In The Name of God
INDEX
Articles on Oil & Gas in the English section, JUN. 2010 / No.126 in cooperation with IranOilGas.com Published by: IRANIAN ASSO - CIATION FOR ENERGY ECO-NOMICS (IRAEE) ISSN 15631133-
OPEC’s 50th Birth Anniversary / 2 Director and Editor-in - Chief: Seyed Gholamhossein Hassantash Editorial Manager: Homayoun Mobaraki
UAE Crude Pipeline to Downgrade Role of Editorial Board: Strait of Hormuz / 4 Majid Abbaspour, Reza Farmand, Ali Moshtaghian, Mohammad-reza Omidkhah, Ebrahim Bagherzadeh, Fereidoun Barkeshly, Hassan Khosravizadeh, Mohammad-ali Movahhed, Behroz Beik Alizadeh, Ali Emami Meibodi, Seyed Mohammad-ali Tabatabaei, Afshin Javan, Hamid Abrishami, Mohammad-bagher Heshmatzadeh, Mehdi Nematollahi, Mozafar Jarrahi, Ali Shams Ardakani, Mohammad Mazreati Russia-Ukraine Honeymoon, After Years of Detachment / 7 Advertisement Dept : Adamiyat Advertising Agency Tel: 021 - 88 96 12 15 - 16
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Translators: Mahyar Emami, Hamid Barimani
Subscription: Hamideh Noori Pakistan May Face Cash Problem With IP Gas Pipeline / 13 / 15 IRANIAN ASSOCIATION FOR ENERGY ECONOMICS Iran Woos Foreign Investors to TSE Unit 13, Fourth flour, No.177, Vahid Dastgerdi (Zafar) Ave., Tehran, Iran Tel: (9821) 222620613- Fax: (9821) 22262064 Web: www.IRAEE.org E-mail: [email protected] Jun . 2010 - 127
perhaps a factor strongly underlying its survival to this date. OPEC member states are still home to the world’s largest crude reserves while these same states remain highly dependent on petro dollars and are affected by the market conditions and global crude prices. Meantime, oil remains the world’s most strategic source of energy and crude prices act as indices for the boom or otherwise recession of economy and to a lesser extent, production or development of other sources of energy. Majority of the OPEC member states remain dependent on outside investment and technology for the development of their oilfields. Launch of OPEC was a historical turning point triggering disputes between the oil rich nations and international companies that are based in the consumer states. The dispute gradually reached its peak as supplier states came to realize the strategic significance attached to oil and energy. This was further escalated as the economies of oil producing nations became more dependent on oil incomes. The “Seven Sisters”, which possessed the overwhelming majority of oil drilling and production concessions, put aside their differences and rivalries and launched the world’s first oil cartel pursuant to the signing of the contract known as OPEC’s 50th Red Line. Establishment of this cartel further intensified the disputes between producers and consumers of crude oil. The Birth Anniversary oil producing states gradually realized that they would not be able to protect their legitimate rights against the Seven Sisters This year marks the 50th anniversary cartel unless they could reach some kind of alliance and of the foundation of the Organization of coordination. T Petroleum Exporting Countries (OPEC). Foundation of OPEC was in fact a reaction to the During these years, OPEC has gone through much thick and formation of that cartel and given that its members were thin, but there is no doubt that OPEC has served to be the entirely dependent on the technology and investment that most influential third world organization of its kind. were available with the cartel members, the new organization This is of course worth noting that OPEC maintains was founded on shaky ground. This has even been reflected a powerful status in the world despite the fact that only in the statute of OPEC. While the OPEC member states developing and third world nations constitute its member primarily sought fairer oil deals, they were at the same time states. reluctant to displease oil companies and consumer states. Since the establishment of OPEC fifty years ago, the world OPEC registered little achievements during the first has undergone major transformations of diversified natures; decade of its foundation and it was only in the second decade however, OPEC has hardly experienced any changes; and following the outbreak of two big global oil shocks that
