Post-sanctions: Any lessons from Iran oil, gas industry?

While Nigeria dithers with its oil and gas industry reform, Iran despite emerging fresh from sanction is pushing on aggressively. Recent attempts to unbundle the state oil company, Nigerian National Petroleum Corporation (NNPC) has been met by stiff resistance.

The plan to split up the NNPC as part of an ongoing transformation process according to the  Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation Ibe Kachikwu was for the corporation to start making profit by year-end adding that for the Nigerian oil and gas industry to make “remarkable progress”, there is need for all stakeholders in the upstream, midstream and downstream sectors to be on the same page on cost control, contracting circle, technology and environmental issues.

However, Lumumba Okugbawa, PENGASSAN Acting General Secretary Lumumba Okugbawa said in a statement from the union said that the unbundling plan will put off investors at a time when the nation needs foreign spending most and explained that the government did not take into consideration an existing law that established the NNPC before plans were in place to unbundle the corporation.

“There is an existing NNPC Act of 1977 that set up the NNPC. This Act has many provisions that deal with structure and operations of the corporation,” Okugbawa said.

“For the government to do anything with the current NNPC, the Act must either be repealed or amended to accommodate the planned restructuring. If not done, it will equal to lack of respect for the rule of law on the part of the government.

“The Petroleum Industry Bill (PIB) that is expected to be the legal instrument for the ongoing reforms of the oil and gas industry will be meaningless if the government should introduce plans outside of the reforms. The PIB is germane to the development of the nation’s oil and gas Industry.

“Above all, the various stakeholders, especially the unions, should be involved before any major change is carried out in the organization and before any unilateral statement capable of heating up the industrial climate is made.”

Iran trudges on

With all the forecast of gloom and doom and in the era of low crude oil prices, Iran is pushing on.  Iran aims to increase exports by 500,000 bpd this year. Other than Europe, its main targets for increased sales in Asia are China, India and South Korea. Iranian oil sales to Asia are estimated to have increased by around 100,000-200,000 bpd in February, after the end of sanctions, which paved the way for Iran to rejoin the global banking transaction network.

Iran had been unable to sell crude to European firms since 2012 when the EU imposed sanctions over its nuclear programme. Since the restrictions were lifted in January, Iran has sold four tankers – 4 million barrels – to Europe, including to France’s Total, Spain’s Cepsa and Russia’s Litasco. That equates to only around five days’ worth of sales at the levels of pre-2012, when European buyers were purchasing as much as 800,000 barrels per day (bpd) from the country

Iran has managed to sell only modest volumes of oil to Europe since the lifting of sanctions weeks ago and several former buyers are staying away, citing legal complications. Many former big buyers, including Anglo-Dutch major Shell, Italy’s Eni, Greece’s Hellenic Petroleum and trading houses Vitol, Glencore and Trafigura, are yet to resume purchases.

Before 2012, Iran was exporting around 2 million bpd, with the bulk going to the Asian countries, which retained most rights to buy Iranian oil when the EU imposed sanctions but informally agreed to limit their collective purchases of Iranian crude to around 1.2 million bpd. Tehran has been banned from selling oil to the United States since the 1979 revolution.

Iran to focus on gasoline export

Iran, a net importer of gasoline, is now turning its attention to start exporting the fuel once the Persian Gulf Star oil refinery begins operating in late August. The country currently imports 9 million liters per day of gasoline.

Iran’s domestic consumption rose 2 percent to 70 million liters (440,000 barrels) a day over the past 11 months compared with the same period in the previous year..

The country plans to spend $1.7 billion to modernize its refineries according to Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs.

The Persian Gulf Star facility at the southern port of Bandar Abbas will be Iran’s biggest refinery upon completion, with a planned processing capacity of 360,000 barrels a day.

Persian Gulf Star will have a daily production of 36 million liters of gasoline, 14 million liters of diesel and 370,000 liters of aviation fuel.

The refinery is to be completed in three phases, each of which will have a processing capacity of 120,000 barrels a day. The first phase had been scheduled to begin operating this month while the second and third phases are to start at six-month intervals after the first.

FRANK UZUEGBUNAM

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