China Embeds Claws Deep in Iran's Oil

Iran Press News: Translation from Farsi by Alan Peters

The Iranian government newspaper, "Investment" writes that Iran has taken the first steps to increase production of gasoline inside the country with a view to cutting off imports of this strategic item through joint investment of foreign and internal funding, which will begin to stem the flow of foreign exchange leaving the country.

Currently, $15,000,000 a day of the country's oil revenues go to toward importing gasoline. This equals 30 million liters of the 70 million liters used daily in Iran, if calculated on a constant 70 million liter usage. When we add the summer driving and seasonal travel, which comes to about another four to five (5) million liters a day, the outflow of foreign exchange for gasoline imports becomes even more significant.

Ahmadi-Nejad, who shortly after being elected, became aware of this huge drain by the cost of subsidizing this strategically important fuel import, gave instructions to speed up the increase in refining capability, begun during the time of (former Oil Minister) Zanganeh. As a result, the refineries at Abadan and Bandar Abbas have been included in the expansion plans and the Arak refinery has been put on the list.

Based on the projections of the Ministry of Oil, the intended expansions and refining increases of gasoline will result in Iran being self-sufficient by the end of the year 1388 (2010) and would no longer need to import this strategic item. Presently 40 million liters (of the 70 million consumed) are refined inside Iran. The Oil Ministry has now taken action in the expansion of capacity by purchasing foreign technology and developing internal capabilities. This time, the Arak refinery will be equipped with foreign technology in its expansion and operation and use Chinese methodology in a heavier production process so that the unit will be able to increase current production levels.

After oil, the Chinese have now become involved in refining in Iran. The well-known Chinese oil company, SINOPEC, will execute the expansion project and also be an investor. The Vice-President of SINOPEC announced in an exclusive telephone interview with "Investment" that a team of representatives of the company would arrive tomorrow (Sunday) in Iran to sign the contract for investment and expansion of the Arak refinery.

Jin Jiang Wuy noted that this contract between China's SINOPEC and Iran's Refining and Distribution was just a beginning.

A $100 Billion memorandum of understanding for the export of Iranian liquid gas to China has been initiated so that SINOPEC, in addition to an increased presence in oil exploration, which has a contractual value of over $100 Billion, will invest and transfer knowledge and technology in the basic methods for oil related production of items such as gasoline. Thus, the co-operation between the two countries will result in Iran becoming self-sufficient in gasoline requirements and be freed from the years of suffering in having to buy products which the rise in crude oil prices have pushed up. READ MORE

The ability for China's SINOPEC to maneuver with Iran has increased and the signing of the contract can be expected to rise to an eye-catching $102 Billion. Jin Jiang Wuy, commenting on the proposed signing of an agreement, said the talks beween Iran and China are ongoing and the "actual implementation of the expansion of (MDP) has not reached a full consensus". Wuy stated he was very hopeful that the contract to explore and develop the Yadavaran oil field, which has reserves of 17 Billion barrels of oil, is in place between the countries and will soon be signed.

The Yadavaran oil field has also been included in the $100 Billion Iran-China energy distribution memorandum of understanding which will extend Iran's daily oil production by 300,000 barrels a day.