In order to know how the JCOPA been instrumental in Iran's economy, it would be enough to review the economic growth data for the Iranian calendar year to March 2017. In that calendar year, the JCPOA implementation helped remove oil restrictions and Iran's economy grew 12.5% thanks to increased oil production and export. Iran's economy had shrunk 1.8% on average when the country was under sanctions from 2012 to 2015.
Some experts believe that had no agreement been reached between Iran and the world powers the sanctions would have reduced Iran's oil exports to nil.
According to official data, Iran was selling 2.3 mb/d of oil before tough sanctions were imposed. After European governments tightened sanctions on Iran's oil sector, the exports fell to 1 mb/d.
Since the agreement was signed and implemented, Iran's oil barrels have found their way into Asian and European markets. Furthermore, Iranian petroleum ministry officials plan to sign nearly $130 billion worth of new contracts to raise the country's crude oil production capacity to more than 4.7 mb/d under the country's 6th Five-Year Economic Development Plan. To that end, memorandums of understanding have thus far been signed with international giants like Royal Dutch Shell, France's Total, Russia's Gazprom Neft, Lukoil, Tatneft and Zarubezhneft, Malaysia's Petronas, Indonesia's Pertamina, Thailand's national oil company, Germany's Wintershall, Austria's OMV, Japan's Inpex, Norway's DNV plus other European and Asian companies.
Over the past two years, Iran has managed to lift its oil exports by more than 850,000 b/d, the biggest increase among fellow OPEC member states.
Iran's deputy minister of petroleum for international affairs and commerce, Amir-Hossein Zamani-Nia, has said the JCPOA's intrinsic strength and equal interests were behind US President Donald Trump's decision to extend Iran sanctions waivers.
"Negotiations with foreign companies for their presence in Iran's petroleum industry have picked up speed. Basically, the JCPOA overtures in the petroleum industry have allowed us use all our capacities for development, production and export and there is no specific obstacle in this way," he said.
Iran's crude oil and gas condensate exports, which had fallen below 1 mb/d before the JCPOA was signed, grew to 2.559 mb/d in the first quarter of the current calendar year which started on 21 March 2017.
Therefore, despite the views of some Iranian and foreign critics, the JCPOA was advantageous for Iran. Iran's crude oil and gas condensate exports stood at 2.487 mb/d in the calendar year to March 2012, 1.361 mb/d in the calendar year to March 2013, 1.284 mb/d in the calendar year to March 2014 and 1.389 mb/d in the calendar year to March 2016. The JCPOA was implemented in January 2016, showing its positive effects in less than three months.
Chief among the achievements of the JCPOA are: two-fold growth in Iran's oil exports, increased hard currency revenues for the country, facility in attracting financial resources, the start of renovation of refineries, foreign investors' readiness to invest $80 billion in Iran and the elimination of intermediaries.
The JCPOA caused rivalry among foreign companies bidding for Iran's projects. In this way Iran could select the most qualified companies at minimum costs and give maximum share possible in joint ventures to their Iranian partners. Therefore, Iran plans to put out to tender major upstream and downstream projects in coming months. Iran has cleared 29 companies from 12 countries to bid for oil projects in Iran under the new model of contracts – Iran Petroleum Contract (IPC). They include Shell, Total, Eni, Petronas, Gazprom, Lukoil and companies from China, Japan, Austria and other countries.
1st Deal with Total
Total was the first oil giant to strike an oil deal with Iran. The French energy major sealed a $5 billion agreement to develop Phase 11 of the supergiant South Pars gas field, which Iran shares with Qatar. Shell also signed a heads of agreement in 2016 to develop South Azadegan and Yadavaran oil fields and Kish gas field.
The first bidding round for the development of Azadegan oil field, which is the biggest oil field in Iran, is expected to be held this year. Russia's Zarubezhneft has also agreed to conduct feasibility studies on two oil fields which Iran shares with Iraq. Norway's Aker has agreed to modernize Iran's petroleum industry while OMV of Austria inked a protocol last May for projects in western and southern Iran. South Korea's engineering company Daewoo has signed a memorandum of understanding to build an oil refinery in Jask Port in southern Iran. Italy's Saipem signed an MOU for cooperation in pipeline projects, upgrading refineries and development of Tous gas field in Khorasan Razavi Province.
After Total, Norway's DNO was the second Western energy company to announce its readiness to study development of Changuleh oil field in western Iran. Lukoil of Russia hopes to make a decision for the development of a second oil field in Iran. Wintershall's subsidiary BASF signed an MOU with the National Iranian Oil Company (NIOC) in April 2016. BASF said last February that it was in talks with Iran for investment in oil and gas projects before deciding to finalize its presence in Iran.
