Deputy Oil Minister Ahmad Ghalebani makes no mention of sanctions when he announces the policy shift, saying that exporting via pipeline made better sense for Iran “in the current situation”.

“Regarding Iran’s relative advantage of gas transfer, gas exports through pipeline has priority over LNG,” he says.

“Right now exporting gas through the country’s national pipeline is more feasible, more convenient and faster while exporting LNG requires huge investments and sophisticated technology and needs a long process.” 

Iran has the second biggest gas reserves in the world after Russia but sanctions over its nuclear energy programme and other factors have hampered its development and it has no major net exports.

Iran needs to add more refining capacity

It shares the South Pars field – the world’s largest known gas reservoir not associated with oil production – with Qatar, its neighbour on the other side of the Gulf. In what it calls the North Field, Qatar has become the world’s largest exporter of liquefied natural gas (LNG), gas cooled to liquid form and exported on tankers.

But sanctions, aimed at pressuring Tehran over its nuclear programme, have pushed Western companies – which have the necessary expertise and capital – out of projects where they would otherwise have been major players. Spain’s Repsol says it had pulled out of a contract it won with Royal Dutch Shell to develop phases 13 and 14 of South Pars. The project covered development of production and exports of LNG.

“At the moment, some of the country’s gas schemes, like South Pars 13 and 14 development phases, have been phased out from producing LNG and the gas produced will only be dedicated to sweetening and then injecting into the national network,” says Ghalebani who is also head of the National Iranian Oil Company. 

Another deputy oil minister, Mohsen Khojasteh Mehr, says Iran aims to produce 40 million tonnes of LNG a year. But Ghalebani says that Iran’s long borders, good relations with its neighbours and substantial pipeline network meant transporting gas that way made sense.

Oil Minister Massoud Mirkazemi said in May that Iran needed to invest $200 billion in its energy sector in the 2010-15 period but that it faced a “liquidity shortage”.

Iran continues to press ahead with exploration

It is unclear to what extent Asian countries will move in to fill the gap created by exiting European companies. 

Washington has increased diplomatic efforts in the region to persuade other countries to isolate Iran economically, beyond the UN sanctions which do not in themselves preclude oil sector investment.

Iran aims to increase energy output to keep up with rising demand over the next five years, a deputy oil minister says.

“During the next five years, the world’s need for energy will increase and we will also increase our output to meet this demand, to have an effective presence on the world scene,” Hossein Noghrekar-Shirazi, deputy oil minister in charge of international affairs, says.

Noghrehkar-Shirazi warns countries against seeking to isolate Iran. “Those who provide the (energy) demand in the world should not (just) see the current situation of Iran and should be concerned about the future because there will be a day when all the oil resources of the world will be finished,” he says.

“Then it will be Iran and Saudi Arabia which still have oil for the next 50 years. And for the time when no one has gas, it is Iran and Russia who can provide the world’s gas for more than the next 100 years.”

Meanwhile, Iran signed a $21 billion contract with several domestic companies, including at least one linked to the powerful Revolutionary Guard, to develop the giant South Pars gas field, highlighting the country’s self-sufficiency, the president says.

The signing of the deals follows a warning by Iran to several Western oil companies that they needed to decide on their investments in South Pars or be replaced by domestic companies. Many international oil companies have been wary about investing in Iran because of the sanctions linked to its nuclear programme.

“Those who imagine that the Iranian nation needs them ... are wrong,” President Mahmoud Ahmadinejad says.

Ahmadinejad says the project would be financed through domestic banks. The deals reflect Iran’s challenges in developing its grossly underfunded and ill-equipped oil sector.

The country sits atop the world’s second largest proven reserves of gas and is the second largest Opec oil producer, though most of its production is used domestically. Years of sanctions, augmented by another round of measures by the UN Security Council, have deterred significant investment by international companies with deep pockets and technical expertise.

Iran has been forced to rely either on local firms or countries like Russia and China, which are not as swayed by US pressure, to develop its oil sector and boost output.

The report says the local firms included Idro, PetroPars, PetroPaydar as well as PetroSina and Sadra, which is owned by Khatam Al-Anbia, the Revolutionary Guards’ engineering arm.

