Iran is taking its oil future into its own hands despite ongoing US sanctions. With higher oil sales and revenues in 2021, Iran plans to invest in its oil industry by opening a new refinery, building a new pipeline and promoting international ties to improve its export opportunities. While U.S. sanctions continue to limit Iran‘s oil exports, that doesn’t stop the country from continuing trade where possible and preparing for life after sanctions.
This month, the head of the National Iranian Oil Company (NIOC), Mohsen Khojasteh-mehr, stated as much Oil revenues increased significantly in 2021. This has been helped by both public and private sector investment in the country’s oil industry. Iran has seen its sales of crude oil, gas liquids and petrochemical products increase in recent months.
Oil Minister Javad Owji reported last week that Iran’s budget for the year beginning in March has included oil sales of 1.2 million bpd. This is an essential goal since China is Iran’s only officially known oil importer. It’s clear that Iran has been exporting oil in recent years, but due to ongoing US sanctions, no other country has admitted to importing Iranian oil.
Iran is nonetheless investing in its oil industry by opening a super heavy oil refinery on the southern island of Qeshm. President Ebrahim Raisi opened the first phase of the $220 million Qeshm refinery last week. The new facility offers Iran a significant opportunity to increase its petrochemical production as crude oil from the Soroush and Nowruz oil fields enters the refinery. It has the potential to turn 35,000 bpd super heavy crude oil into a variety of products including bitumen, naphtha, diesel and light oil. And that number is expected to increase to around 100,000 barrels per day within the next three years.
Elsewhere, the government is planning a new pipeline project. This month, the National Iranian Oil Refining and Distribution Company (NIORDC) signed a MoU with Bank Mellat to finance the Construction of a strategic oil pipeline over a period of four years. The Tabesh Pipeline, which is being built to connect Kerman and Razavi Khorasan provinces, is expected to be 948 km long and cost $425.1 million. This price includes three terminals and two pumping stations. NIORDC is targeting a total transportation capacity of 150,000 bpd of gasoline products to ensure greater fuel security in eastern and northeastern Iran.
Iranian Oil Minister Javad Owji specified, “If this pipeline did not exist, it would take about 800 to 1000 tankers a day to transport this product.” “The project is important for the firing of power plants and industries [in this region]but also for export to neighboring countries like Afghanistan and Pakistan.”
Still, Iran remains firmly under US sanctions, limiting the oil-rich country’s growth potential. Iran and the United States continue their standoff over reviving the 2015 nuclear deal, but despite obstinacy from both sides Iran and the US will both benefit from the conclusion of the contract. For Biden, it would mean advances in US foreign policy after a chaotic exit from Afghanistan. For Iran, this would mean easing conflicts as well as the potential to revitalize its economy through higher oil revenues and more trade in general.
More recently, Iran has gained greater support from major world powers China and Russia in its fight against the US after years of almost total opposition. A 25-year cooperation agreement between the two countries was announced at a meeting between Foreign Minister Wang Yi and Iranian Foreign Minister Hossein Amirabdollahian. Wang explained at the meeting that the The US bore the main responsibility for the ongoing difficulties with Iran over its unilateral withdrawal from the 2015 nuclear deal – the Joint Comprehensive Plan of Action (JCPOA). He also said China opposes illegal unilateral sanctions against Iran.
Similarly, at a meeting between President Vladimir V. Putin and President Ebrahim Raisi this week, the Russian leader said his country had “resisted America for 40 years.” He suggested that the two states, along with China, should form a united front against the US despite significant differences between the two states, according to Putin said “We work very closely together on an international level.”
As US sanctions against Iran continue and tensions mount over ongoing negotiations, Iran appears determined to expand its oil industry. With plans for increased oil sales next year, greater oil security through the construction of a new pipeline, and increased petroleum product production thanks to its new super-heavy crude oil refinery, Iran is clearly preparing to be the focus in regional oil production. And with the backing of big players like China and Russia, it’s only a matter of time before Iran achieves that goal.
By Felicity Bradstock for Oilprice.com
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