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US may be worried about Iran’s latest energy project

US, WASHINGTON (NEWS OBSERVATORY) — In addition to its ability to create chaos in world oil markets, blocking the Strait of Hormuz, through which about 35% of world oil supplies go, given the need to maintain its revenues from oil exports to Asia, Iran has quickly advanced in developing the Bandar-e-Jask port project.

It is important to note that Jask is located not in the risky Strait of Hormuz, but in the southeast in the Gulf of Oman.

This offers a relatively risk-free transit route to Iran’s key markets in the East, especially to China and India, as well as to markets further south in Africa.

According to recent comments by Dehkani, CEO of PEDEC, the company responsible for developing the project in tandem with the National Iranian Oil Company (NIOC), phase one oil exports will begin within the next 12 months and will begin to be finalized this month.

After full commissioning, this project will allow producing 1 million barrels per day of oil from Iran, especially at the first stage from a group of resource-rich fields in the region of West Karun. In addition, Jask will also be used to deliver oil to refineries and petrochemical plants in order to increase this export to Asia.

“The current logistic model is unstable, since about 90% of all Iranian oil is exported to Kharg Island, with most of the remaining cargo passing through the terminals in Laban and Sirri, which makes it the main and easy goal to damage the Iranian economy,” he said.

Last week, a senior source working closely with the Iranian Ministry of Oil. “On the other hand, Iran needs the opportunity to use the threat of closure of the Strait of Hormuz for political reasons, and not to destroy its own flow of income from oil exports,” he added.

From a practical point of view, even before U.S. sanctions were imposed in May 2018, the Kharg terminal was not an ideal place for tankers to use, since the narrowness of the Strait of Hormuz means that they must sail through it extremely slowly.

In accordance with the plans, an oil pipeline with a length of 1,000 km and a cost of $ 1.8 billion will connect Guriye in the rural district of Shoaibiye Garbi, in the province of Khuzestan, with the Jask district, in the province of Hormozgan.

As soon as the oil is in Jaska, it will be stored in any of 20 reservoirs, each of which has a capacity of 500 thousand barrels of oil, at the first stage (total 10 million barrels) for subsequent loading to VLCC, sent from the Gulf of Oman to the Arabian Sea, and then into the Indian Ocean.

These VLCCs will be placed on vehicles worth about $ 200 million at the first stage, although it is planned to expand capacities to ensure the further supply of various petroleum and petrochemical products in demand in Asia.

According to an Iranian source, this includes gasoline, gas oil, jet fuel, sulfur, butadiene, ethylene and propylene, monoethylene glycol. Ali Mohammad Bosaghzadeh, project director for Iran’s national oil company, recently said that Bakhtar Petrochemicals Holding will manage this part of the Jaska project, although “foreign companies” may also participate.

In fact, according to a source in Iran, China proposed sending as many engineers and other specialists to Iran as needed for such a project, for as long as needed. “Within 12 months from the end of next year, it is planned that the storage volume of Jask will be 30 million barrels with the ability to export from 2 million to 2.5 million barrels of oil per day, if necessary,” he said.

Although the initial sponsor of the Jaska project, the current president, Hassan Rouhani, cannot constitutionally run again next year, the project’s support will affect all political groups and will receive full support from the Islamic Revolutionary Guard Corps for three key reasons.

Firstly, the route laid through the Strait of Hormuz means that Iran will continue to develop its oil business with China, as well as with India, until the United States returns to the negotiating table on a nuclear deal. Secondly, this means that a large amount of financing will come to Iran from China and from Russia, since both have already contributed to the costs of Jask.

Finally, the availability of huge oil storage capacities within a short sea voyage from India means that pressure from India and Pakistan will lead to the final approval of the construction of the Iran-India oil and gas pipeline or the Iran-Pakistan-India gas pipeline.

“This would require the deployment of Iranian security officials, that is, the IRGC, on Indian soil or on Pakistani and Indian lands, which is of significant strategic interest to the IRGC,” a source in Iran said. “It also means that Iran can continue to supply oil to the Huti faction in Yemen to constantly threaten the southern flank of Saudi Arabia, as well as militia groups in Somalia and Kenya,” he stressed.

Given the inter-party consensus in Iran on the Jask project, progress was extremely rapid, since the construction phase of the project began only in 2018, and then various obstacles that arose as a result of the reintroduction of U.S. sanctions had to be overcome.

The key one was the organization of the necessary supplies of pipes and related equipment, which was made possible thanks to the often used Iranian position to develop the required technology. Given this, according to Dehkani of PEDEC, the full supply of related equipment for various facilities in Jask and its environs will begin in the next few months.

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Article is written and prepared by our foreign editors from different countries around the world – material edited and published by News Observatory staff in our US newsroom.