Increasing the country’s petro-refining capacity has recently become a hot topic among Iran’s top research institutions and research centers as a key defense mechanism against the impacts of the U.S. sanctions on the country’s oil industry.

As reported by Tasnim news agency on Sunday, following the Parliament Research Center’s report last week, a policy research institute called “Analysts Network of Resilient Economists” have sent a letter to the parliament speaker to stress the importance of the subject. 

The mentioned think tank has called for ratification and implementation of the plan for improving the country's petro-refining capacity as soon as possible.

“This will result in a two-fold increase in the country's foreign exchange revenues compared to selling crude oil,” the letter read.

They argue that in addition to generating more revenue, the conversion of crude oil to oil products will have many other benefits including creating new job opportunities, economic prosperity, and reviving other industries. And most importantly, it will lead to stronger economy which could easily withstand the U.S. pressures.

The research institute underlines the fact that although nearly 62 percent of the world’s crude oil is produced in East Asian countries, but only nine percent is being used in those countries and most of it is exported as crude oil.

On the contrary, developing countries like Japan, China and India are among the top consumers of crude oil, tapping on their ever-growing refining capacities.

“Considering the country’s vast oil reserves, Iran should also endeavor to increase its refining capacities in order to provide a platform for exporting more valuable oil products instead of crude oil,” the thin-tank said.

Since in the article 44 of the country’s Sixth Five-Year National Development Plan (2016-2021) increasing the country’s refining capacity by 2.7 million barrels per day has been put on the agenda, the think-thank mentioned this article, saying “It is important to prepare a national plan to achieve this goals and act on it, especially considering the country’s current economic conditions [mentioning the U.S. sanctions].”

Elsewhere in the letter, the importance of moving toward construction of petro-refineries instead of refinery complexes has been emphasized and some instances in this regard are mentioned.

“For example, BP, Shell, Total and Exxon Mobil have allocated 24, 39, 74 and 90 percent of their recent projects to this area [petro-refineries] respectively.”

According to the think-tank, recent studies indicated that Internal Rate of Return (IRR) of petro-refiners, depending on their configuration, varies from 16 percent to 20 percent, which is 3-4 times more profitable compared to the old refineries and petrochemical complexes.

Considering this letter and the Parliament Research Center’s report last week, it seems that Iran is investing a lot of energy and workforce on finding new ways for countering the U.S. sanctions and easing their impact on the country’s economy.

Earlier this week, the Research Center of Iran’s parliament also said in a report that petro-refineries are two times more profitable than refineries and suggested that National Iranian Oil Company (NIOC)’s new refinery projects be defined as petro-refineries.

The report dubbed “Petro-refineries, their role in competing the oil value chain and the status in Iran’s oil industry” stated that constructing petro-refineries is one of the most important ways to alleviate severe economic impacts of price fluctuations and achieve a much higher margin of profit.

Like the policy research institute, the parliament’s research center also emphasized the importance of completing the value chain of the oil and gas industry to increase value added and prevent crude oil sales as one of the principles that has been underlined in the country’s Sixth National Five-Year Development Plan (2016-2021).

“According to French energy giant Total, by 2020 global demand for oil products will increase by 1.1 percent while the demand for polymers increases by 3.3 percent, so with this in mind, the creation of a hybrid system of refining and petrochemicals (petro-refinery) seems a necessity,” the report read.

Along with refining sector, petrochemical industry is also one of the most important pillars of Iran’s economy and one of the main suppliers of foreign currency especially euro for the country.

Iran is currently producing near 63 million tons of petrochemical products annually and with several new projects underway, the number is expected to jump over 65 million tons, further cementing the Islamic Republic’s stance as a major petrochemical supplier to the world markets.

The country plans to establish a new petrochemical complex in Hormozgan Province adjacent to Persian Gulf waters, which will increase the country’s petrochemical output by 15 million tons per year.

EF/MA