IRAN: KEEPING THE OIL LIFELINE OPEN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97R00694R000800180001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 22, 2016
• Document Release Date: December 22, 2011
• Sequence Number: 1
• Publication Date: September 1, 1987
• Content Type: MISC

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Directorate of
Intelligence
Iran: Keeping the
Oil Lifeline Open
Secret-
-
GI 87-10068
September 1987
400
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Directorate of Secret
Intelligence
Iran: Keeping the
Oil Lifeline Open
This paper was prepared by Office of
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Global Issues. It was coordinated with the Defense
Intelligence Agency.
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Comm
direct
ents and queries are welcome an
ed to the Chief, Strategic Resour
d may be
ces Division,
OGI,
Secret
GI 87-10068
September 1987
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Iran: Keeping the
Oil Lifeline Open
Key Judgments We believe that Iran can maintain currently allowed OPEC production
Information available levels and current crude oil export levels for the next several years in the
as of 3 August 1987 face of any likely level of Iraqi air attacks. Among Baghdad's likely
was used in this report.
options, only sustained attacks on Iran's refineries would have the potential
to disrupt seriously the Iranian economy and its war effort. Thus far, Iraqi
attacks on shipping in the Persian Gulf have done little to disrupt Iranian
oil exports. Nevertheless, the cumulative effect of Iraqi attacks and
reduced field maintenance have sharply cut Iran's excess production
capacity, making a sustained increase in exports highly unlikely even in the
absence of hostile action
Iran has shown an impressive ability to cope with increased Iraqi air
attacks on its oil system during the past 18 months. Baghdad's strikes in
the late summer and fall of 1986 temporarily reduced Iran's oil exports by
a third and its refining capacity by three-quarters. Resourceful Iranian
countermeasures, combined with Iraq's failure to mount effective followup
attacks, allowed Tehran to rebuild capacity and reduce its susceptibility to
long-term disruptions. Tehran has restored its exports to their preattack
level, reestablished a large surplus export capacity, and rebuilt its refining
capacity to about 90 percent of earlier levels before an August 1987 attack
on the Tabriz refinery.
In response to the Iraqi air campaign, Tehran has developed a strategy
based on "low tech" repairs and increased redundancy to reduce vulnera-
bility. Iran's initiatives include adding export facilities to decrease reliance
on Khark Island and developing innovative ways to continue tanker loading
operations at Khark despite major facilities damage. Iran has easy access
to Western-made parts and services and can readily purchase needed
equipment-even that manufactured in the United States. In addition,
Tehran has established links that enable it to ship major pipeline equip-
ment out of the country for repair or maintenance. All of these measures
reduce the likelihood of long-term disruption.
The simplicity of Iran's export system, despite its vast size, has contributed
greatly to Iran's ability to maintain exports after numerous attacks. Built
by Western contractors in the prerevolution era to handle much larger
volumes, most parts of the system still have considerable excess capacity at
recent flow rates of 1.7 million barrels per day (b/d). Pipelines, pump
stations, control facilities, the Khark Island export terminal, and the tanker
shuttle system could all absorb substantial additional damage before
Secret
GI 87-10068
September 1987
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exports would be affected for more than a short period. Continued repairs,
as well as additional capacity being built, will add further to the
redundancy and resiliency of the system. Unless Iraqi attacks were carried
out with far greater frequency than in the past, we would not expect
Iranian export capacity to fall below 1 million b/d for more than 30 days.
Although we believe Baghdad has the capability to increase the frequency
of attacks, its willingness to do so may be diminished because Iraqi leaders
are sensitive to even minor aircraft losses.
Given the redundancy of the export system, Baghdad's best option for
slowing the Iranian economy and war effort lies in shifting its operations
away from the Persian Gulf and attacking the domestic supply of oil
products. Tehran's refineries are clearly vulnerable to air attacks. Despite
the recovery of this sector from last year's damaging attacks, Iran still
must import 25 percent of its requirements and has little pipeline capacity
to increase imports. Moreover, destruction of just four crude distillation
towers at refineries in Tehran and Esfahan would remove about three-
fourths of total refining capacity for at least a year. Such a shortfall would
have broad impact on economic and, to a lesser extent, military activities.
To reduce this vulnerability, Tehran is moving ahead with plans to install
additional refinery capacity at the outer edges of Iraqi air range. It would
take about two years, however, before any of these facilities could be
operational even if construction contracts are signed soon.