The Revolutionary Guards, Iran’s most powerful military force, has been steadily increasing its economic might through lucrative deals in a range of sectors in Iran. Khatam Al-Anbia, which has stakes in mining, telecommunications, dam construction, as well as the oil and gas sector, is among the companies blacklisted by the US and was listed under the latest round of sanctions approved by the Security Council last week.

Sadra will work as part of two consortiums on Phases 13 and 14, and independently on Phases 22, 23 and 24. PetroPars will handle Phase 19 of the project.

With the new planned production, Iran’s gas output would climb to 3.2 billion cubic feet per day (bcfd) in the next three years, the Oil Ministry’s Web site, Shana, reports, citing Javad Owji, the head of the state-owned National Iranian Gas Company – an increase of about 20 per cent.

Iran says the projects will take three years and it will help to boost its natural gas output by 7.06 billion cubic feet per day (200 million cubic metres) – an increase of about 30 per cent.

Phases 13 and 14 were initially slated to be handled by European energy giants Shell and Repsol, but the two companies were dropped after they failed to meet a two-week deadline set by Iran in May to determine their investments in the project.

Analysts, and even some within the Iranian government, have questioned whether Iranian firms – particularly those linked with the Revolutionary Guards – are qualified to work on such projects. Iranian officials, however, have dismissed those concerns.

“The quality of the Iranian contractors is very high,” Ali Vakili, the head of the state-owned Iran Oil and Gas Company, told state radio. “Local companies are able to build some 70 per cent of the required equipment.”

South Pars, which is shared by Iran and Qatar, holds an estimated 50.97 trillion cubic metres (1,800 trillion cubic feet) of natural gas. Iran has discovered 30 billion barrels of in place oil in a southwestern oilfield that borders Iraq.

“An Iranian company along with a Chinese company are preparing the ground for exploration of oil in the Arvand-Kenar field that has 30 billion barrels of oil in place,” says Latif Hayayi Ahvazi, governor of Arvand-Kenar town.

The official did not name the Chinese company.

Iran is one of the world’s biggest oil and gas producers but the industry has been hit by US and UN sanctions that have frightened away international energy firms from investing in the Islamic republic. Iran has increasingly turned to Asian firms but they often lack the technology to implement oil and gas projects.

The West fears Iran’s nuclear programme is aimed at developing weapons. Iran, the world’s fifth-largest crude exporter, says it only aims to generate electricity and has repeatedly refused to bow to international demands to halt uranium enrichment. Average recovery factors are between 20 and 50 per cent of oil in place, so the Arvand-Kenar field could boost Iran’s proven reserves by as much as 15 billion barrels, according to Reuters’ calculations.

Oil officials were not available for immediate comment.

Iran has the world’s third-largest proven reserves at nearly 138 billion barrels or over 10 per cent of the world’s total, according to BP’s 2010 statistical review.

The report did not name the Chinese company, or say how much of the oil in place at the field Iran would be able to produce.

One exploration well has already been completed at Arvand-Kenar, and two more were under way, an Iranian lawmaker was reported as saying by Jomhuri-ye Eslami.

“The first well has been drilled and the preliminary stages of digging two other wells in the field have started,” says lawmaker Hossein Dehdashti, a member of parliament’s Energy committee.

Iran has increasingly turned to state-owned oil firms from energy-hungry countries such as China for investment in its energy sector. The need to secure future supplies to feed rapidly growing economies has made Chinese and other state-run Asian firms less susceptible to political pressure from the US and its allies.

Iran is the world’s fifth-largest oil exporter, but western oil firms have slowly reduced their presence in the country due to US political pressure that aims to isolate Iran over its nuclear programme.

The West fears Iran aims to develop nuclear weapons, while Iran says it needs nuclear power generation to meet domestic energy demand.

Still, Asian firms sometimes lack the technology to implement the oil and gas projects Tehran would like to develop. Iran’s plans to become one of the world’s largest gas exporters have been frustrated due to its inability to access technology to chill gas for export as liquefied natural gas (LNG).

Royal Dutch Shell and Total are among the firms that have put investment in Iran’s giant South Pars field on hold due to political pressure. Iran has continued developing the field to meet domestic demand.

“We should not be dependent on others (to develop our energy sector). Those who are moody and ... obey their masters’ orders not to work with Iran,” Ahmadinejad says.

The comment followed a deal to develop six phases of Iran’s giant South Pars gas field was signed between National Iranian Oil Co. and some Iranian companies, including a company affiliated to the elite Revolutionary Guards. The value of the deals was around $21 billion, Ahmadinejad says. Total investment in developing South Pars would reach $50 billion over the next 40 months, he adds.

