Thursday Nov 23, 2017

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New Chapter in Iran-Brazil Oil Cooperation

(Monday, October 09, 2017) 15:47

TEHRAN, (Shana) -- Iran and Brazil have agreed to come closer as the latter has technology and the former is rich in hydrocarbon. Brazil's Minister of Mines and Energy Fernando Coelho Filho recently travelled to Tehran and met with Iran's Minister of Petroleum Bijan Zangeneh.

 

After their talks, Zangeneh said: "The Brazilians have suggested that Iran supply oil to a refinery which is planned to be built in that country. Iran has also offered to Brazil's Petrobras the development of South Pars Oil Layer."

Coelho was not visiting Tehran for the first time. He travelled to Tehran in December 2016 when he said in a meeting with Zangeneh that strong banking relations would guarantee oil and gas cooperation.

Filho's official visit was aimed at driving Iran-Brazil oil talks into a new phase. These talks started in March 2015 when Iran's Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia welcomed Brazil's then minister of development, industry and trade, Armando de Queiroz Monteiro Neto, in Iran's capital. During those talks, Tehran expressed its readiness to have cooperation with Brasilia in the manufacturing of downhole and wellhead drilling equipment for the purpose of deep-water production, as well as in the development of oil fields within the framework of new model of oil contracts, known as "Iran Petroleum Contract" (IPC). 

Last March, Zamani-Nia met with Brazil's Ambassador to Tehran Rodrigo de Azeredo Santos and discussed grounds for oil and gas cooperation. The Brazilian side had shown inclination for purchasing crude oil from Iran.

After the last meeting between Zangeneh and Filho, Zamani-Nia told reporters that there was potentiality for cooperation between the two countries in many sectors.

"But since cooperation between the two countries does not enjoy a long history, it is a little bit difficult to prepare the ground for the start of cooperation," he said.

He said banking relations between Iran and Brazil would be reestablished soon after an Iranian delegation comprising representatives from the Central Bank of Iran and Iranian private banks travelled to that country.

SPOL Offered to Petrobras

Zangeneh said Brazil's state-run major Petrobras would send a delegation of managers to Iran to discuss development of the South Pars oil layer and cooperation in the Caspian Sea oil projects.

Zamani-Nia said Petrobras was equipped with required technology to develop the oil layer of South Pars, but it lacked sufficient finance, at least for now.

Denmark's Maersk had held talks for the development of the oil layer, but the purchase of its oil stocks by France's Total worried Iran. The reason is clear: Total is the operator of the Qatar-owned section of South Pars which is jointly owned by Iran and Qatar. The two countries have been vying for recovery from South Pars and Total's acquisition of Maersk would give rise to conflict of interests.

"Over the coming three to four months, we will hold intensive trade talks with oil companies," said Zangeneh.

Brazil's interest in cooperation with Iran is not limited to oil and gas sector. The South American major economy is also willing to manufacture electric and gas-fueled buses in Iran.

Zangeneh and Filho also discussed manufacturing of oil equipment in Iran to be used in Iran and also be exported to countries in the region. 
"The Brazilians have said that a group of Brazilian industrialists are to travel to Iran in coming months. Iran welcomes such a visit," he said.

Oil Supply to Brazil Refinery

Brazil renewed its request for Iran to supply crude oil to a refinery it plans to build in the future.

"It was agreed that an international consultant be hired by Iran to review the Brazilian party's proposal in terms of its concerns and requests, and then give its views," said Zangeneh.

The planned oil treatment facility would be able to process 600,000 b/d of oil. A Chinese company is to cooperate with Brazil in the financing and manufacturing of this facility.

Zangeneh said Iran would welcome the Brazilians' cooperation in Iran's IPC-based oil and gas projects. "It seems that the Brazilians are seeking to cooperate with Iran in the refining sector."

"We have not so far exported products to the American market and the American continent will be our final market for oil exports and this issue needs to be studied," said the Iranian minister.

Investment in Oil Projects

Filho said after his talks with Zangeneh that examining opportunities and grounds for cooperation between the two countries would be conducive to investment in oil projects.

He said representatives of Brazil's petroleum industry were intent on visiting Iran, adding: "After considering request for the Brazilian companies' technology and technical knowhow in Iran, we will review the expansion of cooperation."