In contrast with the export system, Iran's production system has little
excess capacity. In the oilfields, cutbacks in development drilling and well
maintenance have eroded production potential. Our analysis indicates that
problems with reservoirs and wells currently pose the most significant
constraint on any major expansion of production and exports, probably
limiting Iran's output to 3.0 million b/d or less. Although we believe that
recent oil production of about 2.5 million b/d can be maintained for the
next few years with current levels of field work, any curtailment of drilling
and well repairs could have a dramatic effect on long-run production and
export potential. We doubt that production, even with major investments,
will ever recover to levels achieved during the Shah's reign
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Iraq's 1986-87 Air Campaign
Iran's Response Strategy
Tehran's Access to Western Equipment and Services
4
Erosion of Productive Capacity
4
Resilience of the Export System
7
Getting Oil to Khark Island
8
The New SBM Option
11
The Export Pipeline Option
13
Oil Products: A Critical Vulnerability
13
Outlook and Implications
17
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Iran: Keeping the
Oil Lifeline Open
Oil, long the mainstay of the Iranian economy, re-
mains the financial underpinning of the Islamic re-
gime and its war effort against Iraq. Production
began in the early 1900s and built to a peak of more
than 6 million barrels per day (b/d) in 1974 under the
Shah. Although struggling to cope with Iraqi attacks
against oil facilities, Iran managed to produce nearly
2.5 million b/d of crude oil in the first half of 1987-
slightly above the level permitted under the OPEC
agreement. Oil exports ran at about 1.7 million b/d
during that period and accounted for nearly 94 per-
cent of Iran's total foreign exchange revenues. Inten-
sified Iraqi air attacks and loss of considerable capaci-
ty since the start of the war have forced Tehran to
devote more effort to keeping its oil lifeline open.
With extensive Western help, the Shah built a highly
integrated combination of facilities for oil production,
refining, importing, and exporting (figure 1):
? Crude production facilities include oil wells, saltwa-
ter removal equipment, gas-oil separation plants
(GOSPs), and gas handling equipment. These facili-
ties serve both export and domestic systems.
? Crude export facilities include export terminals,
pipelines, and booster pump stations.
? Oil product facilities include refineries and product
import facilities, as well as pipelines and pump
Despite its vast size, the Iranian oil system is fairly
simple in design. Crude oil is collected from wells in
onshore fields in southwestern Iran by small-diameter
gathering lines, which feed centralized production
units where oil and natural gas are separated and
saltwater is removed. After leaving the production
units, oil flows in a southeasterly direction through
larger trunklines to Khark Island for export or is sent
to refineries in the north for further processing and
domestic distribution F____]Nearly all of Iran's
Figure 1
Iran's Oil System
Crude export
terminals
International
crude oil markets
Domestic product
markets
Product import
terminals
exported crude is shipped through Khark Island. Most
of it is shuttled via an Iranian tanker fleet to storage
vessels at Larak Island, where Iranian customers can
lift crude relatively free from risk of Iraqi attack. All
but one offshore field in the northern Persian Gulf
have been shut in since early in the war, and most
offshore production in the southern Gulf has been
interrupted by Iraqi airstrikes on oil platforms late
last year.
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Figure 2
Major Oil and Gas Facilities in Iran
A Oil refinery
-ar Tanker terminal
40 Oilfield
Oil pipeline
eft Selected pump station
Boundary representation Is
not necessarily authoritative.
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Table 1
Major Recent Air Attacks
on the Iranian Oil System
Gorreh booster pump
station
Pumps
Tehran (Shahr-e Rey)
refinery
Esfahan refinery
Major equipment
Fully repaired in three months.
Khark Island export
terminal
T-jetty; four additional
berths unusable
Repairs ongoing. Capacity reduced to 3.8
million b/d.
Refinery feed pump stations
Major pump
Bypassed and partially repaired in three
weeks.
Major equipment
Partially repaired in two months. Now
fully restored.
Khark Island export
terminal
Closed northern end of
T-jetty
Restored use of two berths in two weeks.
Capacity reduced to 3 million b/d.
Major equipment
Fifty percent restored. Could be fully
repaired by late 1987.
Major processing equipment
and pipeline
Shut down for at least two months.
Iraq's 1986-87 Air Campaign
ies for a prolonged period.
