31 January 2023 - 12:58
  • News ID: 468217
Investment in Crude Oil Storage Capacity

TEHRAN (Shana) -- A meeting was held to introduce opportunities for investment in crude oil storage tanks construction and operation, required by National Iranian Oil Company (NIOC), within the framework of public-private partnership (PPP). This is the first time the private sector is given the chance for investment in the crude oil storage sector. NIOC intends to enhance its crude oil storage capacity by 7.7 million barrels.

Iran’s oil production capacity is now close to 4 mb/d, which the country plans to increase to 5.7 mb/d in coming years. Achieving this goal requires an investment of $90 billion over a ten-year period. Meanwhile, the crude oil storage sector is very important for two reasons: continuity of production and market management and creation of added value resulting from oil sales.

There are storage tanks for 130 million barrels of crude oil in Iran, of which 110 million barrels is available and 20 million barrels under construction. National Iranian Oil Refining and Distribution Company (NIORDC) owns storage tanks for 35 million barrels, while NIOC owns storage tanks for 95 million barrels. Gas condensate storage tanks can handle 30 million barrels.

During the aforesaid meeting, discussions were focused on crude oil storage tank construction projects based on Build-Own-Operate (BOO), Build-Operate-Transfer (BOT) and Engineering, Procurement, Construction and Finance (EPCF) models.

Based on NIOC planning, National Iranian South Oil Company (NISOC) would need 2-million-barrel storage tanks, Arvandan Oil and Gas Production Company (AOGPC) 1-million-barrel storage tanks, Iranian Central Oil Fields Company (ICOFC) 500,000-barrel storage tanks and Iran Oil Terminals Company (IOTC) 4.2-million-barrel storage tanks.

Furthermore, NIOC would need to invest in the completion and reconstruction of new storage tanks, renovating and maintaining exiting ones. This issue was highlighted by Fereidoun Kurd Zangeneh, director of investment and business at NIOC. 

Crude Oil in NIOC Possession

The duration of the crude oil storage tank project contract is up to 18 years, and the construction period of the first phase is up to 24 months since signing the contract, the construction period of the second phase is up to 12 months after the first phase, and the crude oil storage period is up to 15 years after the end of the period.

Of course, investors must know that NIOC only delivers crude oil with specified specifications to the investor, and the rest of the affairs, including design, construction, construction, financing, storage, maintenance and delivery of crude oil rests with the investor. Kurd Zangeneh said that the ownership of crude oil in this contract under any circumstances belongs to NIOC and the ownership of tanks and ancillary facilities during the contract period and after that belongs to the investor.

This is the first time that NIOC provides the private sector with opportunity to invest in crude oil storage projects. Of course, before this the private sector was active in the project of building storage tanks in Jask and Qeshm terminals.

Kurd Zangeneh pointed out that according to the NIOC statute, the steering and management of the crude oil production value chain from the exploration stage to export and delivery to consumers is one of the duties of this company. “One of the important links of this chain is the construction of storage tanks. Through NIOC direct investment, storage tanks have been built for more than 60 million barrels of oil.”

In accordance with the development of oil fields and the increase of oil production capacity in the country, the issue of building crude oil storage capacities is also important because it could be effective in the field of sales and meeting the customers’ needs, and provide significant benefits for the country, while facilitating the operation of crude oil, he said.

NIOC Obligations

However, the obligations of NIOC to prospective investors include delivering crude oil to the investor for storage, receiving the stored oil from the investor, and purchasing oil storage services and paying fees.

The guarantee of fulfilling the obligations of the construction period and the guarantee of the company in the gas referral process are based on the PPP Guarantee Regulations. In addition, the warranty for the performance of obligations is for one year and could be renewed at the end of each year.

If the investor companies get the commodities they need from the knowledge-based companies; NIOC, in advance, purchases storage services up to 20% of the one-year operating period. Payments are calculated monthly and in foreign currency and some is paid in cash and some in local currency.

Kurd Zangeneh said the government had approved tax exemption for BOO, BOT and EPCF contract, adding: “This implies that natural and legal persons engaged in such contracts would enjoy tax exemption during construction and operation.”

NIOC, while signing the contract for the purchase of crude oil storage services with the investor, pays the crude oil storage fee during the contract period. All responsibilities related to financing, design, supply of goods, construction, start-up, repair and maintenance during the contract period lie with the investor, with NIOC facing no liability in this regard.

Investment in Maintenance

Hamid-Reza Shahdoust, director of operations at IOTC, said the company was mainly tasked with exporting crude oil and gas condensate, shipping operations, and crude oil swap through norther terminals. He said that IOTC had been also assigned part of the task for crude oil exports from Jask terminal.

Referring to the storage tanks owned by IOTC in Kharg Island, he said: “In this area, there are 48 tanks with different capacities of 250,000 to 1 million barrels, where exported oil is stored. There are nine 150,000-barrel tanks in the northern terminal.”

He announced the storage of crude oil in Kharg Island at 4.2 mb/d, adding: “Based on the investigations and decisions made by the Office of Deputy CEO of NIOC for Investment and Business, the investment for the construction of three 1-million-barrel and 2 600,000-barrel tanks would be done in this area.”

He asked the private sector to review maintenance projects of the existing storage tanks.

Storage Tanks in Cheshmeh Khosh

Yasser Farnia, technical director of ICOFC, said: “The Company would account for building storage facilities with a capacity of 500,000 barrels in the strategic Cheshmeh Khosh area in western Iran along the border with Iraq.”

He expressed hope that storage tanks would store 10-day production volumes.

“ICOFC could help the investing companies in terms of providing water and electricity resources. In addition, there is no problem for the allotment of land from the natural resources side, and the allotment can be easily made for the construction of reservoirs and facilities,” he added.

40 Companies Ready

Last October a forum was held to introduce opportunities for investment in the building of 100 vessels in the Persian Gulf and Caspian Sea areas, worth one billion euros. The NIOC-organized event recommended BOO projects. At that time, CEO of NIOC Mohsen Khojasteh-Mehr said that NIOC would guarantee purchasing these vessels from builders for a ten-year period.

According to Kurd Zangeneh, 40 companies, including local and foreign, volunteered to build vessels.

Courtesy of Iran Petroleum

News ID 468217


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