The new deals were for phases 13, 14, 19, 22, 23 and 24 of the field. “By developing these fields, Iran’s production of natural gas will increase 140 million cubic metres per day (4.942 bcfd),” state television says.

South Pars is part of the world’s largest reservoir of gas not associated with oil production. Iran shares the field with Qatar, where it is known as the North Field. Qatar has developed its side of the field with investment from international energy companies and has become the world’s largest exporter of LNG.

Production from some Iranian oil fields is declining by 400,000 bpd a year and the Opec producer’s overall output is falling by an average of 250,000 bpd, a senior Iranian oil official says in an interview, saying more investment was needed to enhance oil recovery from existing fields and to develop new ones.

Hojatollah Ghanimifard, the National Iranian Oil Company’s director for investment, also says Iran was not concerned about the threat of sanctions and would encourage its own banks to operate more like “international institutions” in order to raise the necessary funds for energy projects.

Insufficient funding “has been the concern of everybody in the industry and was loudly spoken about by the oil minister; the concern about the money we need to put for the recovery of the barrels that we lose from aging fields and at the same time the money that we need to develop green fields which have been explored with enough deposits but have not yet been developed,” he says.

“The construction of the Arabian Gulf Star refinery has so far made 33.74 per cent progress...but the progress target by March was set at around 60 per cent,” Karachian says. “This project was on schedule until the month of Mehr (started September 22) because shareholders were fulfilling their commitments, but after that, and because they didn’t pay, progress slowed.”

Karachian adds that Iran’s oil ministry had paid €250 million ($339.7 million) to make up for the shortfalls in investment.

The total cost of the project, whose shareholders are National Iranian Oil Products Refining and Distribution Company (40 per cent), Tamin Oil and Gas Investment Company (35 per cent), Indonesia’s Star PetroGas (15 per cent) and the Oil Industry Retirement Fund (10 per cent), was earlier reported as €2.6 billion.

Karachian also notes the refinery had decided to increase its registered capital from $20 billion to $50 billion, but says the move needs interested investors.

“Since the National Iranian Oil Products Refining and Distribution Company cannot buy shares as a public company and the foreign partner is not willing to do so either, only the two other (private) companies (Tamin and Oil Industry Retirement Fund) can buy new shares of this company,” Karachian says. “If these two are also not interested, financing the project will be problematic again.”

Iran previously announced plans to privatise all its refineries and petrochemical units by selling their shares on the stock market. The refinery, which is one of Iran’s seven new plants to be built in a bid to double the country’s current 1.6 million bpd capacity, is in the southern Hormozgan province.

The plant had been scheduled for construction in 36 months and to go on stream in March 2012. However this date is now unlikely. Once complete, the plant will refine 360,000 bpd of gas condensate from the southern offshore South Pars gas field to produce 35 million litres per day of gasoline.

Iran is forced to import large volumes of gasoline because of a lack of refining capacity despite being one of the world’s largest crude oil exporters.

Iran exported more than 844 million barrels of oil in its last calendar year that ended March 20, says Iran Oil Terminals managing director Mohammad Reza Movahed. IOT exported 258.6 million barrels of light oil, 473.2 million barrels of heavy oil and 112.4 million barrels of Forozan oil. IOT, as operator of the Kharg, Mahshahr, Neka and South Pars oil terminals, is responsible for all Iranian crude exports and petroleum product imports.

Separately, Iran expects to boost government coffers by some $17 billion per year by removing subsidies on domestic natural gas prices over the next five years, oil minister Masoud Mirkazemi says.

The move is part of a new “targeted subsidies” scheme that will replace the current subsidies with targeted cash handouts instead. “We propose that in the targeted subsidies plan price of gas reaches to at least Riyals 900-1,000 (9-10 cents) per cubic metre,” Mirkazemi says. Currently household gas is being sold at Riyals 100 per cu m.

State-owned Asian firms have less exposure to US political pressure to halt dealings with Iran and firms from energy-hungry China and India have continued to seek deals there, while Western companies have limited contacts.

Tehran’s gasoline imports could be a target for stricter economic sanctions in the row over Iran’s nuclear programme, which the West says is used to develop weapons. Tehran says it needs nuclear generation of electricity.