Since May 1986, Iraqi air attacks on the Iranian oil
system have become more numerous and effective as
Baghdad modified its tactics and increased its capa-
bilities (table 1). With few exceptions before May
1986, Iraq's airstrikes were limited to high-speed,
high-altitude bombing tactics. In 1986 Iraqi aircraft
began lower altitude, slower attacks using more so-
phisticated weaponry, such as laser-guided munitions,
which dramatically increased their effectiveness. Ira-
nian oil installations at Khark Island were severely
damaged in six low-level attacks since June 1986, and
several important pump stations onshore were dam-
aged. All six Iranian refineries have been hit, and
facilities at all major operating oilfields have sus-
tained at least minor damage. Iraq, however, has not
maintained sufficient pressure to cripple Iran's
economy by halting exports or shutting down refiner-
The Iraqi air campaign of 1986 forced Tehran to
adopt a more responsive and resourceful strategy to
preserve its oil system. During the early years of the
war, the large redundant capacity Iran inherited in oil
production and export facilities enabled Tehran to
rely almost entirely on unused capacity to offset losses
caused by war damage. Over the years, much of this
surplus capacity has been whittled away by successive
Iraqi attacks, lack of maintenance, and cannibaliza-
tion. Although the redundancies and broad capabili-
ties built into the initial system-especially compared
with current low flow rates-continue to provide
Tehran with many options to keep its oil flowing,
Tehran increasingly is having to work harder and
more creatively to maintain the resiliency of its
system.
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Key elements of Tehran's strategy are a number of
"low tech" countermeasures to reduce the system's
vulnerability and add redundancy to lessen the impact
of damage:
? By burying pipelines and controls, Iran has reduced
the exposure of many relatively easy targets as well
as the risks of spreading fire or collateral damage.
? By adding equipment and pipelines that increase
redundancy and flexibility, Iran has reduced its
dependence on key chokepoints in the oil system.
For example, Tehran has undertaken a major recon-
figuration of the flow control manifold at Ganaveh,
in part to accommodate new single buoy moorings
off the coast that will increase export capabilities
and reduce dependence on Khark Island.
? By enhancing its repair and replacement capabili-
ties, Iran is also able to mitigate the impact of
damage. Tehran has increased its inventory of spare
parts and made use of innovative techniques that
reduce downtime, especially at Khark, which has
borne the brunt of Iraqi air attacks and where every
tanker loading berth has been out of service at some
time.
? By installing antiaircraft weapons and building
safety carriers for personnel and equipment, Tehran
is attempting to improve protection for critical
components. Key equipment at refineries and pump
stations is being surrounded by 3-meter-high barri-
ers to protect workers and reduce potential damage
from flying debris or truck bombs.
The refining sector has posed a particular challenge
for Tehran. The loss of the Abadan refinery early in
the war eliminated Iran's surplus refining capacity
and forced Tehran to respond quickly. Iran acceler-
ated the completion of the Esfahan refinery, added
components to other refineries, and expanded ar-
rangements to use spare refining capacity in other
countries. When Baghdad recently began targeting
Iran's refineries more systematically, Iran increased
its capacity to import products and took steps to add
refining capacity.
Tehran's Access to Western Equipment and Services
Access to Western oil equipment is critical to Teh-
ran's survival strategy and has not presented prob-
lems, Spare pumps and
possibly spare tanker mooring buoys have been
stocked, and additional pumps and other equipment
are on order. Kala-the London-based purchasing
arm for the National Iranian Oil Company (NIOC)-
has had authority since 1985 to purchase equipment
and spare parts from any source, including US manu-
facturers. Typically, the process of purchasing equip-
ment is slow, which has led NIOC to stockpile spare
parts and even large equipment items in anticipation
of war damage. In emergencies, the acquisition pro-
cess has been improved by streamlining internal pro-
cedures, buying used equipment, and authorizing
expensive airlifts.
Iran also has had few problems obtaining Western
services. The NIOC reportedly is sending 30 US-built
oil pump drives to Europe for maintenance and repair
at a rate of four to six per year. Several have already
been overhauled and returned.
Iran's domestic repair facilities for
such equipment are no longer operating, partly be-
cause of a lack of qualified technicians. The limited
number of skilled Iranian technicians is generally
used to make emergency repairs in the field.
Iran's oil production potential has eroded substantial-
ly since the beginning of the war, largely from
deteriorating subsurface conditions and declining well
capabilities rather than from damage inflicted by the
war (figure 3). Iran's reservoirs and wells are in poor
condition and are probably getting worse. We believe
that reservoir and well problems currently limit the
maximum production capability of Iran's onshore
oilfields to about 3 million b/d.