2 Jun . 2010 - 127 made OPEC a household name. to get out of the current condition. Evidently, planning and In the wake of the first oil shock, the member states of the implementing a long term strategy for OPEC, under the Organization of Economic Cooperation and Development prevailing world’s complicated economic conditions, is a (OECD) set up the International Energy Agency (IEA), task that requires organized contribution of OPEC and which was to gradually formulate and enforce the member non-OPEC experts to the formulation of such a long term states’ energy strategies. strategy. At the time of its foundation, twenty odd members of IEA Needless to reiterate that OPEC is required to show how consumed more than 62% of the world’s total energy. The it is planning to address the global issues, impediments and same states are currently consuming 53% of the world’s total phenomena. OPEC is urged to move along a course that energy. would lead to the Organization’s integrity, which would IEA gradually managed to bring to order and regulate resolve many of OPEC’s problems and assist with the consumption of energy by the member states and design removing of others as well. strategic patterns for them as well as for the entire world. The most critical challenge for OPEC is how to regulate When IEA policies and strategies were enforced, OPEC production capacity-building among its member states. was once again put on a reactive track. The OPEC members have so far confined themselves to IEA deals with all forms of energy carriers and makes temporary production quotas proportionate with the already relevant planning within a macro framework. OPEC, specified production ceilings. In a longer term plan, however, however, has confined itself to dealing with oil only. More they are required to share production capacity-buildings. To importantly, IEA maintains long term strategies but OPEC date, the OPEC member states have, by tradition, engaged has been content to making short term and temporary in making production capacity-building separately, hence, decisions, in which it has been largely successful. This is disturbing the market order. perhaps the most important factor underlying OPEC’s Should the OPEC member states manage to tackle the adherence to a reactive status, which can only be overcome said challenge, the next step for the Organization would be to by planning a long term strategy. And perhaps the most address the following vital issues: serious impediment in the way of OPEC’s reform is the - OPEC should clarify its stance in relation to mechanism of consensus in its statute which deprives it of international environmental conventions and take a unified self revising potential. position in this respect, for environmental regulations will Each one of the twelve member states of OPEC has its constitute the most important factors impacting future own interests. There are many factors that segregate these demand for various energy carriers, oil and oil products in states while they appear to be convergent only over issues particular. that either deal with oil or oil-related interests. Hence, they - OPEC should clarify its stance in relation to other are not likely to reach any consensus on a fundamental and organizations such as World Trade Organization (WTO), long term issue. globalization of economy, Energy Charter Treaty (ECT) and As was mentioned earlier, with the present structure in global economic recessions and booms. place, OPEC will be unable to break out of its deficient If OPEC fails to make use of a its fifty years of experience to routine course or passive status, nor will it be able to devise refurbish its current structure, and if it falls short of long term and enforce long term strategies unless a more ideal and plans and strategies, the Organization should expect to gain successful model of OPEC is taken into consideration. nothing beyond short term regulation of oil market, a trend it Following is a list of OPEC’s strategic priorities that need has been engaged in for more than three decades now. to be taken into account should OPEC member states intend Director
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UAE Crude Pipeline to Downgrade Role of Strait of Hormuz