33 Post-JCPOA Oil MOUs
After the removal of sanctions under the JCPOA, the NIOC embarked on negotiations with Iranian and foreign companies for the development of oil and gas fields. The state-run company managed to seal 33 oil MOUs by June 2017.
The most remarkable agreement was the one signed with a Total-led consortium which includes China's CNPCI and Iran's Petropars. Many experts viewed the Total-NIOC deal as a starting point for a renewed presence of foreign companies in Iran's petroleum industry. Now after the signature of deal with Total, CNPCI and Petropars for Phase 11 of South Pars, the top priority project is the development of Azadegan oil field. For that purpose, negotiations have started with Rosneft of Russia, CNPC and Sinopec of China, Eni of Italy, Maersk of Denmark, OMV of Austria, ONGC of India, Pertamina of Indonesia, Petronas of Malaysia, Shell, Wintershall, Total and a Thai firm.
The planned bidding round for Azadegan will take time. Within six months, it will come out which company would lead the development of Azadegan.
An MOU has also been signed between the NIOC and Shell to study Yadavaran. After Azadegan, Yadavaran will be the second field to be put out to tender for development under the IPC model.
Last July, the NIOC also signed an MOU with Petropars and Japan's Toyo for the renovation of installations at Salman field and increased gas production from it.
Among foreign countries, Russia has signed the highest number of MOUs with Iran. Lukoil, Zarubezhneft, Tatneft and Gazprom Neft have agreed to study respectively Ab Teymour & Mansouri, Abadan & PaydarGharb, Dehloran & Shadegan, and Cheshmeh-Khosh &Changuleh.
More MOUs are expected to be finalized before the end of Iran's calendar year in March. The Resilient Economy Committee requires the NIOC to conclude 10 agreements for the development of oil and gas fields in Iran. Required arrangements are being made within the framework of tender, and negotiations held in parallel.
Recently, the NIOC and Gazprom launched talks for the development of the Kish, Farzad A, Farzad B and North Pars fields. The Russian firm has demanded more time from Iran to submit the findings of its studies, and Iran has agreed with that. Last September, Zarubezhneft's representatives outlined solutions for enhancing recovery from the Aban and PaydarGharb oil fields in Tehran.
The Darquain field, which has so far been developed in two phases, is set to start its third phase development under the IPC model. To that end, MOUs have been signed between the NIOC and Eni and between the Philippines' national oil company and Iran's Ghadir Investment Company.
Kish is also in the line to undergo development under the IPC model. So far, Shell, Eni as well as Iranian Ghadir and Sane' investment companies have expressed interest for its development and have signed MOUs to study the field. Kish is a big gas field whose development will be done in several phases.
Changuleh, a jointly owned field, is very similar to Azar field. So far, three MOUs have been signed between the NIOC, Gazprom Neft, Thailand's PTTEP and Norway's DNO on studying Changuleh.
OMV has also signed an MOU with the NIOC to study the Band Karkheh field, and has presented the findings of its studies. The PTTEP representatives have outlined the conclusion of the Thai company's studies on Balal, Changuleh and Dalpari fields in a meeting with the NIOC officials.
The Thai state-run oil firm also signed MOUs with the NIOC to study the same three fields and presented its findings six months later in July 2017.
In addition to signing MOU with the Thai company, the NIOC had earlier signed MOUs with South Korea's Gas Company (KOGAS) to study Balal, and with OMV to study Dalpari. Lukoil and Pertamina have submitted their findings about development of the Bangestan reservoir of Mansouri oil field.
The NIOC and Singapore's Berlanga also signed an MOU and a non-disclosure agreement to study, evaluate and develop the Dalpari oil field. Furthermore, an MOU was signed between the NIOC and Norway's ORG to study the Sardar-e Jangal oil field as well as three exploration blocks in the Caspian Sea.
MOUs were close to being signed with Maersk for the development of the South Pars oil layer and Farzad-B gas field; however, Total's acquisition of Maersk at a time Total is present in the Qatari section of South Pars and financial disputes between Iran and India over Farzad-B delayed the signing of MOUs.
An MOU for the renovation of installations and increased production from the Salman gas field between the NIOC and Toyo, an MOU for studying Pazanan and Phase 3 of Darquain with PTTEP, MOU for studying the Golshan and Ferdowsi gas fields with Malaysia are among protocols inked in the past two years between the NIOC and foreign firms.