Petronas, which has secured about 500,000 barrels of fuel storage at the port of Fujairah in the UAE, has been selling on average about 16,000 barrels per day of the motor fuel monthly to Tehran since the fourth-quarter of 2009, traders says.

The company was not immediately available for comment.

“They came out last year sometime in the second-half of the year, but it was sporadic sales at first, it hasn’t been until the past few months that we see them doing more,” a Middle East based trader says.

“The storage option certainly now gives them the flexibility, and it allows them to participate more in supplying Iran monthly.” Petronas, facing declining production at home, is a 10 per cent stakeholder in Iran’s South Pars 11 project. The field is part of the world’s largest gas reservoir. The company also has long established close political ties with Iran.

“Petronas is one of those companies which won’t be exposed much if the US starts to enforce tougher sanctions for companies selling gasoline to Iran,” an Asian based trader says. “Companies like Petronas see an opportunity and will step in to plug the gap, they could very well be buying the fuel from companies who no longer do business with Iran.”

“Under the new deal we predict the daily imports to reach 40 million cubic metres by winter,” Javad Owji says. Despite having the world’s second largest gas reserves, Iran currently imports 25 million cubic metres of gas a day from Turkmenistan.

On June 16, Turkmen President Gurbanguly Berdimuhamedov met in Ashgabat with Iran Oil Minister Masoud Mirkazemi and managing director of the National Iranian Gas Company (NIGC) Javad Owji.

“During the meeting the sides confirmed willingness of both Turkmenistan and Iran to continue negotiations based on mutual interests, above all in the oil and gas sector. In this context, a number of issues related to supplies of Turkmen gas to Iran were discussed.

On the same day, the NIGC head held talks at Turkmengaz state concern. Following the talks, the sides signed a supplementary agreement to the existing contract for the supply of Turkmen gas to the neighbouring country.

Under the agreement, additional volumes of natural gas will be exported to Iran via the recently commissioned second gas pipeline Dovletabat-Sarakhs-Hangeran.

To this end, the document provides for joint work at a level of experts of the two countries to draft a contract for additional sale of Turkmen gas with the prospect of further increasing of these volumes.

Iran’s northern neighbour cut its gas exports to the Islamic republic for several months in the winter of 2007-2008 over what it says were payment delays and technical issues.

The move would strengthen the guards’ position in the oil and gas sector at a time when the US is pushing for a new UN Security Council resolution that would target some of their commercial interests.

Iranian Oil Minister Massoud Mirkazemi says following the “firm exit” of the European duo, the project would now be reassigned to the Khatam-Ul-Osea consortium, which also includes local contractors Sadra and Isoico.

A senior Iranian gas official says that earlier Shell and Repsol had been given a two-week ultimatum to commit themselves to the project or face being kicked out.

Shell and Repsol, which were initially awarded the two phases in January 2002 as part of an integrated scheme to produce LNG for export, deny they have pulled out, despite the ultimatum. “There’s no change: No decision has been made on whether to proceed,” a Shell spokesman says.

But if they are forced to withdraw, the two will have to reconsider their participation in the LNG joint venture with National Iranian Oil Co (NIOC) that was established in early 2007 with the aim of turning the South Pars gas into more than 16 million tonnes per year of LNG.

Each of the European firms holds 25 per cent in the venture but, much to NIOC’s frustration, they have repeatedly delayed making a final investment decision (FID).

One of the main reasons Shell and Repsol have stalled on the final decision is the fear of incurring sanctions, which over the past few years have been steadily ratcheted up by the US and its European allies.

The US Congress hopes to introduce a new Iran sanctions bill that would make it much harder for non-US companies – especially those with a significant American presence, like Shell – to invest in Iran’s energy sector.

Mahmoud Mohadess, head of the exploration office at the National Iranian Oil Company (NIOC), made the announcement at a time when Iran is facing Western pressure over its disputed nuclear programme.

The Islamic Republic, the world’s fifth-largest crude oil exporter, needs foreign capital and technology to help develop its all-important energy sector, but the row over Tehran’s nuclear ambitions has deterred Western investors.

“We are planning to hold tenders on eight exploration blocks soon. We are currently preparing the needed documents on these blocks,” Mohadess says. He did not give details.