"Undoubtedly, the presence of Petrobras here and examining solutions would be of help in future cooperation and investment," he said.

"We want to see what kind of help and which solution we can present in the technology sector because we already know that Iranian companies and other foreign firms like France's Total, which is a strategic partner of Petrobras in the world, would be ready for investment in Iran's oil and gas projects," said Filho.

He said that Iran's Zangeneh had welcomed Petrobras' cooperation in deep-water drilling in the Caspian Sea oil projects.

"Today, Petrobras is drilling for oil and gas in the depths of nearly seven kilometers offshore Brazil. Therefore, we have abundant savvy and technology in these sectors and we hope to be able to work together here," said Filho.

"I will hold talks with Iran's ambassador to Brazil and also with our ambassador here in Tehran in order to set a date for the future visit of a Petrobras delegation which would examine grounds for cooperation," he added.

Oil Market Balanced

Separately, Zangeneh gave positive assessment of Iran's oil market, saying: "I see the market in a balanced state."

"The compliance of members of the Organization of the Petroleum Exporting Countries (OPEC) [with an oil production cut deal] is in good conditions and the members' convergence about the supply cut agreement has not dropped over the past six months and has been on the rise," he said.

"Cooperation between non-OPEC countries, particularly Russia, is good with regard to the oil supply cut, and in my view the market is headed towards balance," said Zangeneh.

"The global agreement for output cut will continue by the end of the current year and there have been talks about its extension, but not finalized yet. But in my view, the level of crude oil storage still remains high," he added.

Zangeneh said Iran welcomed cooperation with non-OPEC producers, adding: "Cooperation does not mean oil production cut; however, it is unlikely that Brazil would join the supply cut agreement under the current circumstances."

Third Party Needed in IP Pipeline

Zangeneh also referred to Iran-Pakistan gas pipeline, saying he thought that Iran would finally start pumping gas to its eastern neighbor.

"However, based on our experience in recent years I think that a third party is needed to settle the Iran-Pakistan deal (in terms of finance and other commercial procedures)," he said.

"It means that a third company would agree to build the Pakistani side of the IP pipeline so that we would have peace of mind with regard to payment of gas cost," he added.

"The Pakistanis say they don't have money to build their side of the pipeline and there are concerns that even if the pipeline is built and gas is exported, they may not have capacity to pay money to us for gas exports," said Zangeneh. "A number of oil and gas companies in the world are willing to be engaged in the IP project as third party; however, no conclusion has been achieved yet."

Swap Operations Crucial

Zangeneh also touched on the resumption of crude oil swap, saying: "The important issue has been the resumption of crude oil swap operations. We can have cooperation with the three countries: Turkmenistan, Kazakhstan and Azerbaijan in this regard. Of course, we are in the process of receiving oil from international companies."

He said that swap deals are often for six months up to one year. He added that changes of parameters and price criteria needed to be taken into consideration in the swap deals.

"In swap operations, we compete with the Mediterranean market. Supplying oil in the Persian Gulf market must be more profitable than cargoes headed via the Mediterranean," he added.

Zangeneh said: "We are not after profits from crude oil swap operations and revival of these operations is of higher significance to us."

Iran resumed crude oil swap from the Caspian Sea after a seven-year hiatus.

Through swap operations, Iran will receive crude oil from the Caspian Sea littoral states at Neka Port and deliver the same volume to clients in the Persian Gulf at Kharg oil terminal.

In the first swap, 360,000 barrels of crude oil was transferred from Neka to Tehran oil refinery.

The oil swap project was halted in June 2010 at the order of then minister of petroleum. But when Zangeneh took office as Iran's petroleum minister in 2013 he insisted on the revival of the project noting that oil swap would give Iran a more active role in the oil trading of Caspian Sea states.

Iran-Russia Oil Deal on Track

Zangeneh also said that Iran was waiting for Russia to start receiving crude oil supplied by Iran.

"Iran has no problems in this regard. The Russian side had some banking issues, which have been resolved to some extent. For us, the banking issues have been resolved too," he said.

Zangeneh said a Russian bank was expected to open a letter of credit (LC) and handle relevant payments.

 

Courtesy of Iran Petroleum