An Iranian deputy oil minister says negotiations with China to provide $3 billion of finance for development of the Abadan oil refinery are making good progress.
The progress cited by Abbas Kazemi, the managing director of the National Iranian Oil Refining and Distribution Company, follows Iran’s ultimatum to the Chinese side to make its mind on the project.
“Negotiations with Chinese financiers and banks in order to provide financial resources for this refining project have started and good progress has been made so far,” the Mehr news agency quoted him as saying Sunday.
Kazemi had previously accused the Chinese of “killing time,” threatening to replace them with other partners.
The official said talks have been held so far with two South Korean and Japanese companies to “participate and invest” in the upgrade of the Isfahan refinery.
Initial estimates of the Abadan project call for $3 billion of investment in order to improve “the quality and production standards of petroleum products, especially gasoline and diesel,” Kazemi said.
“It is predicted that the project will go into execution in the new (Iranian) year if an agreement is reached with the Chinese.”
China’s debts and finance
Kazemi, however, did not touch on the modality of the Chinese financing.
Under an arrangement which the two countries reached during years of sanctions on Iran, China had undertaken to finance Iranian projects in return for the oil money which it owed to the country.
But Iranian officials complained that the Chinese had a tendency to dictate their terms. Former central bank governor and economy minister Tahmasb Mazaheri once said Iran often faced a myriad of problems to access its own funds in China.
Managing Director of the National Petrochemical Company (NPC) Marzieh Shah-Daei said last October that Chinese financiers were charging high commissions and fees.
China’s investors forced clients to source 50-70% of equipment from the Asian country, while Iranian project owners could get 70% of the equipment needed inside their country, she said then.
Former NPC managing director Abbas Shari-Moqaddam has put China’s oil debts to Iran at more than 20 billion euros, according to local media.
Iranian officials, meanwhile, have urged China to adopt a more business-like approach in its dealings with the country following the lifting of sanctions on Tehran.
Iran plans an extensive revamp of its oil refineries which are in dire need of upgrade after years of draconian Western sanctions.
Isfahan and Bandar Abbas refineries are on course to get $1.2 billion each to upgrade and enhance products, officials have said.
Italy’s Saipem has signed a memorandum of understanding with the Parsian Oil & Gas Development Company to revamp and upgrade Shiraz and Tabriz refineries.
Nine Iranian refineries currently process 1.8 million barrels of crude oil per day. According to Ministry of Petroleum reports, only one facility is operating with an acceptable profit margin and the rest need major upgrades.
Kazemi has said Iranian refineries were producing too much fuel oil and were being pressed to make higher-value products.
“As per the Vision Plan, fuel oil production has to reach 10%. This rate is currently 28%,” he said in November.