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Figure 3
Iran: Crude Oil Production Subsystem
We doubt that Iran will ever approach production
levels achieved during the Shah's regime, even with a
sizable financial commitment and continued access to
Western equipment and services. Oil production fell
sharply from 5.2 million b/d in 1978 to less than 3
million b/dfollowing the fundamentalist revolution
and to below 1.7 million b/d in the early months of
the war with Iraq. In 1987 production has averaged
nearly 2.3 million b/d. Iran would have to expend
considerable resources to reverse its decline in pro-
duction capability and boost output substantially
over the next decade. We estimate that in the produc-
tion area alone more than $1 billion would be needed
to repair collapsed well casings, corroded tubing, and
downhole equipment and to contend with reservoir
pressure losses.
at least three years would be required to push
production from current levels to 3.5 million b/d. We
believe that it could take as long as 10 years to
expand production to about 4 million b/d.
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unless this minimal level of activity is main- 25X1
tained, production could decline rapidly after about
six months. Although the extent of deterioration in
Iran's reservoirs is unclear, we believe that even
serious damage and recent budget cuts-because of
the decline in oil prices and the economic drain of the
war-will not prevent Tehran from producing at its
current OPEC ceiling of 2.4 million b/d at least for
the next few years. Budget cuts that further reduce
drilling and maintenance could quickly change this
outlook.
Saltwater
removal
Iran's onshore production processing capacity remains
more than 6.5 million b/d, in our judgment-reduced 25X1
from 1985 levels of nearly 8 million b/d but still more
than double current production levels. We believe that
34 oilfield processing areas remain in service out of 48
originally constructed. Only five of these have been
totally or partially shut down because of war damage;
inadequate maintenance and the postponement of gas
injection plans developed in the late 1970s. Moreover,
new wells must be drilled continuously to offset lost
production from older wells-about four months is
required to complete one well-and existing wells
need constant attention.
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Gas System Shortcomings Preclude Early
Resumption of Exports
Despite recent press attention to increased contacts
between Soviet and Iranian officials on the resump-
tion of natural gas trade, we believe that the potential
for boosting revenues by exporting gas to the Soviet
Union is slight until the war is over. In the 1970s,
Iran exported an average of nearly 10 billion cubic
meters (bcm) per year of associated natural gas to the
Soviet Union through the IGA T I pipeline from
oilfields in the south. Planning for even higher ex-
ports and added domestic requirements, Tehran and
Moscow embarked on a major cooperative project to
construct a second pipeline to the Soviet border from
the giant Kangan gasfield in southern Iran that would
deliver 17 bcm annually to Western Europe. Exports
stopped in March 1980, however, when the Soviets
balked at Tehran's demands for a fourfold gas price
increase. Iran claimed that it lost $130 million a year
from Soviet gas trade.
Even if a major breakthrough in Soviet-Iranian
relations led to an agreement to resume exports, gas
produced as a result of current Iranian oil production
would not be sufficient to support gas exports at
previous levels-nearly 7 million b/d of oil produc-
tion would be required to produce 8 bcm per year of
the others were shut down because of low oil produc-
tion, were never put in service, or have been cannibal-
ized for parts. Over half of the 34 oilfield processing
areas are in four major onshore oilfields-Marun,
Agha Jari, Ahvaz, Gachsaran-and account for 70
percent of Iran's current oil production of 2.5 million
b/d.
Iraqi aircraft
have damaged equipment at nearly 30 percent of
onshore processing facilities. Bomb damage, however,
is scattered throughout the facilities, suggesting that
Iraqi pilots may not have been aware of the location of
the critical pump houses or were not concerned with
accuracy. In many cases, damage was limited to gas
compression equipment, which could affect gas sup-
plies available for domestic consumption and possibly
gas for export. A number of expensive and time-
consuming projects first need to be undertaken, such
as completion of the Kangan gas facility to process
nonassociated gas, completion of the IGA T II pipe-
line and installation of compressor stations needed to
move the gas from southern Iran, and repairs to
compressors and pipelines along the IGA T I pipeline
to the Soviet border. Tehran might also insist that
gas facilities in the oilfields damaged as a result of
the war be repaired before exports resume to ensure
that increasing domestic demands served by the
IGA T I pipeline are met. Leadtimes to complete these
projects, if done simultaneously, could exceed a year.