Ali Khajavi Construction Company at $3.29bn cost, will not only Strategic Planning Dept., Iran’s Ministry of Petroleum safeguard most of crude exports of the UAE when Hormuz is threatened, but will also be a part of a much larger plan. Fujairah is to be transformed into an ‘Energy Special Zone’ ccording to energy experts, the pipeline with extensive crude oil refining facilities, crude storage tank for carrying crude oil of the United Arab Image 1: Displays route of Habshan-Fujairah pipeline A Emirate (UAE) to its Fujairah port, which is beyond the Strait of Hormuz and in the Gulf of Oman, will be inaugurated by early 2011. This line is being built to ensure security of crude export of the UAE in case hostilities between Iran and the US lead to the closure of Hormuz or make it unsafe for tankers to sail through. The pipeline starts at ‘Habshan’ onshore oilfield of Abu Dhabi and will have an initial capacity of carrying 1.5 mn b/d of crude, which will be raised to the final capacity of 1.8 mn b/d by the middle of 2011. The 360 km long 48” Habshan-Fujairah pipeline, being constructed by China Petroleum Engineering & Source: International Petroleum Investment Company / Poten & Partners
4 Jun . 2010 - 127 farms and petrochemical plants. The Habshan-Fujairah Figure 1: Displays UAE’s Crude Production pipeline will be feeding a 300,000 b/d oil refinery as well as Consumption in 2005-2008 the Zone’s crude oil export terminal. Italy’s Belleli has won the main engineering, procurement and construction (EPC) contract on Fujairah –based Vopak Horizon’s estimated $100m expansion of its oil terminal in the northern. The Italian engineering firm will add 600000 cubic meters of storage facilities to the terminal under the deal, which was formally awarded on 15 April 2010 and In Q1 2012, the project is expected to be completed. Its current storage capacity is 1.5 million cubic meters. Interestingly enough, some UAE officials have even Source: www.eia.doe.gov expressed their desire to convert Fujairah into a small Rotterdam of the region. used in the domestic market and over 2,525mn b/d Besides, building Habashan-Fujairah pipeline will also exported. That means, Habashan-Fujairah pipeline can reduce the costs of crude export for the UAE because cost of handle around 70% of the exportable volume or about 60% insuring tankers in the Gulf of Oman is half of the cost in the of the UAE crude oil production. Persian Gulf. At present, the Strait of Hormuz is the most important According to the estimates published by the Energy waterway in the world and is used for transporting oil from Information Agency (EIA), everyday some 17mn b/d of the Persian Gulf, where 28% of the world’s crude is produced, crude oil were transported through the Strait of Hormuz in to the Western as well as Asian countries (Table 1). 2006, which was roughly 20% of the daily crude oil produced Second to the Strait of Hormuz is Malaysia’s Strait of in the world that year. Habshan-Fujairah pipeline has the Malacca (connecting Indian Ocean to the south china sea & capacity to carry almost 10% of what passes through Hormuz. Pacific Ocean), through which some 15mn barrels of crude In 2008, an average of 3,050mn b/d of crude were oil pass each day. produced by the UAE, some 525,000 b/d of which were Other important Straits/Canals of the world are as
Table 1: Displays crude production figures of the Persian Gulf countries & those of the whole world in 2005-2009 period Year/Country 2005 2006 2007 2008 2009 Bahrain 47.525 48.561 48.561 48.561 48.561 Iran 4238.6 4149.6 4034.8 4175.4 4172.4 Iraq 1889.4 2009.4 2095.6 2384.5 2399.3 Kuwait 2672 2662.9 2601.1 2726.2 2494.1 Qatar 1111 1138.1 1121.6 1203.7 1213.4 S-Arabia 11096 10665 10248 10782 9763.6 UAE 2844.6 2948.5 2951.1 3050 2798.3 All Persian Gulf Countries 23899 23623 23100 24370 22890 Whole World 84550 84517 84394 85384 84159 Share of P.G from Whole World 28.27 27.95 27.37 28.54 27.19
5 Jun . 2010 - 127 follows: -Suez Canal and Sumed Pipelines in Egypt (linking the Red Sea to the Gulf of Suez), through which some 4.5mn barrels of crude oil pass each day. -Bab el-Mandab Waterway in Yemen (connecting the Arabian and Red Seas), through which some 3.3mn barrels of crude oil pass each day. -Strait of Bosporus in Turkey (linking the Black Sea to the Med), through which some 2.4mn barrels of crude oil pass each day. -Panama Canal & Panama Pipelines (linking the Pacific example and scheme. If such plans are implemented, Iran’s Ocean to the Caribbean Sea & the Atlantic Ocean), through position in the region will be weakened and the costs of which some 0.5mn barrels of crude oil pass each day. confronting the country will be much reduced. According to the UAE officials, construction of Habashan- Fujairah pipeline is going through its final phases. When Reference: -“Hormuz Tensions Rise, Abu Dhabi Bypass Pipeline Nears completion”, completed, the pipeline will not be capable of undermining MEES, Vol LIII No 19, 10 May 2010 the key and geopolitically important status of the Strait of - www.poten.com: “Strait Flush”, April 16, 2010 Hormuz. Even then, other countries of the Persian Gulf - www.EIA.doe.gov: “World Oil Transit Chokepoints”, January 2008 - www.dutch-energysolutions.nl: “Billeli wins Vopak Fujairah oil terminal region like Saudi Arabia are also thinking of following that expansion deal”, 5 May 2010
