no doubt that Japan and EU
are eager to invest in Iran as well. They are interested because this would
serve their own interests and political considerations have been a major
barrier in this way.
The Korean finance project can break part of the obstacle.
Total Gas Deal: Iran Safe for Investment
Iran will sign a $4 billion deal with France’s Total to develop Phase 11 of
the giant South Pars gas field before summer, Minister of Petroleum Bijan
Zangeneh and Total Chief Executive Patrick Pouyanne met in Vienna on the
sidelines of the OPEC meeting (late May) and discussed the deal.
“The signing of the contract with Total is very close and will be done in
less than a month,” Zangeneh told reporters.
Total signed an agreement with the National Iranian Oil Company (NIOC) in
November 2016 but said earlier in February that a final decision on the deal
hinged on the new US administration renewing sanctions waivers on Iran.
Pouyanne told journalists on the sidelines of the Vienna meeting that the
signing of the waivers had cleared the path for the deal to be concluded.
Zangeneh said a major European bank will provide guarantees, but did not
disclose its name. He also said foreign countries have reached a consensus
on Iran’s new oil contract called IPC.
Other Iranian officials have already said that they expected the first
contract under the new formula to be signed soon, marking a turning point in
months of anticipation as the country reopens its oil and gas sector to
Zangeneh said some companies had worries about the new contract but those
concerns have been removed now.
Iran has named 29 international firms as being eligible to bid for oil and
gas projects but they have been waiting for the country to finalize the new
model, known as Iran Petroleum Contract (IPC).
The new model has been the subject to repeated reviews amid fears that it
might compromise Iran’s national interests at the expense of making business
with the country more flexible.
Total became the first Western oil major to sign an energy agreement after
the European Union and the United States eased sanctions as part of a
nuclear accord with the Islamic Republic.
The South Pars 11 project will have a production capacity of 1.8 billion
cubic feet per day, or 370,000 barrels of oil equivalent per day. The
produced gas will be fed into Iran’s gas network.
Total will operate the project with a 50.1% interest alongside Petropars
at 19.9% and the Chinese state-owned oil and gas company CNPC at 30%.
The French oil major also plans to invest in the South Azadegan oil field.
Zangeneh said the tender for development of Azadegan oil field will be
implemented soon, for both the southern and northern sections.
The oil minister further reiterated that Iran has no problems for the
participation of American companies in its oil and gas projects.
“We have no problem for the presence of US companies in oil and gas projects
in Iran. They are limited by their own government,” he said, adding Iran’s
preference is to sign deals with noted international companies.
How to Respond to Those Who Want Iran Unsafe?
We cannot stop the countries which do not want to see Iran’s progress by
mere slogans. Some observers maintain that the final aim of Iran’s regional
rivals is to prevent Iran from increasing its oil and gas production because
they know that the oil industry is the driving engine of Iran’s economy.
According to Zangeneh, Iran needs $200 billion worth of investment in its
oil industry. If we consider a similar scale for other industries and
economic grounds such as IT, transportation, etc., it can be said that Iran
offers a trillion dollar market for foreign investors.
In other words, the US administration has inflicted a loss of 1,000 billion
dollars on European, Asian and other investors.
By adopting a wise and sound foreign policy we can forge development, boost
our national security and beat our regional rivals through foreign
For the time
being, the Korean finance project and the French Total deal are a tough
response to those who do not want Iran to be secure!