In addition, Iran should give high priority to reinsti-
tuting a costly gas injection program to prevent oil
reservoir damage, in our view, before exports are
considered. Such a program could cost about $5
billion and take more than four years to complete,
but without it Iran faces the prospect of more rapid
depletion of its oil resources and erosion in oil
productive capacity.
for reinjection to support long-term oil production, but
has no immediate effect on crude exports or refinery
supplies.
Iran's onshore oil production facilities are among the
least vulnerable parts of the oil system to air attacks
because they are scattered throughout southwestern
Iran and have considerable redundant capacity. Over
half of the nearly three dozen operating gas-oil sepa-
ration plants would have to be destroyed to drop
production below Iran's current OPEC quota of 2.4
million b/d. Moreover, a pinpoint attack that de-
stroyed the crude oil pump house or all of the gas-oil
separators at a production unit-not an easy task-
would be required to shut down each facility. Damage
to other equipment within the processing area would
not impede production significantly.
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lack of use and maintenance.
In our judgment, a continuous and intense Iraqi air
campaign that simultaneously destroyed the oil pump
houses at gas-oil separation plants in the four major
oilfields would be needed to restrict severely Iranian
oil production. Although Iran has received replace-
ment pumps and has additional pumps on order to
minimize long-term production delays, a loss of this
magnitude could limit production to about 1 million
b/d-less than half of current output-for several
months. Undamaged fields capable of producing more
than 2 million b/d before the war probably are now
incapable of producing near that rate because of the
stopped production at all of these fields.
facilities at Lavan Island, but an Iraqi attack at
Rostam and Sassan platforms in November 1986
Offshore production accounts for only about 5 percent
of Iranian oil exports-down from about 10 percent in
late 1986. Only two of Iran's 20 offshore oilfields in
the Persian Gulf are operating-Fereidoon in the
north and Sirri in the south. Fereidoon production is
moved through underwater pipelines to Khark Island,
where it is exported and is normally counted with
other exports from Khark. Sirri oilfield production is
fed through underwater pipelines to Sirri Island,
where it is exported or moved by tanker to the Lavan
refinery. Until late 1986, oil was also produced from
Sassan, Rostam, and Rakhsh fields in the southern
Gulf. This production served processing and export
Sassan-capable of producing as
approach $50 million,
will need major reconstruction. Repair costs could
much as 130,000 b/d-suffered severe damage and
Figure 4
Iran: Crude Export Subsystem
From
gas-oil separation plants
Ganaveh
flow control
manifold
Ganaveh
single buoy mooring
terminal
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Khark Island
terminal
Iranian
F
shuttle
Larak
shuttle terminal
Although all components of the Iranian export system
(figure 4) have been damaged, the system can easily
handle Iranian exports, which range between 1.5
million and 2 million b/d. Crude oil from onshore
production flows southeasterly downhill into the heart
of Iran's export system, consisting of pipelines, boost-
er pump stations, the Ganaveh flow control manifold,
the Khark Island export terminal, and a tanker
shuttle system. The system is being used at only about
25 percent of its original design capacity, but Tehran
has been forced to react more vigorously to Iraqi
attacks in recent years because of the cumulative
damage inflicted by repeated strikes. The lack of a
continuously aggressive Iraqi air campaign and the
success of Iran's constant repair effort have enabled
Tehran to maintain exports except for a few months
of reduced export capability.
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Figure 5
Iran: Gravity Flow System
Storage
tanks
a Booster pumps are used `to increaseFflow~ above limitiachieved by
gravity, alone ,.
Getting Oil to Khark Island
Facilities feeding crude oil to Khark Island have been
attacked on numerous occasions but could absorb
considerably more damage before exports would be
affected. Many already have sustained substantial
damage, but quick repairs have restored some lost
capacity, and such preventive measures as burying
pipelines and manifolds reduce vulnerability to fur-
ther attacks. The delivery system benefits greatly
from considerable redundancy originally built into the
system and from a gravity flow capability (figure 5)
that limits the need for pumps only when high export
levels are desired or under abnormal operating
conditions.