6 Jun . 2010 - 127 Russia-Ukraine Honeymoon, After Years of Detachment
he 21st of April this year definitely rates for the energy it supplied to the former satellite states, marks a strategic return of alliance in the which had by now become Independent States. T relationship between Russia and Ukraine. Following the outburst of the so called
7 Jun . 2010 - 127 pro-Russian Viktor Yanukovych managed to take back 1,000 cubic meters. That means, Ukraine will receive at least the political scene from the pro-Western government of $ 3 bln/year of subsidies in the price of gas from Russia, a Viktor Yushchenko and proved that Russia>s policy of total of $ 30 bln for the contractual period. winning back Ukraine has worked. In his campaign for the In return, Ukraine will be losing the $ 12 bln loan from elections, Yanukovych had called his country>s attempts the International Monetary Fund (IMF) because of the to join NATO as useless and irrational. This reduced government interference in the country>s economy, which the Russia>s concerns about NATO>s expansion to its is ignorable when compared to the Russian subsidies. borders. Besides, Ukraine has for now given up trying to join NATO The other side of the Russian-Ukrainian agreement and has extended the lease of>Sevastopol> naval base until was that Russia was allowed to extend the lease of its 2042.
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Bank Mellat to open In order to implement Iran>s refining - $ 82 Mln to Tabriz refinery, credit line for refining and gasoline production plans, Bank - And the remaining $ 36 Mln will be plans Mellat is expected to make $ 2.408 allocated to Tehran refinery. This plan Bln credit available to National Iranian is supposed to be operational by Mar. Oil Refining and Distribution Co. 2011. (NIORDC) from National Energy Based on this report, Bank Mellat will Fund this Iranian year (Started 20th pay the remaining $ 1.884 Bln credit Mar ’10). to NIORDC for implementation of According to the ISNA, $ 524 Mln refining projects this Iranian year. from the above financial plan will be $ 1.224 Bln of this amount will be invested in gasoline production plans allocated to upgrading and capacity of 4 oil refineries of Tehran, Tabriz, boosting plan of Arak refinery, $209 Isfahan, and Bandar Abbas as follows: Mln to Lavan refinery, $ 192 Mln to - $ 258 Mln will be allocated to Tehran refinery and $ 259 Mln will be Bandar Abbas refinery, put aside for the construction of Naeen- - $ 148 Mln to Isfahan refinery, Kashan-Rey pipeline.
An IDRO led consortium A consortium of Industrial this phase.” for SP phase 14 Development & Renovation According to the report, Organization of Iran (IDRO), Hedayat added: «In order to save MAPNA Group, Industrial Projects time, we could immediately start to Management of Iran (IPMI), work as soon as the site is handed Iran Shipbuilding & Offshore over to us by the client (POGC).» Industries Complex (ISOICO), The development projects of Payandan Co., Machine Sazi Arak SP phases 13 and 14 had been (MSA), National Iranian Drilling supposed to be undertaken by Co. (NIDC), and Iranian Offshore Shell and Repsol YPF Co.- as Engineering & Construction an integrated part of the Persian Co. (IOEC), led by IDRO is in LNG project- but because of the final talks with POGC over the prolonged talks as well as POGC>s development project of South Pars insistence on quick development phase14. of these phases, the two companies In a talk with ILNA, Majid have been put aside. Hedayat- chief executive of IDRO- Development of South Pars gas explained: “We intend to construct field was supposed to be carried phase 14 based on engineering out in 28 phases; however, since principles applied to phases 17 POGC has created some changes in &18 and we expect to complete the the field’s phasing, the area and the project in 35-40 months> time. 48 number of some of the phases have gas wells are decided to be drilled in undergone alterations.
