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Asian firms plot out Iran’s refinery upgrade

Abadan Refinery at night

Iran has signed several agreements with Chinese, Japanese and Korean companies to upgrade and expand its oil refineries, a deputy oil minister says.

The agreements foresee construction, renovation and expansion of oil refineries in a number of Iranian cities, including Tehran, Isfahan, Bandar Abbas and Tabriz, Abbas Kazemi was quoted as saying on Wednesday.

“With the execution of these new plans, Iran’s oil refining capacity will certainly surpass 3 million barrels per day,” Mehr news agency quoted him as saying.

Iranian refineries currently process about 1.85 million barrels per day of crude oil. Kazemi said new plans include cutting fuel oil production at refineries to 10% from 30% at the moment. 

For the fuel oil reduction project at the Bandar Abbas plant, a memorandum of understanding has been signed with Japan’s Marubeni Corp and Chiyoda Corp.

South Korea’s SKS has signed to reduce fuel oil at Tabriz Refinery while Japan’s Nippon Oil has undertaken to carry out the facility’s petro refining project.

Another agreement has been reached with South Korea’s Daelim to improve oil refining at Isfahan Refinery, Kazemi said. Moreover, a Chinese company has held talks to upgrade Abadan Refinery, he added.

Iran has a surplus of fuel oil to export after using it for electricity generation and powering in shipping.

Cleaner diesel exports to rise      

A Tuesday report said the country is aiming to increase export volumes of cleaner diesel from next year as its refineries are upgraded.

Iran currently ships out about 500,000 tonnes of gasoil with 1 percent sulfur, or 10,000 parts-per-million (ppm), Reuters quoted unnamed sources as saying.

From early next year, diesel exports containing 500 ppm of sulfur will likely make up about half of Iran’s overall diesel shipments, compared with about less than 10% currently, the report said.

The National Iranian Oil Company (NIOC) “is aiming to increase its low sulfur (diesel) exports and reduce the high sulfur to about 50-50 as refineries are upgrading," Reuters said.

NIOC also said it will reduce its gasoline imports and condensate exports once the first phase of its Persian Gulf Star Refinery, described as the world's largest condensates refinery, starts up by end-March 2017.

The lifting of sanctions in February has allowed Iran to embolden its presence in international markets.

New crude grade to hit market

On Monday, a senior NIOC official said the country will begin exporting about 300,000 barrels per day of a new crude grade by year-end.

The West Karoun blend from oilfields near the border with Iraq will help Iran boost its market share which shrank under sanctions in 2012.

Iran is currently building a pipeline and a new terminal near Kharq Island to export the new grade of crude, director for NIOC’s international affairs Mohsen Qamsari said.

The country is producing just over 3.8 million bpd of crude and could reach 4 million bpd in a few months, he added. More than 60% of the exports go to Asia but shipments to Europe are expected to rise to 500,000 bpd in September.

The volume is set to increase if current talks with Arab Petroleum Pipelines Company (SUMED) to lease storage tanks for shipment through Egypt’s Suez Canal succeed, Qamsari said.  


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