Iran in Talks to Help Build Refinery in Spain

Iran is in talks to help build a refinery in Spain, an Iranian oil official told state media over the weekend, as it seeks to secure buyers for its oil after a European embargo on its oil is lifted.

The talks come as world powers are set to implement a deal with Tehran to lift sanctions in exchange for curbs on the Islamic Republic’s controversial nuclear program. Iranian officials have said the country would ramp up its exports by 1 million barrels a day once the agreement comes into force, sending more oil into a global market reeling from a flood of supplies that have pushed prices below $34 a barrel.

Iran is planning to invest with local companies in a Spanish facility that could refine 200,000 barrels of oil a day, said Abbas Kazemi, the head of the state-run National Iranian Oil Refining and Distribution Co., in remarks carried by the official Islamic Republic News Agency.

“The safest way to increase the exports is investment in refineries abroad. On this basis, the petroleum ministry wants to invest in refineries abroad, whose crude oil will be met by Iran,” he said.

Mr. Kazemi didn’t name the Spanish companies involved in the talks. Oil companies from the European Union are allowed to discuss oil projects with their Iranian counterparts but can’t sign deals until sanctions are lifted, a move expected in the coming weeks.

A spokesman for Repsol, the largest Spanish oil company and a major refiner, said he knew nothing about the talks. A Spanish Foreign Ministry spokeswoman said she had no information about the talks.

Iran has held talks in Europe, Asia, and South and Central America to build or buy stakes in existing refineries ahead of its full return to the export market.

A National Iranian Oil Refining and Distribution Co. spokesman has previously said the company is in talks to buy stakes in Indian and Brazilian refineries. The Wall Street Journal has also reported attempts by Iranian private companies to buy refineries in Switzerland and France, though they failed due to the risk posed by existing sanctions.

Securing stakes in refineries would help guarantee an outlet for Iranian oil when the country returns to fully exporting its crude. Before restrictions were imposed on its oil sector by the EU in 2010, Iran produced nearly 4 million barrels of oil a day—about half of it destined for foreign countries. It now produces less than 3 million barrels a day but says it can turn the taps back on quickly.

If Iran invests in a new Spanish refinery it would be moving against industry trends. Oil-industry analysts have said Europe has too much refining capacity, making it difficult for companies to turn a profit. Large European oil companies like Total SA of France have begun selling refineries or refitting them for other uses.

But Iran’s interest in European refineries is in line with its history. European countries such as Spain, Italy and Greece were among the biggest buyers of Iranian crude before sanctions.

Since Iran’s oil was taken off the market in Europe, other countries have stepped into the void, including Iran’s rival Saudi Arabia. Riyadh’s state-owned oil giant, Saudi Arabian Oil Co., better known as Saudi Aramco, recently dropped its prices for northwest and southern European buyers in a move seen as a direct challenge to Iran.

Iran and Saudi Arabia have clashed in recent days after Riyadh carried through with the execution of Shiite Muslim cleric Nemer al-Nemer. In Iran, where most people are Shiite, the Saudi Arabian embassy was set on fire in Tehran after the event. In response, Saudi Arabia and other Sunni Muslim countries have cut off or downgraded diplomatic ties with Iran.

The countries are also in conflict in Yemen, where Saudi Arabia is battling Iran-supported rebels, and Syria, where Iran backs President Bashar al-Assad against opposition that includes western and Saudi forces.

—Richard Boudreaux contributed to this article.

Benoît Faucon

http://www.wsj.com/articles/iran-in-talks-to-help-build-refinery-in-spain-1452441781