The pipelines in the onshore export system are largely
undamaged and are not a limiting factor in determin-
ing export capacity. We believe that under the current
operating procedure only one or two of the six major
pipelines leading to the export terminal at Khark
Island are being used to move crude oil.
another two of the six
pipelines, which were used to export crude, are now
being used to import refined petroleum products
through Khark to the mainland. The remaining two
pipelines may be assigned to feed a new single buoy
mooring floating oil loading terminal (SBM). If all six
pipelines are used, our analysis shows that oil can flow
without any pumping at a rate of more than 4 million
b/d from the onshore production areas to Khark
Island. If only two of the smaller pipelines are usedL
the gravity flow rate is reduced to slightly
over 1 million b/d, suggesting that Iran probably
requires booster pumps to sustain current export levels
of 1.5 to 2 million b/d.
Booster pump stations are located along the main
export pipeline corridor at Ahvaz, Omidiyeh, and
Gorreh ragi
air attacks in 1986 damaged the Omidiyeh and
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the pipes and valves around the Omidiyeh booster
station are being buried to limit further damage.
be a top priority
Gorreh booster pump stations, reducing the export
capacity through these stations and all six available
pipelines to Khark from a prewar level of about 6.3
million b/d to about 4.2 million b/d, which still
provides a large surplus pumping capacity at current
export levels. We estimate that, by using its remain-
ing pumps, Tehran could push as much as 3 million
b/d through the two export pipelines that we believe
are in operation. Because plenty of pumping capacity
appears available, repairs to these facilities may not
Lost
capacity
because of
war damage
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Total
capacity a25X1
well as direct flow to Khark Island.
The flow control manifold at Ganaveh-controlling
crude fed to the Khark export terminal-was dam-
aged by Iraqi aircraft in January 1986 but has been
repaired and is not currently limiting production or
exports. The manifold was originally designed to
direct flow of Iranian light and heavy crude oils from
the producing fields in southwestern Iran through a
series of valves to any of the six pipelines that feed
Khark Island. In the last year, however, it has
undergone major modifications and soon will be capa-
ble of directing flow to a new SBM export terminal as
(figure 6).
The Status of Khark Island
The Khark Island terminal, which handles 98 percent
of all Iranian exports, has reportedly been attacked
more than 150 times since August 1985 but still has
more than adequate capacity to support Iranian ex-
port contracts and spot sales. Khark Island was built
in stages, and, when completed, consisted of 14
loading berths and 45 storage tanks. War damage,
however, has reduced the number of functioning
storage tanks to 31 and at one time or another has
disrupted the use of all 14 tanker loading berths.
Repairs have restored seven berths; Khark Island now
has the capability to operate five berths on the eastern
T-jetty and two on the western Sea Island. Current
sustainable capacity at Khark Island is about 4.5
million b/d, according to our calculations-well
above limits imposed by production capacity
Figure 6
Iran: Export Facility Capabilities Versus
Production Capacity
Export
terminal
a Combined capacity from Ganaveh and Khark Island.
b Normally about 600,000 to 700,000 b/d of production is
used for domestic requirements.
Iran's strategy to reduce its vulnerability to losses of
crude exports for long periods is most apparent at
Khark Island (figure 7). In particular, we believe that
the T-jetty is now even less vulnerable to disruptions
lasting more than 30 days with Iran's use of floating
hoses as an alternative to a conventional loading
berth. Even if the T-jetty at Khark Island were
destroyed, several floating hose arrangements from
the onshore pipeline corridor could be set up to export
about 1 million b/d. Most pipelines leading from the
storage area to the T-jetty are now buried, leaving
only a new control center exposed, but this could be
repaired or replaced in less than a month. The oil
storage tanks on Khark are useful in the loading
operation but are not critical. Alternative loading
procedures could be used in an emergency, although
these procedures would reduce effective capacity.
25X1
25X1
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Figure 7
Damage to Iran's Khark
Island Oil Terminal, 1984-87
Submerged oil pipelines
to Ganaveh
ii
Khalrk Islan
T-jetty oil -
loading terminal
BERTH 10 BERTH 9
Sea Island oil-
loading terminal
BERTH
Damaged
Oct. '86;
fully repaired
and operation
Damaged June '84;
not operating
Submerged oil P~efine
o I P,PeIi
ge
Submer
BERTH 12
Damaged Oct. '86;
partially repaired
and operational
:Tank farm
Operational Operational
Nw, ? Wds
?
?
?:0?
\??.?