9 Jun . 2010 - 127
NDC to buy 2 new Managing director of North Drilling blown out. After 10 days the said well drilling rigs Co. (NDC) Hedayatollah Khademi is still in blaze, erupting 9,000 bpd of disclosed that the company intends to crude oil. There is extensive activity to buy 2 onshore drilling rigs through a stop the leak though still unsuccessful. public tender. According to the local Pana According to the news agency of Iran News, the value of NDC shares at oil ministry, Khademi said that the relevant Tehran Stock Exchange (TSE) has tender documents would be ready to experienced its lowest level of Rials publish within the next 10-15 days. 2,040 (equal to ¢20). Previously, each In a gas leak incident in well 24 of share of NDC used to cost Rials 3,200. Naft Shahr, NDC’s new built drilling Date: Wednesday, June 09, 2010 rig N-K 118 was exploded and totally Source: Croatian Times
Sirri NGL plan at 92% Pointing out that Sirri NGL project The whole project will be on stream by headway is presently at pre-commissioning Mar. ‘10.” stage, Sirri NGL project manager “Sirri NGL plan has made 92% at Oil Industry Engineering’ and overall progress,” Jad Babaei explained. Construction Co. (OIEC) Abdol- “It has made 92% physical headway in Hossein Jad Babaei said: “Utilities engineering, 96.5% in procurement sector of the project will be and over 78% in construction, commissioned by late September ‘10. installation and commissioning.”
Iran and Spain to build Gas Natural SDG S.A. from Spain and (HEP) and Plinacro to join the project. It LNG terminal in Croatia National Iranian Oil Company (NIOC) has been suggested that the Gas Natural are planning to build a liquefied natural would be the holder of the investment, gas (LNG) terminal for central Europe while the Iranian company as a co- near Rogotin in southern Dalmatia. investor would guarantee the supply. The project is expected to cost 700 The Iranian government has unofficially million Euros, and the two companies confirmed its interest to participate in would enter after the formation of a group the financing of the project and ensure including Berber from Zagreb, a company the needed quantities of LNG starting that specializes in business project in 2015, the Croatian daily Jutarnji List development. The location of the terminal writes. Djuro Popijac, the Croatian would be two kilometres of airway from Minister of the Economy has given the port of Ploce in Adriatic Sea. It would his support to energy projects that are be built on a 25 hectares of land currently «economically and environmentally owned by the Vebecot company. viable.» A study of the potential Berber officials have concluded a environmental impacts and the project’s chain of conversations in Iran and Spain compliance with the regional plan will and have invited the Croatian energy be commissioned due to the size of the companies Hrvatska Elektroprivreda undertaking.
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North Pars jackets Tender for the fabrication of hold> status as well as talks with other fabrication in obscurity the jackets of North Pars gas field companies. development project was held in The construction of jackets was 2009. In April 2010, a JV of Iranian supposed to be completed in first half Offshore Engineering & Construction of 2011 and drilling operation was Co. (IOEC) and China Offshore expected to start once the jackets are Oil Engineering Corporation Ltd. installed. (COOEC) was announced the winner The North Pars project is predicted of the tender. to cost $16 Bln including $5 Bln for The project was expected to be kicked upstream development and $11 Bln for a off in the same month; however, it is liquefaction plant and other downstream said that the relevant contract has not facilities. only left unsigned, but China National National Iranian Oil Company Offshore Oil Corporation (CNOOC) (NIOC) and CNOOC signed an MoU -the buyback contractor for North Pars in 2006 for development of upstream project- is also presently in talks to farm and downstream parts of North Pars gas out the project to other bidders for field. Four years on, still the upstream the said tender. Various reasons were part has not started and talks on the listed for the jacket fabrication SADRA kicks off EP of Iran Marine Industrial Co. As the sources close to the project SP 17&18 platforms (SADRA) has started the engineering say, SADRA has already started and procurement of the project to engineering and procurement of the construct 2 satellite platforms of South said project; however, it has taken no Pars phases 17 and 18. measures to fabricate the platforms yet. The said project was assigned to These satellite platforms will