The Doroud 1&2, Salman, Abuzar, Foroozan, and Sirri fields comprise the bulk of Irans offshore oil output. Iran plans extensive development of existing offshore fields and hopes to raise its offshore production capacity significantly. In early October 2003, Iran re-launched a tender for eight exploration blocks in the Persian Gulf after receiving little interest from a January 2003 announcement (Iran may launch a second licensing round in the next few months). One area considered to have potential is located near the Strait of Hormuz. Another interesting area is offshore near Bushehr, where Iran claimed in July 2003 to have discovered three fields with potentially huge - 38 billion barrels oil reserves. In May 2004, Brazils Petrobras signed a 3-year, $32-$34 million deal to develop the Tousan fields of the Persian Gulf.
In late 2001 and early 2002, Shell brought part of the $800 million Soroush-Nowruz development online, with production reaching 190,000 bbl/d in June 2005. The two fields are located offshore, about 50 miles west of Kharg Island, and contain estimated recoverable reserves of around 1 billion barrels of heavy oil (20° API). The heaviness and high sulfur content (3 percent) of the oil has made marketing Soroush-Nowruz oil difficult; in September 2005, Iran reportedly diverted Soroush-Nowruz production into storage rather than try to sell it at a steep discount. In addition, there were reports in early October 2005 of technical difficulties at the oil fields, reducing production to 100,000 bbl/d for a time.
In March 2004, the Iranian Offshore Oil Company (IOOC) awarded a $1.26 billion contract for recovery of NGLs and natural gas from Soroush, Nowruz, Foroozan, and Abuzar to Japans JGC Corporation. Ethane from the gas will feed an ethylene complex at the Kharg petrochemical complex. Iran reportedly hopes to become a major petrochemicals producer within 10 years.
Irans desire to become a player on the Caspian oil front has led it to push forward in the area of oil "swaps." This arrangement involves the delivery of Caspian oil to refineries, via the Caspian port town of Neka in northern Iran, for local consumption. An equivalent amount of Iranian oil is then exported through Persian Gulf terminals such as Kharg Island. Shippers normally pay a "swap fee" of $1.50-$2.00 per barrel, with swaps handled by Naftiran Intertrade Co. (Nico), the Swiss-based trading arm of NIOC. As of August 2005, about 60,000 bbl/d of Turkmen and Kazakh oil were being shipped to Neka. From Neka, oil is then sent to Tehran by the existing 180,000-bbl/d capacity Neka-Tehran pipeline. Eventually, Iran hopes to upgrade its facilities in order to greatly expand oil swaps, partly in order to compete with the 1-million-bbl/d Baku-Tbilisi-Ceyhan (BTC) pipeline, scheduled to open in late 2005.
Iran plans to boost capacity at its northern refineries at Arak, Tabriz, and Tehran in order to process additional Caspian oil, to boost Neka-Tehran pipeline capacity to 500,000 bbl/d, and also to increase port capacity at Neka to 500,000 bbl/d. In August 2003, a $500 million tender was issued to upgrade the Tehran and Tabriz refineries in order to handle 370,000 bbl/d of high sulfur Caspian crude. This follows a $330 million project, completed by a Sinopec-led consortium in late 2003, to expand storage at Neka and to upgrade the Tehran and Tabriz refineries.
In July 2005, Iran and Iraq signed an MOU on a swap agreement involving construction of a 24-mile, 350,000-bbl/d oil pipeline from Basra to the Abadan refinery in southwestern Iran. In exchange, Iran would ship refined products back to Iraq. In addition, Iran could allow Iraq to export crude through the Kharg Island terminal and to import refined products through the Iranian port of Bandar Mahshahr. One potential problem with this deal revolves around the ability of the Abadan refinery to process Basrah Light in significant volumes. Another is the fact that Iran already faces a severe shortfall in its own domestic gasoline supplies, making exports of gasoline problematic.
As of January 2005, Iran had nine aging (most built before the 1979 Iranian revolution) but operational refineries with a combined capacity of 1.47 million bbl/d. Major refineries include: Abadan (400,000-bbl/d capacity); Isfahan (265,000 bbl/d); Bandar Abbas (232,000 bbl/d); Tehran (225,000 bbl/d); Arak (150,000 bbl/d); and Tabriz (112,000 bbl/d). In order to meet burgeoning domestic demand for middle and light distillates (gasoline demand is growing at around 9 percent per year), Iran plans to increase its refining capacity, possibly to 2.2 million bbl/d by 2008, although this will be extremely difficult to achieve given the security situation in the country. One goal of this expansion is to allow Irans refineries to process a heavier crude slate while decreasing the fuel oil cut. Currently, Irans refineries produce around 30 percent heavy fuel oil and just 16 percent gasoline. In addition, diesel sulfur levels are slated for a major reduction (from 500 parts per million to 50 ppm by 2010), requiring significant additional hydrotreating capacity.
Iran has imported refined products since 1982, and these imports have been increasing rapidly. In 2005, Iran has been importing an estimated 170,000 bbl/d of gasoline at an estimated annual cost of around $3-$4 billion. According to Petroleum Argus, around 60 percent of this comes from European oil trader, Vitol, with another 15 percent coming from Indias 600,000-bbl/d Reliance refinery. For 2006, according to the FACTS consulting firm, Iran is expected to produce 266,000 bbl/d of gasoline, consume 462,000 bbl/d, and import 196,000 bbl/d.
In June 2004, Japans JGC reached an agreement with Iran to expand Arak to 250,000 bbl/d by 2009. In addition, Abadan is being expanded by 50,000 bbl/d, with completion expected by spring 2006 (in addition, a new, 180,000-bbl/d-capacity refinery is being planned for Abadan). Bandar Abbas is being expanded in several phases, adding around 250,000 bbl/d of capacity by 2010 (and significantly more after that). Two planned grassroots refineries include a 225,000-bbl/d plant at Shah Bahar and a 120,000-bbl/d unit on Qeshm Island. Under Iranian law, foreign companies are permitted to own no more than 49 percent of Iranian oil refining assets.
Iran exports crude oil via four main terminals - Kharg Island (by far the largest), Lavan Island, Sirri Island (reopened on April 13, 2003 for the first time since 1988, when it was damaged by an Iraqi air raid), and Ras Bahregan. Refined products are exported via the Abadan and Bandar Mahshahr terminals. Many Iranian oil export terminals were damaged during the Iran-Iraq War, but all have been rebuilt.