Iran seeks to expand refining capacity

Oct 28, 2008 01:00 AM

The Islamic Republic is striving to boost its refining capacity in a bid to tame lavishly rising consumption by Iranian drivers.
But US and United Nations sanctions aimed at curbing Iran's peaceful nuclear program have pushed up costs and slowed down some projects in Tehran's $ 16 bn effort to double domestic refining capacity, said Mohammad Reza Nematzadeh, a top adviser to the oil minister and former oil ministry official in charge of Iran's refineries. Despite the sanctions, Nematzadeh said Iran can still achieve its goal of becoming a net exporter of refined oil products in the next six years.

Tehran's efforts stem from a longstanding shortfall between its gasoline consumption and its refining capacity. Iran spent roughly $ 6.5 bn on gasoline and diesel imports in the year ended March 2008. In June 2007, Iran started rationing gasoline, a scheme the government credits with cutting consumption by about 28 % this year. The first new Iranian refinery is slated to come online in 2011.
Iran, which sits on the world's second largest reserves of both oil and gas, is facing US sanctions over its civilian nuclear program. Iranian officials have dismissed US sanctions as inefficient, saying that they are finding Asian partners instead. Several Chinese and other Asian firms are negotiating or signing up to oil and gas deals.

Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in Iran, which is rich in oil and gas, but not getting into big deals that could endanger their interests in the US.
Yet, after oil giants in the West witnessed that their absence in big deals has provided Chinese, Indian and Russian companies with excellent opportunities to signing up to an increasing number of energy projects and earn billions of dollars, many western firms are slowly losing reluctance to invest or expand work in Iran.

Some European countries have also recently voiced interest in investment in Iran's energy sector after a gas deal was signed between Iran and Switzerland regardless of US sanctions. The National Iranian Gas Export Company and Switzerland's Elektrizitaetsgesellschaft Laufenburg signed a 25-year deal in March for the delivery of 5.5 bn cm of gas per year.
The biggest recent deal, worth EUR 100 mm ($ 147 mm, £ 80 mm), was signed by Steiner Prematechnik Gastec, the German engineering company, this month to build equipment for three gas conversion plants in Iran. This is at a time when France's Total, Royal/Dutch Shell and Norway's Statoil have put on hold their shares in multi-billion dollar contracts.

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