Minister Floats Idea of Building Small Oil Refineries in Border Areas

EghtesadOnline: Oil Minister Bijan Namdar Zanganeh says his ministry is ready to issue licenses for constructing small oil refineries in the border regions.

News ID: ۷۴۷۵۹۶

18 June 2019

"Building refining centers with a maximum 100,000 barrels per day capacity near the borders can help the country expand economic ties to neighbors and also circumvent the unilateral US sanctions," Zanganeh was quoted as saying by ISNA.

Iran's oil industry is largely state-owned and usually tangled with political issues and that is why sanctions can easily undermine this key sector, the minister said.

Washington withdrew from the international Iran nuclear deal in May 2018, after President Donald Trump abandoned the historic agreement and imposed tough new economic sanctions. He says he wants a new and compressive deal with Tehran. Iran has said it is not interested, Financial Tribune reported.

Under the present circumstances, private companies can play a role in minimizing the negative economic effects of the US restrictions by getting involved in oil and gas projects, namely refining projects, he added.

"The Oil Ministry cannot embark on such plans due to financial constraints," the minister admitted, noting that the ministry welcomes proposals from qualified private firms willing and able to undertake refinery construction projects near the borders."

Independent energy experts and state officials say  strengthening bonds with the international community,  especially neighbors, has big benefits because “the more they depend on each other the less they will be harmed in critical situations.”

Zanganeh asserted that infrastructure, namely crude supply pipelines for refineries in the border areas is not in place and oil should be transferred by trucks to destinations including places far and wide.

A Critical Issue

Moreover, deciding about the ideal location for the refineries is a crucial issue because “not all neighbors may need petroleum derivatives.”

Unlike Iraq, Pakistan and Turkey, Turkmenistan has no need for petroleum products and importing petrochemicals is a priority fort that republic.

The Oil Ministry has said in recent months that the National Iranian Oil Company is selling oil and other products in the "grey market," but has never provided details.

According to deputy oil minister, Amir Hossein Zamaninia, NIOC has mobilized its resources and is selling oil in unofficial markets.

Zamaninia gave no details about the market, but Iran is widely reported to have sold oil through private firms during sanctions earlier this decade.

"We certainly are not selling 2.5 million barrels per day as under the (nuclear deal)," he said, adding that selling crude in the grey market is not smuggling.

“This is akin to fighting sanctions that we do not see as just or legitimate.”

Experts including Seyyed Mohammad-Ali Khatibi, Iran's former OPEC governor, believe that buying shares or building refineries in other countries could also help ensure long-term demand for Iranian oil.

All said, to embark on such initiatives, the Oil Ministry must first get authorization from the government and the parliament.