Western energy companies are becoming increasingly wary of investing in Iran because of the tensions with the West. Tehran denies Western accusations that its nuclear work is aimed at developing bombs, but its refusal to halt sensitive activities has led to three rounds of UN sanctions since 2006.

Six world powers, including the US, have begun deliberations on more sanctions at UN Security Council level in New York.

Mohadess also says the NIOC had projected the discovery of new reserves of 500 million barrels of oil and 5 trillion cubic feet of gas a year over the course of the fifth five-year development plan in 2010-2015.

The Forouz field was discovered about 30 km southeast of the island of Kish, he said, adding it had the capacity to produce 70 million cubic metres of gas per day. He did not give further details. Iran, a major crude exporter, has the world’s second-largest natural gas reserves after Russia. Iran says it needs around $25 billion a year in oil and gas industry investment. But sanctions over Iran’s nuclear programme have deterred international energy companies from investing in the Islamic republic, slowing Iran’s development as a major exporter.

Iranian authorities have played down the impact of international sanctions, saying they have helped Iran to become self-sufficient. Mirkazemi says sanctions on an “energy-rich” country like Iran would be useless.

“I am firmly announcing that Iran’s energy sector will face no problems because of the sanctions,” says Mirkazemi. The US and its European allies fear Iran’s nuclear programme could be a cover to build weapons. Tehran insists its nuclear work is for the generation of electricity to meet booming domestic demand.

In a move to pressure Iran into curbing its nuclear activities, the UN Security Council has imposed sanctions on the Islamic state since 2006.

US President Barack Obama has signed into law far-reaching new sanctions on Iran that aim to squeeze the Islamic Republic’s fuel imports and deepen its international isolation. The European Union has also decided to implement additional measures.

The world’s fifth-largest oil producer, Iran lacks sufficient refining capacity and imports up to 40 per cent of its petrol, making the Islamic state potentially vulnerable to sanctions.

Previously Iranian officials have said output was around 500 million cubic metres. These figures usually refer to output capacity rather than actual production.

Iran hopes the development of its vast South Pars gas field – where much needed foreign investment has been constrained by sanctions – combined with policies to suppress domestic demand will finally help it become a net exporter.

Javad Oji told reporters on the sidelines of the signing of a pipeline contract with Pakistan that expansion of Iran’s South Pars gas field should mean output will increase to 900 million cubic metres per day in the next two to three years. By the end of 2015, Iran’s output will reach 1.1 billion cubic metres a day, he says.

Iran has the world’s second largest gas reserves but has struggled for years to develop its oil and gas reserves. It says it needs around $25 billion a year in oil and gas investment. In tandem with attempts to develop South Pars – the world’s largest reservoir of gas which it shares with Qatar – Iran plans a major cut in domestic demand by phasing out subsidies, something which will push up prices and, it hopes, encourage energy efficiency.

“The National Energy Fund, with the help of the resources of four local banks and the Central Bank, has been established to help finance major parts of the oil industry’s activities,” Mirkazemi says.

“Several rounds of talks were held in this regard and it was approved by the president (Mahmoud Ahmadinejad),” he says.

Analysts say Iran, the world’s fifth-largest crude exporter, needs inflows of capital and more foreign investment to help expand and modernise its all-important energy sector. But many Western companies are increasingly wary of investing in the Islamic Republic, which also sits on the world’s second-largest natural gas reserves, due to a long-running international row over its nuclear ambitions.

Mirkazemi says the fund would pave the way for both local and foreign firms to take part in Iranian energy projects.

“By using domestic resources we would pave the way for the presence of local firms in oil and gas projects, but at the same time we won’t block attracting foreign resources,” he says. “It is necessary to invest in the country’s oil and gas development projects, particularly in joint fields with the neighbouring states,” says Mirkazemi, who did not provide any figures.

It was not immediately clear whether the energy fund would be linked to a planned new National Development Fund (NDF), to which at least a fifth of the country’s oil and gas revenue would be transferred.

IRNA reported about the NDF, saying its top priority would be to invest in Iran and making clear it would replace the existing Oil Stabilisation Fund (OSF).

The OSF, set up in 2000, is a contingency fund set aside by the government to cushion the economy against fluctuating international oil prices and help both the public and private sectors with their hard currency needs by extending loans.

The OSF forms part of the Islamic state’s foreign exchange reserves, but its size and the overall foreign exchange reserves are not regularly revealed to the public. President Mahmoud Ahmadinejad said in December 2008 the OSF was worth the equivalent of over $23 billion.

