Iran plans to build 7 refineries

Experts uncertain that Teheran has the financial wherewithal to build the facilities.

February 1, 2010 00:32
2 minute read.
oil refinery illustrative 248.88

oil refinery illustrative 248.88. (photo credit: )


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Iran plans to build seven new oil and gas refineries in a bid to diminish its vulnerability to sanctions from foreign refineries.

According to the official Iranian news agency IRNA, the new oil and gas refineries will allow Iran both to meet domestic demand and become a gas exporter, although the agency failed to state when construction was due to start.   Though Iran has one of the largest known oil reserves in the world, it lacks the necessary refineries to turn the crude oil into high-value consumer products, such as gas. If completed, the new plant will significantly boost Iran’s oil industry.

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Iran relies on exporting its oil to southern Gulf countries for refinement, which necessitates re-importing its own oil at a much higher price.  New sanctions being considered against Iran by the United States plan to target this dependence.

“From an economic point of view, it’s very difficult, simply because it’s going to be a very costly enterprise,” Mohammed Shakeel, editor and economist with the Economist Intelligence Unit, said.

“But also for Iran, it’s a very immediate concern as well, because the threat of sanctions is targeting that particular sector. So the government wants to show that it’s on top of developing its refineries, and therefore is able to handle any pressure from sanctions,” he said.

“Whether it has the resources to carry this out is a completely different story,” Shakeel added, referring to the huge costs of constructing refineries.

Regional analysts suspect Washington might find it tricky to get some Gulf countries to follow its directives, as Oman recently signed a gas cooperation deal with Iran.

“There is also pressure on Dubai to curb its
trading relationship with Iran, a policy more in line with the United Arab Emirates policy, and to anticipate any further sanctions that might be imposed,” he said, noting that Dubai has strong business ties with Iran despite a conflict over the sovereignty of three islands in the Gulf.

The root of the conflict between Iran and the US revolves around Iran’s nuclear program, which Washington suspects is a cover for nuclear weapons development, but which Teheran claims is for energy production.

The US government is in the process of appealing to the United Nations Security Council to approve the planned sanctions, a move which would grant the sanctions better legal backing.

Russia and China, who both have business ties with Iran, and are permanent members of the council and thus hold veto power, have so far failed to support the US in its calls for tougher sanctions.

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