Post-JCPOA Renovation in Refining and Distribution
It would make sense if we describe the JCPOA as fresh blood in the vessels of Iran's petroleum industry. During the years of sanctions, non-implementation of many projects had halted this industry, but it has been revived thanks to the JCPOA. Add to this the Iranian creativity achieved during years of international sanctions.
Iran's bargaining chip in talks with foreign companies and its possibility to choose investors are new conditions faced by leading international companies. Top refining companies have rushed to win a toehold in Iran's oil sector.
The show of inclination by European, American and Asian companies for renewed relations with Iran and presence in the country's oil projects including refining facilities is indicative of the standing of Iran's petroleum industry on the planet. The National Iranian Oil Refining and Distribution Company (NIORDC), one of the four main subsidiaries of Iran's Ministry of Petroleum, is targeting materialization of negotiations on refining agreements.
The signature of MOU with South Korea's Hyundai to study a project for reducing fuel oil production at Tehran's oil refinery, MOU with Brazil's STR, Spain's Magtel, Ghana's Quantum Limited and Sierra Leone's oil company during the February 2014-2016 period for building refineries in those countries are among the achievements of these years. Six months after the signature of MOUs, negotiations begin for a final agreement.
Final talks between Abadan Oil Refining Company and Japan's JGC and Marubeni, between Tehran Oil Refining Company and Japan's JGC and Mitsui, between Isfahan Oil Refining Company and South Korea's Dailem, between Tabriz Oil Refining Company and South Korea's SK, and between Bandar Abbas Oil Refining Company and Chiyoda and Marubeni are nearing conclusion for economic and technical feasibility studies on boosting the quality of refined products and reducing fuel oil production.
Some other achievements of the JCPOA are as follows: Signature of contract between Abadan Oil Refining Company and Japan's Hitachi, examining technical and financial proposals of Italy's Remosa for the supply of products, the show of inclination by catalyst manufacturing companies Grace UOP and Albemarle for bidding for catalyst supply to gasoline production unit, France's Dalman's agreement to operate some facilities, British Simon Carves' agreement to remove problems of the sulfuric acid recovery unit.
Alongside these achievements, the main outcome of the JCPOA in the refining industry was the finalization of agreement for Phase 1 development and capacity stability of the Abadan refinery through a credit line offered by China. A letter of credit is being opened by Bank Mellat.
Furthermore, signature of a trade contract between Iran and China for Phase 2 development and negotiations with China's Sinopec for financing represent another JCPOA achievement for the Abadan refinery.
An agreement was signed with France's Axens for the purchase of catalyst for the hydrocracking unit of Isfahan oil refinery. It is in the stage of registration of order. Suppliers of commodity and equipment have expressed willingness to continue cooperation while negotiations have been held with South Korean banks to finance new development and optimization projects. A heads of agreement was signed between the Isfahan refinery and South Korea's Dailem.
At Bandar Abbas refinery, permission has been issued for importing commodities made in European countries and whose purchase was impossible during years of sanctions. Catalyst purchased for the Isomax unit is being loaded for delivery. Talks have been held with Japan's Mitsui and Gyuda about upgrading the refinery. Economic and technical feasibility studies have been held for that purpose. Furthermore, economic and technical feasibility studies are under way for the upgrading of the refinery by South Korea's SK. An agreement has been sealed with Albemarle for purchasing catalyst for the Isomax unit.
Clearance and transport of compressors and furnaces of gasoline production and hydrogen purification of gasoline manufactured by Siemens, startup of the distillation unit of Phase 1 and related sections like steam and power supply including power plants, power distribution posts, water sections including water pools, refinery pools, water desalination plants, firefighting water network, air unit, nitrogen, storage facilities, flare, controlling system and fuel unit have already been done. Naphtha and diesel have been produced. Moreover, thanks to the JCPOA, Euro-5 gasoline is being produced in Phase 1 of this refinery and officials have said that other phases of this refinery would come online in coming months.
Iran's refining industry is set to turn into one of the most powerful sectors of oil industry in Iran by next March as more refining projects are becoming operational. Chief among these projects are foreign investment and use of domestic potential for self-sufficiency in gasoline production, minimizing supply of fuel oil to refineries and sustainable export of gasoline, gasoil, fuel oil, kerosene and liquefied petroleum gas.
Post-JCPOA Petchem Industry
The standing of petrochemical industry is no secret to anyone. During years of imposing unfair sanctions on Iran, the petrochemical industry was instrumental in keeping the Iranian economy afloat. However, growth and development are key to sustainability. For the petrochemical industry, access to global markets requires expansion of international relations.