“We analysed the new law passed by the US Congress and our opinion is that it does not affect the Iran-Pakistan gas pipeline as the sanctions are restricted to investment in petroleum refinement besides oil and gas sectors,” says an official.

Also, this is an agreement between two governments and Pakistan is exporting; not importing or investing in Iran. Consequently, both countries are proceeding as per the agreed schedule. Iran is constructing the last 300-km stretch of the pipeline from Iranshahr to the Chabahar port and Pakistan is conducting the feasibility study on its leg of the pipeline from the border with Iran to Nawabshah, the hub of the country’s gas pipelines in the province of Sindh.

On his last visit to Islamabad mid-June, US Special Representative to Afghanistan and Pakistan Richard Holbrooke had said there was a possibility of the pipeline running into rough weather because of the sanctions imposed on Iran owing to Tehran’s refusal to suspend uranium enrichment that could produce fuel for a nuclear weapon.

Day after day, without formal authorisation from Baghdad, more than a thousand tankers snake through this town on Iraq’s border with Iran, not only undercutting recent American sanctions but also worsening tensions with the Iraqi government over how to divide the country’s oil profits. The scale and organisation of the trade has raised concerns among American officials here, says one senior American official in northern Iraq, who would speak about the Iran oil trade only anonymously, following diplomatic ground rules.

They fear that proceeds from the sales could be flowing to corrupt Iraqi politicians and benefiting the Iranian government, even as the US has approved new unilateral sanctions against Tehran, imposing penalties on foreign entities that sell refined petroleum products to Iran.

A senior Kurdish government official says that the benefits from a business he described as “elaborate’’ and “huge’’ went to the region’s two governing parties and affiliated companies, and that officials and politicians in Baghdad were involved as well.

“The people are being scammed, but by whom, we do not know,’’ says Hamid Mohammed, an Iraqi tanker truck driver waiting to enter Iran recently. The Kurds have long been allied with the US. Since the first Gulf war, American and Nato forces had imposed a no-flight zone over Kurdish territory in northern Iraq, protecting the Kurds from Saddam Hussein and helping them to build a semi-autonomous region.

Smuggling of oil and other goods and commodities along Iraq’s porous borders thrived in the 1990s, when Iraq was under international sanctions. But the semiofficial nature of the current trade underscored how business interests had trumped the messy politics of Iraq and the region.

The stream of tankers into Iran continued without interruption during an Iranian military campaign last month against Iranian Kurdish separatists operating at the border. Hundreds of tankers, each with a capacity of at least 226 barrels of crude oil and refined products, enter Iran every day from Penjwin and two other border posts in Iraqi Kurdistan, Kurdish officials say.

While much of the refined product is used in Iran, which sorely lacks refinery capacity, the crude oil is trucked all the way down to the Gulf ports of Bandar Bushehr, Bandar Imam Khomeini and Bandar Abbas, where it is emptied into reservoirs or loaded onto ships, according to drivers.

The trade is supported by an estimated 70 mini-refineries, known in the industry as topping plants, says the Kurdistan region’s oil minister, Ashti Hawrami. They are dotted around the Kurdistan region and Kurdish-controlled areas in nearby Kirkuk and Nineveh Province, he says, and many of them are unlicensed.

Abdul-Karim Al-Luaibi, Iraq’s deputy oil minister for production, says he was unaware of oil exports to Iran from the Kurdistan region, adding that all the mini-refineries were illegal. “They bear responsibility for this,’’ says Luaibi, referring to Kurdish authorities.

In a rare interview, Hawrami says only fuel oil and byproducts like naphtha were being sent to Iran after processing the region’s own crude at two privately owned refineries.

The second contract – worth $20 million and growing – is for the design, manufacture supply and testing of 2,000 km of low voltage power, lighting and earthing cable for Hyundai Engineering’s 5 utilities and offsite project also for Habshan 5. All of the cables to be supplied are manufactured to International BS and IEC standards and also need to comply with Gasco specifications.

These contract wins come as a result of many months of design suggestions, product development and specification and negotiations between Ducab’s multi-disciplinary special cables unit teams and prospective EPC contractors, the project consultants and the clients themselves, according to Laith Madi, Ducab’s manager oil, gas and petrochemical sector.

