Cut in Costs of Oil Equipment Imports

EghtesadOnline: The lifting of international economic sanctions last year helped Iran cut costs for import of essential equipment for the key oil industry.

News ID: ۷۴۱۴۲۵

09 May 2017

Abbas Kazemi, managing director of the National Iranian Oil Refining and Distribution Company (NIORDC), made the statement in a news conference on the sidelines of the 22nd International Oil, Gas, Refining and Petrochemical Exhibition in Tehran, IRNA reported Monday.

“Under international sanctions, we had to pay roughly three times the average global price for oil equipment and catalysts, and were forced to do so through Chinese dealers,” Kazemi noted.

Iran faced several hurdles under the sanctions, including foreign companies that overcharged for equipment, having to deal with one or several brokers, high transportation costs and extra expenses for the transfer of foreign exchange, Financial Tribune reported.

According to published reports, prior to the sanctions, the initial investment to produce crude oil from Iranian fields was roughly the equivalent of $7,000 per barrel.  After the restrictions were tightened, which forced Tehran to turn to Chinese contractors, investment costs soared to $35,000 per barrel.

Iran spent $160,000 a day to lease foreign drilling rigs when sanctions were in place, but costs have were halved after the implementation of the nuclear deal in January.

Kazemi added that the easing of sanctions has allowed Iran to embark on diesel exports. "Not long ago, we relied on imports to meet domestic demand for diesel," he said, adding that the country is on its way to self-sufficiency in gasoline production upon the planned completion of the giant Persian Gulf Star Refinery in Hormozgan Province by March 2018. Iran on average imported 12 million liters of gasoline daily in the previous fiscal to meet domestic demand of around 74 million liters a day.

Pointing to the increasing number of international buyers of petroleum products from Iran, Kazemi said, “For the first time, we are witnessing heavy tanker traffic to load fuel products.” According to the official, Iran is building new jetties at its southern oil terminals to accommodate more tankers.