be SADRA in 2009. However, according connected to the main platforms to the authorities of this company, the of the said phases, presently being relevant contract with Pars Oil and Gas constructed by Iranian Offshore Co. (POGC) has not been officially Engineering & Construction Co. signed yet. (IOEC), through a pipeline. Phase I of Iran LNG Managing director of Iran LNG reported the Mehr news agency. power plant on stream in Co. (ILC) Ali Kheir Andish talked of Reminding that the nominal June the commission of the first phase of capacity of this power plant is 1100 Iranian LNG power plant in the 2nd MW, Kheir Andish told that the half of June ‘10 and said: “This power operation of this plan has made over plant will get on stream with the initial 60% physical headway. This plant capacity of 300 MW of electricity will start generating electricity with 2 which will be gradually increased,” turbines. 11 Jun . 2010 - 127 SP remaining phases News has been around in recent talks are underway with Industrial waiting for deals to be days, quoting some officials of National Development & Renovation signed Iranian Oil Co. (NIOC), that the Organization of Iran (IDRO) over contracts for the remaining phases of phase 13 and with a consortium of South Pars -which includes phases 13, Khatam HQ, SADRA, National Iranian 14, 19, 22-24 and 27-28 would be signed Drilling Co. (NIDC) and Iranian with local companies in a few days. Offshore Engineering & Construction Based on this, Khatam HQ would Co. (IOEC) over phase 14. seem to get its hands on South Pars About SP phases 19, 27 and 28, it is phases 22-24. It is said that the relevant not clear which phase is to be given to Memorandum of Understanding Petropars yet. (MoU) has been already signed with With all the shifts Pars Oil and Gas the HQ and the required piece of land Co. (POGC) has imposed on SP to construct onshore installations, has phasing, it is not determined as yet been also made available to them. which phase has replaced another. For It is said that South Pars phases instance, it is not yet certain that under 13 and 14 are supposed to be which phase, South Pars phases 25 and transferred separately. At present, 26 are to be developed. Yadavaran could have Yadavaran possible oil-in-place in of Iran oil ministry, Asadi added: more oil-in-place its Sarvak and Fahlian layers has been “The preliminary results of recent estimated to be about 12.3 Bln barrels. researches show an estimated volume Stating the above, Yadavaran oilfield of 30 Bln barrels of oil-in-place in project manager Mohammad Reza the oilfield. Though, confirmation Asadi said: “The data over Yadavaran of this figure depends on the oilfield is not fully available yet. Once complementary data collection after the drillings of its Early Production the EP stage.” Stage (EPS) are done, the relevant data Asadi explained 55, 100 and 105 would become completed and a fresh wells have been estimated to be drilled evaluation of the volume of oil-in-place to produce 85,000 bpd, 180,000 and a would be reached.” total of 300,000 bpd of heavy and light At EPS, Chinese Sinopec, the buy crude oil in the first, second and third back contractor of the oilfield, is phase of Yadavaran development plan supposed to drill 5 production and respectively. 3 work-over wells in the field. The Asadi also announced that based EPS-with the aim to produce 20,000 on the researches done, if the second bpd of crude oil- is supposed to take phase is not carried out, the estimated 16-month’s time. 85,000 bpd in the first phase would be According to the news agency retained for 7 years. 12 Jun . 2010 - 127 Pakistan May Face Cash Problem With IP Gas Pipeline fter 17 years of negotiations, Tehran and the context, and I wouldn’t expect international banks to be Islamabad have finally signed a deal to there. A domestic project in Pakistan is itself challenging, to A build a 2,150km pipeline to supply Iranian say the least.” gas to Pakistan. But Pakistan cannot find the $1.65bn it Pakistan pays a premium for investments, due to needs to build its part of the project. They signed the 25‐year perceived risk. The OECD publishes country risk deal on 28 May to pump 750mn cfd of gas from the South classifications, which export credit agencies (ECAs) use to Pars field to Pakistan by the end of 2014, with the option of determine their premiums when they provide insurance and increasing it to 1bn cfd. or loans. The OECD ranks countries into eight categories, Agreeing a pricing mechanism was a factor previously with zero representing the least risky and seven the highest. delaying the project, but under the deal the partners have Pakistan is ranked at seven – higher than Iran, which is agreed to link the price to Japanese Crude Cocktail (JCC) classified as six. prices. Unable to secure financing from solely domestic sources, “Financing it is the problem, which is holding things up,” a Islamabad has looked abroad for investment, including senior Pakistani gas executive tells MEES. An international from Abu Dhabi’s state‐owned International Petroleum project finance manager said: “It’s a political hot potato given Investment Company (IPIC), but has been unsuccessful to 13 Jun . 