The removal of sanctions created the best conditions for Iran's petrochemical industry to restart its development.
Abundant oil and gas reserves in Iran constitute a strategic advantage for the country. The international companies' awareness of advantages of investment in Iran's petrochemical industry encouraged these companies to seek opportunities for investment in this sector. These advantages include abundant and low-cost feedstock, access to high seas, sufficient land, necessary infrastructure and manpower.
Total of France, Linde of Germany, BASF, Shell and Mitsui are among companies that have expressed interest in Iran's petrochemical industry after the implementation of the JCPOA. Talks have been held with these companies, resulting in the signature of a memorandum of understanding with Total for studying a petrochemical project, with Shell for assessing investment and transferring technological knowhow particularly for GTL, with South Korea's Hyosung for a PDH/PP (converting LPG and propane to propylene and polypropylene), and with Linde for air separation units within the framework of BOO and BOT deals and transfer of technological savvy and taking facilities from German banks.
Signature of deals with Itochu and Marubeni corporations for 320-million-euro usance (which could be raised to 640 million Euros if need be), signature of agreement for studying a petrochemical utility project in the second phase of Assaluyeh, signature of agreement with Mitsui on the Japanese bank JBIC's granting of financing facilities, signature of agreement with Franco-German Air Liquide for the development of technical knowledge and MTP-based engineering documents, signature of MOU with BASF for studying joint investment in a petrochemical plant and signature of MOU with Indorama on the feasibility study of joint projects in Iran are among other MOUs signed post-JCPOA.
Negotiations held with foreign banks and agreements made with Denmark, Japan, Germany and Britain for the financing of petrochemical projects are among other post-JCPOA achievements in this industry.
It would be a lengthy process to convert the MOUs into agreements. Therefore, the road must be paved for foreign investors. It is noteworthy that expansion of relations with the world and reduction of investment risks in the country could sustain investment and guarantee a stronger presence of Iran's petrochemical industry in world markets and national economic growth.
In addition to the necessity of attracting investment to develop the petrochemical industry, the improvement in petrochemical exports post-JCPOA could not be ignored. During years of sanctions, exporting petrochemical cargoes was difficult. But thanks to the 11th administration's efforts and the implementation of the JCPOA, problems of insurance, transport and banking transactions have been relaxed; therefore, exports have increased.
Activities related to petrochemical industry are mainly process-based. Therefore, due to the increased diversity of petrochemical products and tough rivalry between petrochemical manufacturing companies in global markets, the industry needs to apply modern technologies to have sustainable growth. Application of cutting edge technologies is a winning card for development in every country. Therefore, improving and renovation petrochemical industry processes and upgrading the quality of products must be taken into consideration much further.
Gas Rivalry
The MOUs signed in Iran's gas industry since the JCPOA took effect have been less numerous than in other sectors. The main reason is Iran's self-reliance in the gas industry. However, the MOU signed between Iran and Russia for cooperation in gas industry is a special one as these two countries have always been considered as gas rivals. Recently, a 30-member delegation of Gazprom led by the company's deputy CEO visited Iran and held talks with the National Iranian Gas Company (NIGC). In light of broad domains of cooperation in gas industry, five working groups were agreed to be established to focus on gas trading, research and development, production and joint projects and gas utility.
During the Gazprom-NIGC talks, investee projects in Iran were outlined. It was noted that Iran would be ready to attract more than $62 billion in investment to fund its infrastructure projects in coming years. One year after the NIGC-Gazprom working committees' talks, a memorandum was signed for cooperation between the two countries. The CEOs of NIGC and Gazprom signed the MOU.
JCPOA Advantages
The minimum advantage of the JCPOA for Iran was that the country managed to regain its position in global oil markets, which in turn help the country grow its economy and overcome economic challenges. Of course many opportunities for enhancing international transactions have been lost; however, Iran has got minimum advantages. Therefore, as long as it is possible to use it we have to resist political games like the US hostile policies.
Thanks to the JCPOA, Iran managed to at least increase its oil revenue by 90% from the post-JCPOA period. However, it does not mean that Iran should not seek foreign investment in its petroleum industry because the presence of foreign investors is not in conflict with economic, political and development indices. Under the present circumstances, the presence of foreigners is a must because the experience of foreigners' presence in Iran's petroleum industry, their investment and transfer of technology a decade ago showed acceleration in Iran's move forward. Iran's petroleum industry needs $200 billion in investment, which domestic resources cannot provide.