Jask Crude oil reservoirs construction project
(Nasr e Esfahan Co.)
May 2015
Ten million barrels crude oil reservoirs at Jask, Hormozgan is introduced as a financial covering, construction and ownership by National Iranian Oil Engineering and Construction Co. (NIOEC) as the representative of National Iranian Oil Co. (NIOC) to the investors.
In this project National Iranian Oil Co. provides the required land for the project and rents it for twenty years to the contractor. In addition, employer guaranties to rent the reservoirs for 15 years after commissioning from the contractor.
The initial estimates indicate the overall cost of project to be approximately 200 million Euros. Following the project is evaluated according to the best of available field information.
The project location:
Jask County is located in the south of Hormozgan province. The center of the county is Jask port along the Makran sea shore. Makran sea shore is the name of a region in south of Iran that is bound by Jask port at west and Baloochestan province of Pakistan in the east side.
Considering the Iran’s shipping capacity building in Persian Gulf and geopolitically strategic location of Hormoz pass, development of Makran sea shore has attracted Iranian government. “Mr. Akbar Torkan” the adviser to the Iranian president and high commissioner of Iranian free zones stated that during 2012 specific studies conducted by the Strategic Research Center for development of Makran with an emphasis on oil and gas and geographical perspectives. As a result, this is finalized for drafting a development plan for Jask Port related to oil and gas industries. Two pipe lines of Neka to Jusk (mainly to supply Kazakhstan’s oil at Oman Sea) and Goore (across the Khark Island) to Jask has been studied. On the other side, pipe line from Sarakhs to Jask with the aim of delivering the Turkmenistan’s natural gas as well as big oil refinery projects including Hormoz Bahman Geno refinery plant and devised petrochemical industries, all will reshape the Jask to a main refinery and export of the Iranian oil in next decade.
Introducing the project:
According to the CEO of Iranian Oil Terminals Co. (IOTC), from 2014 the ministry of oil focused more on development of Oil reservoirs for 34 million barrels. The development of oil reservoirs will be carried out in Caspain Sea, Persian Gulf and Oman Sea with an emphasis on Jask. In this way, Mr. Sajedy, CEO of National Iranian Oil Engineering and Construction Co. announced twenty million barrels reservoir for crude oil in two phases to be constructed in Jask and with two years and half from April 2015 to be connected to the Iranian network for oil reservoirs and export. The first phase with the capacity of ten million barrels introduced in May 2015 for contractor selection using BOO method and with the rent guarantee of National Iranian Oil Co.
Project capacity:
Project capacity is announced to be nominally ten million barrels. As a rule of thumb and conventional design, it is expected that twenty tanks with the capacity of eighty thousands each along with inter-reservoir piping, Piping from tank farm to export port, possibly design and construction of Single Buoy Mooring (SBM), Fire and Gas detection system including fire distinguisher tanks, measurement tools for physical parameters, roads and related buildings and equipment required for this project as an oil terminal.
Project cost estimatation:
According to Nasr e Esfahan related previous projects, each tank with aforementioned capacity and dimensions of approximately 20 m height and 75m diameter demands 2000 tons of direct metal works. It is estimated that twenty tanks and related equipment and piping costs approximately 4000 to 5000 billion Rials that includes 1000 billion Rials direct cost for supplying metal sheets of tanks and pipes of piping system, 1500 Billion Rials for measurement tools and electricity equipment and pumping system, 500 billion Rials for civil works, and 150 billion Rials for construction, commissioning etc. Considerably, the full package of design, construction and operation impacts the overall costs of project in the efficient way for capital consumption. Considering 35000 Rials for each US dollar roughly it means the complete tank farm manufacturing and erection has been estimated to cost over 150 M$ totally.
Project fiscal model:
The employer’s suggested model is construction, operation, ownership and rent. This method is one of the BOO funding methods that rental phase or leasing supports is guaranteed on return of investment in practice.
It’s been a while since such model is presented and executed in the country. Following some successful examples of the model is presented:
-Tank construction for different petroleum products with the overall capacity of approximately 360 thousand barrels in Imam Khomeini and Shahid Rajaiee ports (Khouzestan Province).
-Tank construction with the capacity of six million barrels in Genave (Boushehr Province).
-Tank construction with the capacity of ten million barrels in Gheshm (Hormozgan Province).
Globally, renting the tanks is conventional. For example, National Iranian Oil Co. in Dalian Port in China rented oil tanks last year because renting tanks is significantly cheaper than renting oil shipping vessels. According to the speech of CEO of Sepah Bank (One of the major investor banks in Iran), renting a vessel costs five times to the similar tank renting for crude oil.
IEA report on 2013 assumes the profit of crude oil tanks to be $3 to $4 per barrel annually. According to domestic and international market data such tanks are rented for 1.5 to 2 cents per barrel per day. Therefore, the annual income of the plan would be around 55M$ to 75M$ that taking off 5M$ for O&M costs turns to approximately 3 years return on investment.
All after all, intensive and accurate study and devising the fiscal model related to current regional market situation is required for investing on the project.