“The lifecycles for OGP (oil, gas, petrochemical) projects are the longest in Ducab,” he says.

“We start with all the EPC contract bidders at the pre-tender stage when they prepare their client proposals. At this stage we understand the specifications and our engineers work with their (to find solutions), we help them with budgeting and understanding the project requirements and the lifecycle of the project.”

“We also so work with the client – the end user – on local specifications. Every single project that is related to oil and gas has its own unique specifications and requirements. Part of these specifications will be international standards but there are also locally developed specification made up by the project consultants and the clients,” Madi continues.

An example of this came in the JGC – Technimont project when Gasco, the client, was concerned about the environmental impact of lead sheathing and wanted an effective alternative that still met and fulfilled the international specification that called for lead sheathing for the cables. Ducab’s research and development group came back with solutions using a combination of materials that can do the job of lead sheathing but unfortunately, due to time constraints the new design could not be used for that particular project.

The cable yard outside the Ducab factory

This is slightly ironic since Ducab is one of a handful of cable manufacturers that offers lead sheathing – a huge competitive advantage when bidding for OGP contacts in this region where lead sheathing is the accepted practice and it is a tribute both to Ducab’s far sightedness and it’s longstanding relationships with its end users in the OGP arena that it is actively researching and investing alternatives to lead sheathing and other new technologies to match its clients requirements. 

Once the EPC contract has been granted the work really gears up as Ducab then needs to work with the successful EPC contractor to refine the specifications and design of the cables and to work through the logistics and commercial issues that will ensure the successful completion of this element of the overall project. Furthermore, Ducab always conducts factory visit for its facilities to showcase to EPC contractors the latest applicable technologies on cable manufacturing and provide a brief about the latest inspection facilities and procedure used in testing the cables and Ducab has a specialised technical service team that is on stand by to provide service support to the project sites when required.

For these two Habshan 5 contracts the specifications call for fire resistant cables that can operate in case of extreme fire temperatures of up to 1,000 deg C for one hour. The areas of application include fire detection and fire alarm circuits, sprinkler pumps, smoke extractors and so on.

Also exposure to UV radiation and desert environments for prolonged duration may result in developing surface-cracks. Hence Ducab’s cable solutions utilise special ultra violet radiation resistant stabiliser packages in the insulation materials which protects the insulation from deterioration from continuous exposure of sunlight. Ducab cables are designed to operate within an environment where the spillage or seepage of corrosive liquids and vapours pose a threat to circuit integrity. The design of cables makes them suitable for continuous operation in service conditions typical in hydrocarbon resistant areas in oil gas and petrochemical industry within a desert environment.

Madi, sums up the attributes that EPC contractors and their clients should look for in a cable manufacturer as follows: “You need a reliable supplier. A supplier who is close to the project location – we are talking about thousands and thousands of metres of cable of different specifications that need to managed in terms of logistics and documentation, linking in with the site engineers. You need a supplier with a strong and professional service centre and engineering capability that can support the engineers on site if they have any problems with the cables, the choice of glands and so on. It is a natural choice for a big project such as Habshan to go with a reliable strong supporter and preferably local, if possible. Ducab fulfills all these requirements,” he says.

Ducab’s Special Cables Unit was commissioned in November 2009 at its main facility in Jebel Ali in a timely move to respond to existing and future demands of the oil and gas industry. The new unit significantly expands Ducab’s capacity for specialised cables suitable for oil and gas projects in the region.

At the same time Ducab’s Central Technical Design department has also been expanded and reinforced with the competencies required to ensure the best integration of customer specifications into design. The new facility has a production capacity of 3,000 cubic tonnes per year and the end product conforms to BS and IEC standards.The SCU is equipped with state-of-the-art machinery sourced from industry majors such as Niehoff (Germany), Cortinaris (Italy) and Rosendhall (Austria).

SUPERBRAND
Following a year marked by business expansions, Ducab has been honoured for the second consecutive year by the Superbrands organisation for its marketing and branding excellence. The honour is a powerful endorsement that recognises Ducab’s exceptional work in positioning the brand while strengthening business relationships from its UAE headquarters. Ducab has been chosen for second time as a UAE “Superbrand” against stiff competition and as one of the very few recognised industrial brands.