2010 - 127 date. Furthermore, the US opposes the project. Its banks will decreasing its exports. And much of the new gas from its not lend money to firms that trade with or invest in Iran, or recent South Pars field projects is being re-injected into oil to banks that fund those projects. And the US also pressures fields to enhance oil recovery.” governments’ ECAs that support engineering firms working The Iranian gas volume of 750mn cfd would be equivalent on Iranian projects. to nearly 20% of Pakistan’s domestic gas supplies, at a time Iran has already built 1,100km of pipeline from the South when the country’s gas demand is growing at around 8% Pars gas processing plants at Assaluyeh to Iranshahr, and annually. India and China have held talks with Tehran and the National Iranian Gas Company (NIGC) only needs to Islamabad about extending the pipeline to their countries, complete the final 250km in Iran to the Pakistan border near but nothing definite has been agreed. Pakistan is willing to the Gwadar deep sea port. do this, but it would need to build a bigger pipeline for the Pakistan, however, needs to build its own 800km part extra gas – so the deals would need sealing before any final of the 1bn cfd capacity, 42‐inch pipeline, which will pass investment decision is made. through Baluchistan and Sindh provinces to the gas hub of Chinese engineers have studied routes over high Nawabshah, 300km north of Karachi. Here it will connect to mountains and long distances to link to its west to east the networks of state‐owned utility firms Sui Northern Gas pipeline. India left the initial talks, disagreeing over price, but was mainly concerned about security – its gas supply would go through Pakistan. Delhi had pushed for a subsea pipeline through international waters. Meanwhile, Pakistan is going ahead with liquefied natural gas (LNG) imports and is in talks with Qatar, which is diverting LNG into the Asia‐Pacific market during the global gas glut. However, Pakistan’s first planned LNG terminal, which was due to open in Karachi by the end of 2011, has been delayed by the Supreme Court. The court ruled in April that the gas supply contract was unfairly awarded. Swiss energy trader Vitol and Pakistan’s Fauji Foundation – Pipeline Limited and Sui Southern Gas Company Limited a charitable organization that has energy investments – made (SSGCL), which supply Karachi, Islamabad and Lahor. the lowest bid to supply the LNG, but SSGCL awarded the Iran’s ability to supply the gas is also in doubt. Its supply contract to French energy firm GDF Suez. completion of the pipeline does not signal commitment – Independent gas consultant Andy Flower said: “2011 was Iranshahr is an industrial city, which can easily use the gas, certainly feasible, but they will have to secure their supply and Tehran has a patchy track record in honoring gas deals soon, following the court ruling, if they are to meet the Iran is also in talks with Kuwait, Bahrain and Oman about target.” supplying gas, and “dragging their feet while playing us all off The LNG project requires a minimum delivery of 2.5mn against each other,” said an Omani government official. tons/year, with a possible extra 1mn t/y. Under the pricing Independent gas consultant Alex Forbes said: “Pakistan formula, 75% of the price is linked to North America’s Henry really needs gas in a hurry – and if you need gas in a hurry Hub gas price and 25% is linked to oil prices. Dutch LNG then you don’t want to be talking to the Iranians.” He added: terminal operator 4Gas is looking to build a floating LNG “Iran has increased its gas imports from Turkmenistan, while terminal and linked onshore facilities to receive the imports. 14 Jun . 