Iran strives to expand oil refineries

Wall Street Journal: As Western powers talk of targeting Iranian gasoline imports in fresh economic sanctions, the Islamic republic is scrambling to boost its refining capacity and tamp down domestic demand.

The Wall Street Journal

By ROSHANAK TAGHAVI

TEHRAN — As Western powers talk of targeting Iranian gasoline imports in fresh economic sanctions, the Islamic republic is scrambling to boost its refining capacity and tamp down domestic demand.

But U.S. and United Nations sanctions aimed at curbing Iran's nuclear program have pushed up costs and slowed down some projects in Tehran's $16 billion effort to double domestic refining capacity, said Mohammad Reza Nematzadeh, a top adviser to the oil minister and the country's recently replaced refinery czar.

Despite the sanctions, Mr. Nematzadeh said Iran can still achieve its goal of becoming a net exporter of refined oil products in the next six years.

Tehran's efforts stem from a longstanding shortfall between its gasoline consumption and its refining capacity. But the initiative has taken on added urgency amid Western diplomats' talks of more sanctions, including targeting Iran's gasoline imports, against which there are currently no sanctions. Iran spent roughly $6.5 billion on gasoline and diesel imports in the year ended March 2008. In June 2007, Iran started tightly rationing gasoline, a scheme the government credits with cutting consumption by about 28% this year. The first new Iranian refinery is slated to come online in 2011, but Seyed Gholamhossein Hassantash, an energy analyst in Tehran, said he doubts it will be finished by then because of a lack of domestic capacity constraints.

Sanctions have scared off many foreign investors from the West who might otherwise be willing to sink the billions of dollars necessary to help build new refineries.