IRAN - Overseas Refining Interests.

Iran under the Pahlavi regime was the first OPEC member to invest in overseas oil refining. Shortly after the Islamic regime came to power in 1979, Tehran decided against investing abroad. But in recent years that decision was reversed. With pressure built up on Iran from the US, specifically targetting the oil industry, NIOC has considered expanding its downstream interests in Asia. It has negotiated downstream partnerships in China, India, Indonesia, Malaysia, Pakistan, Vietnam, etc. NIOC has kept its holdings in India, involving a 130,000 b/d refinery in Madras. The JV was set up in 1971 between NIOC, Madras Refineries Ltd. (MRL) and Chevron Chemical Co. of the US. Initially NIOC held a 13.5% equity, worth $2.3m, in the venture. In 1985, it increased the stake to 20% by investing $15m. But later NIOC's stake was reduced to 16%. Since the 1970s, NIOC had been supplying about half the refinery's needs. Supplies were raised to 83% of the plant's throughput in 1985. In late 1998 MRL announced a plan to build a 60,000 b/d refinery, a power plant and port facilities. NIOC's marketing boss Ghanimi-Fard then said Iran might take part in some of the projects. In the early 1970s, NIOC took a 17.5% stake in South Africa's Sasol refinery in Sasolburg (Orange Free State). The deal involved a 20-year agreement under which NIOC was to supply 70% of the refinery's crude oil requirements. NIOC revived the South African partnership after Mandela came to power. Currently, six South African companies buy Iranian crudes. An agreement for NIOC to store crude oil at the Saldhana Bay tank farm, was signed on Aug. 31, 1995. The Islamic regime sold its 50% stake in a refining venture at Onsan, South Korea, where the Korea-Iran Petroleum Co. (KIPC) was established in 1974. Construction of the refinery, with a capacity of 60,000 b/d, was completed three years later. In the early 1980s NIOC's share was sold at a price far below what it would get today. In May 1998, NIOC was negotiating with Hanwha to buy a controlling stake in its 275,000 b/d refinery. But Hanwha's oil operations were taken over by Hyundai in early April 1999. China is seen as another important partner. In May 1997, then oil minister Aghazadeh signed an initial agreement for NIOC to invest in Chinese refineries that would process Iranian crudes. Later Sinopec signed an agreement with NIOC to build a JV refinery in China. Pakistan and Iran signed an accord on Aug. 19, 1996, to build a $1.1 bn, 120,000 b/d refinery at Bin Qasim Port, 50 km south-east of Karachi. This would be Pakistan's largest, to be shared equally between Pakistan's State Petroleum Refining and Petrochemical Corp. (Perac) and NIOC. Proposed since 1990, the project is to include a pipeline to supply Iranian Heavy crude for the plant. In the initial stage, the crude would reach the refinery by sea. The plant would eventually have another 20,000 b/d unit and double Pakistan's refining capacity. The complex is proposed to have an atmospheric distillation unit, a heavy naphtha hydro-treating reformer, a light gas-oil hydrocracker, a delayed coker hydrocracker and sulphur plants. Financing problems have delayed this project, however. Several other such refining projects have been proposed. On Feb. 27, 1997, then deputy foreign minister Allaudin Borujerdi said during a visit to Dhaka that Iran would build an $800m refinery in Bangladesh. In July 1997, the secretary general of Iran's Chamber of Commerce, Industry and Mines Ali Shams Ardekani signed a preliminary accord with with the Muslim autonomous state of Mindanao, the southern Philippines, where Iran was to invest up to $4 bn and projects were to include a 150,000 b/d oil refinery. But since then nothing concrete has emerged. In 1991, plans were announced for a $1.2 bn JV with Malaysia and Indonesia for a 100,000 b/d refinery to be located in Kedah state (Malaysia), which was to include an oil storage centre for distribution to Asian/Pacific markets and a 20m barrel terminal. In late 1994 NIOC was reported to have pulled out of that project. In 1995, it was said that NIOC was discussing a 100,000 b/d refinery in Vietnam, following a preliminary agreement signed in May 1994. In more recent years, NIOC was said to be among potential investors in the Trans-Malay project, promoted by Chiyoda Corp. of Japan, which would include a 2m b/d pipeline and major crude oil storage facilities (see survey of Indonesia in OMT No. 11).