Tabriz Oil Refining Company signed a €1.6 billion ($1.88 billion) deal on Saturday with a consortium of South Korean and Iranian companies on financing and implementing a project to upgrade Tabriz Refinery in East Azarbaijan Province.
SK E&C Company of South Korea and Oil Design and Construction Company of Iran aim to cut the refinery’s mazut production to less than 2% from the current 20% in four years, ILNA reported.
The optimization will help Tabriz Refinery produce fuels with higher value-added, such as Euro-5 quality gasoline and diesel.
The signing ceremony in uptown Tehran was overseen by government officials of both countries.
SK E&C Company Ltd. provides civil, transportation, telecommunications infrastructure and building construction services to customers in the Middle East, Southeast Asia and Latin America. It offers services in the areas of planning, feasibility studies, sale, design, engineering, construction, operation, maintenance and installation for chemical and power plant projects.
The South Korean-Iranian consortium will be in charge of design, engineering, procurement and installation of equipment, with the Export-Import Bank of Korea or Korea Eximbank to finance the venture.
On the sidelines of the signing ceremony, Abbas Kazemi, deputy oil minister, referred to bilateral cooperation with South Korean companies, such as Daelim Corporation and Hyundai, hoping that the SK E&C will expand its operations in Iran.
State-owned National Iranian Oil Refining and Distribution Company had signed a $20 million memorandum of understanding with the South Korean company last year on conducting feasibility studies on Tabriz Refinery’s development.
Asian companies have actively sought downstream projects in Iran's emerging petroleum industry after the easing of international sanctions in January of last year. As per the terms of the contract, at least 51% of equipment and services for refurbishing Tabriz refinery should be provided by Iranian companies.
Iran’s Behin Energy Company this week signed a preliminary agreement with two South Korean firms for collaboration in wide-ranging energy projects, including SK E&C.
The agreement calls for carrying out oil, gas and petrochemical projects under engineering, procurement, construction and financing contracts, constructing refineries, establishing small liquefied natural gas production plants and power stations as well as building LNG and liquefied gas storage tanks, IRNA reported.
---- Gasoline Production
Tabriz refinery project is part of efforts to raise the output of high-quality gasoline and meet the increasing demand for the fuel at home.
"Gasoline production in the Persian Gulf Star Refinery in the city of Bandar Abbas [Hormozgan Province] stands at 7 million liters per day," Kazemi said on Saturday, adding that the output level reaches 11 ml/d in the next few months as more units of the Middle East's largest gas condensate refinery go on stream.
On gasoline consumption, he said, "An average of 79 ml/d was burned over the last four months. Moreover, 12 million liters of gasoline daily have been imported in the said period."
According to the official, Iran's gasoline reserves amount to 1 billion liters.
Referring to PGSR production, he noted that since the first phase of the refinery went on stream in May, more than 300 million liters of fuel have been distributed in the market.
"The refinery's output level is rising progressively as the launch of one plant, such as the isomerization unit, requires the functioning of other facilities," Kazemi said, noting that the second phase of the refinery will become operational in 2018.