Andrew Shaw, managing director of Ducab, says that as one of the leading companies in the UAE’s manufacturing sector, Ducab is very proud to have been recognised and honoured by the local business community and its industry peers. “Focusing on client relationships coupled with the development of reliable and high quality products has taken us far in the past thirty years,” comments Shaw.

Explaining the new product range, a company spokesman says the pumping heart in some of the plants is the brand new booster compressor BK26. With the continued strategic product development, Bauer has developed a new compressor range boosting the maximum compressor capacity to a higher level to meet the oil and gas industry requirements for high pressurised air and gases.

The idea is as simple as it is efficient. Most gases like nitrogen, helium, argon, and natural gas are available at low pressure (70-200 PSIG) right from the source such as a nitrogen plant or a gas pipeline.

Instead of reducing this pressure down to atmospheric pressure and then compress it to high pressure again, the new booster range BK23 and BK26 uses this pressure as “1st stage” and boosts it directly to higher pressure.

If there is no pressure source available, a screw compressor is used as a first stage (compound unit) which results in several advantages in comparison to conventional units including reduced power consumption, smaller footprint, reduced weight / less transportation and installation costs, reduced annual preventative maintenance costs and quicker commercial payback.

Merkel and bin Yousef inaugurate Bauer’s first production plant in the UAE.

With the BK23 and BK26, Bauer also presents the first pressure tight crankcase. This allows the unit to achieve outstanding volumetric efficiency and simplifies the technical concept due to the advantage of no bypass compressor, he says.

BAUER IN THE MIDDLE EAST
It was in 2005 that Bauer strategically focused on the region’s local market due to the increasing demand for high pressure solutions in the Middle East. By opening its own subsidiary in Jebel Ali Free Zone Dubai, a new level of service was offered to existing and new partners focused on end-user requirements.

As a result, Bauer has successfully secured the largest CNG installation within the Middle East region to date, very much focused on the level of support available locally for turnkey projects. The delivery and installation of 17 CNG compressor stations to Abu Dhabi National Oil Company (Adnoc) in 2009/2010 has set the standard.

On May 25, 2010 German Chancellor Angela Merkel ceremonially opened the first production plant in Khalifa City. Before that the test runs of 17 plants already delivered had been successfully finished. The plant then started operations in the presence of Adnoc CEO, Yousef Omair bin Yousef, the German Chancellor Merkel and Philipp Bayat, managing director of the Bauer-group. Before the opening, Bauer and Abu Dhabi’s state gas company Gasco signed a contract for the delivery of 12 more plants. The value of this order is in the tens of millions. These contracts allowed the further development of a solid infrastructure concerning project management, engineering as well as service and after-market support.

MODULAR PRODUCTION
Bauer uses a modular concept with flexible cylinder assemblies of different diameters. So it is possible to cover the output pressure range from 350 – 6000 PSIG (25-420 bar) and the delivery range from 120-940SCFM (200-1600cu m/h) with only one basic pump unit.

The company’s design engineers have made it possible to transfer the mass production concept from breathing air compressors, which have much larger production numbers, to the big industrial compressor units.

At the state-of-the-art manufacturing facility UCC, close to Munich in Germany, Bauer is hosting the biggest on-line production of high pressure compressor pumps in the world. The advantages in terms of production time and quality assurance are remarkable.

CUSTOMISED SOLUTION
Bauer is now able to make another beneficial combination. Within the industrial sector focused on the oil and gas industry the requirements for equipment is varying and demanding. It might be an oil rig in the Norwegian Sea, a urea plant in the Omani desert or a seismic research vessel in the South East Asia that needs a reliable supply of high pressurised gas.

“Our project and design engineers have the capability to integrate the standardised compressor block into customised solutions to meet the special requirements of the customer and application including containerised package with all necessary downstream items, diesel driven systems for use in remote areas, compressors systems for hazardous areas and compliance with the industrial standards such as DIN, ASME, KHK, GOST, CE, ADM, ATEX, European Pressure Vessel Regulation, ISO 9001,” the spokesman says.

RELIABILITY
With over 60 years experience in the construction of medium and high pressure systems, the market feedback collected while servicing a huge installed base all over the world guarantee the legendary reliability and longevity of Bauer compressor system. The roller bearings of all Bauer compressors are designed for 30,000 continuous operation hours. It can be compared to a motor vehicle that is equal to 1.5 million km, which would equate to driving around the world more than 30 times with the same engine.