2010 - 127 Iran Woos Foreign Investors to TSE ran’s government ratified a new ruling on the regulations governing foreign I investments in exchanges and over the counter (OTC) markets, in a bid to attract foreign investors to the Tehran Stock Exchange (TSE). Trading on the TSE has risen sharply in the past year or so, with the TEPIX 1 index closing at 14,155 on 19 May, up by 49.5% from 9,471 on 1 July 2009. Under the new bylaw, “foreign individuals and entities will be eligible to participate in the securities exchanges and over the counter markets trading,” following the issue of a required license. According to the bylaw, “the Securities and Exchange Organization of Iran will be obliged to issue the trading license in seven working days after receiving the entire application documents. Each foreign individual or entity will be allowed to acquire up to 10% of a listed issuer’s equity, as a non‐strategic investor. Those applicants who submit their request for more than this value will be considered as strategic investors.” investor who intends to possess over 10% of a company’s The bylaw goes on to state that the non‐strategic shares listed on the exchange or on the OTC market, or foreign investors will face no impediments for selling their that upon possession of the shares of a company listed acquired shares in the market and will be treated under the on the exchange or the OTC market, fills a seat on that existing market regulations. However, for strategic foreign company’s board of directors.” According to Article 7 of investors the repatriation period of capital will be two the bylaw, the total amount of foreign investment in all years from the buying date, and their request to sell their listed companies on the exchanges or the OTC market in equities will be considered under the “articles of block Iran, or in any individual listed company shall not exceed trading regulations.” 20%. The bylaw defines the strategic investor as a “foreign Also, the licensed foreign investors will be granted 15 Jun . 2010 - 127 permission to open rial or foreign currency accounts for the banking transactions for importing and exporting their capital, capital gains and earnings, as well as exchanging their foreign currencies, under the rules and regulations of the Central Bank of Iran. Commenting on the new bylaw, the head of the Iran Privatization Organization Heydari Kord‐Zanganeh said that the ratification of the new bylaw will allow foreign investors to trade on the TSE without difficulties, following the removal of obstacles. An expert on Iran’s economy suggested, however, that potential investors could face problems. “There is difficulty in getting information from Iran, and investor success is often determined by local knowledge, so they need to exercise caution,” he warned. Also with more sanctions looming on the horizon, coupled with further restrictions on the banking system in Iran, potential foreign investors may still shy away from the TSE, despite the latest ratification of the bylaw. TSE official Ali Sahrai is nonplussed by the index’s climb. To list a few examples, a number of banks have recently He said that concerns about a bubble are unfounded and floated their shares which were promptly snatched up that “the reason for the rise in the index is the flow of cash by investors. In other cases, like the privatization of the into the stock market.” Mehdi Varzi of UK consultancy state‐owned Telecommunications Company of Iran last Varzi Energy sees the boom as driven by wealthy investors October, 50% of shares on offer went to the powerful who are looking for a home to place this money. But he Islamic Revolutionary Guards Corps, in a transaction warned that there is potential problem in this market, which lacked transparency, according to local press reports because it is not transparent. “Iranians do not have many (MEES, 5 October 2009). investment alternatives, so the stock market tends to mop More recently the government has transferred shares up surplus cash. of six petrochemical and power plants to SATA, the social Those that were investing in real estate, possibly welfare investment organization of the Islamic republic’s in Dubai, may have been discouraged by the recent armed forces (MEES, 19 April). downturn and decided to play the markets at home,” said “Privatization in Iran is something unique. It’s not one Tehran‐based financier. privatization. The shares go to some semi‐state owned Under the amendment of Article 44 of the constitution companies, like pension funds of teachers, police, army, in 2004, the Iranian government embarked on a program the oil company,” said the Iran expert. “The state had a to privatize major sectors of the state‐owned economy, lot of debts to pay to the pension funds and they did not which will continue to drive the TSE boom. give them cash, but shares. These pension funds found The process has been relatively slow and many analysts themselves owning shares in companies all over Iran,” he point out that many shares of the privatized state entities said, noting “they are unable to really use this. You cannot end up in the hands of “pseudo‐public sector companies.” cash these things easily.” 16