Damaged oil
storage tanks ?
repaired
Closed since
BERTH 1 Aug. '85
BERTH 6
Operational
Damaged
Aug. '86;
1 undergoing
repairs
BERTH 5
Operational
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Measuring Khark Island's Capacity
The question of Khark Island's export capacity, like
that of any other export facility, can be dealt with on
two levels:
? As a mechanical capacity-the volume that could
be achieved if the equipment is opened fully and
allowed to flow continuously.
? As a sustainable capacity-the volume that practi-
cally can be maintained over an extended period,
taking into account all factors that commonly
restrict the flow.
Before the war started, Khark's sustainable loading
capacity for 30 days was about 9 million b/d, com-
pared with a mechanical loading rate of more than 38
million b/d. Sustainable capacity was limited by
aspects of loading operations that typified any major
export terminal. Customers arrived on irregular
schedules, requesting cargoes of various sizes and at
varying receiving rates. Loading times at the two
different types of facilities-the Sea Island on the
west and the T -jetty on the east-varied with tanker
sizes and possible loading rates. Weather variations
affected arrival times as well as loading capabilities
on arrival. Because of these factors, the Sea Island
terminal could use only about one-third of its me-
chanical capacity and the T-jetty could achieve only
about 16 percent of its potential. Even so, the capaci-
ty of these facilities is well above the maximum
amount of crude that can be delivered to Khark
through pipelines from the mainland, which restrict
Khark'sflow rate to about 6.3 million b/d for periods
exceeding 30 days.
Khark's Sea Island loading terminal is more vulnera-
ble than the T-jetty because repairs there probably
would take longer. If either of the two platforms were
destroyed, we believe NIOC could replace it with an
SBM connected to the existing underwater pipelines.
Spare SBMs may already have been purchased for
the new Ganaveh export terminal and could be used
at the Sea Island. If available, SBMs with a capacity
of 1 million b/d could be installed in less than four
months.
By introducing a tanker shuttle operation using its
own ships to pick up crude from Khark, Iran man-
aged to increase the efficiency of loading operations
there. Most important, the shuttle permits higher
utilization offewer berths, partially offsetting the
impact of the loss of berths as a result of Iraqi
airstrikes. For example, by controlling the number of
tankers in the fleet and their schedule, Iran mini-
mizes downtime because of tanker availability and
weather problems. Tanker sizes are also controlled, 25X1
allowing loading and receiving rates to be maximized
and the number of partial cargoes reduced. We
estimate that use of a shuttle system would have
enabled Iran to sustain loadings of about 11.4 million
b/d from Khark before the war if sufficient mainland
pipeline capacity had been available.) 25X1
Our analysis shows that, before the introduction of
the shuttle operation, the capacity of the seven berths
currently in operation-Berths 2, 5, 6, 9, 10, 12, and
15-would be limited to about 4 million b/d, assum-
ing no damage to these berths. The capability to
reduce downtime provided by the shuttle boosts the
potential capacity of the same set of berths to more
than 6.5 million b/d. This rate, however, requires that
all equipment be in top condition. Current damage
and such stopgap measures as the floating hose
operation have reduced the loading rate, resulting in
a lower capacity. We estimate that the current capac-
ity of Khark is about 4.5 million b/d-3.2 million b/d
at the T-jetty and 1.3 million b/d at the Sea Island.
The New SBM Option
The addition of a new export location off the coast of
Ganaveh could boost Tehran's total export capacity to
about 6.5 million b/d, further increasing its flexibility
and reducing its vulnerability to Iraqi attacks. The
new Ganaveh facility will include four floating buoys
for offshore tanker loading (figure 8), onshore storage
tanks, a metering station, and control facilities. These
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Figure 8. Typical Offshore Oil
Loading System. (Right) Single
buoy mooring under construc-
tion (11 meters in diameter,
3 meters high); (below) single
buoy mooring oil transfer
Rotating
mooring arm
Rotating
Product cargo
distribution manifold
unit
Floating hoses
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export at Ganaveh
new loading facilities will have a capacity of about 2
million b/d and could be operating by late 1987. The
SBMs have been in place 16 kilometers km offshore
since last year pipelines
and valves onshore are being buried and may be
dispersed to reduce the risk of air damage as much as
possible. Controls to operate loading valves may even
be underground. The original manifold area that
controls flow to Khark Island has been buried and, as
a result, disruption of flow to Khark by air attack
against Ganaveh would now be limited. In addition,
the offshore buoys are only I 1 meters in diameter-a
difficult target for an air attack. The exposed meter-
ing station, control house, and crude oil storage tanks
permit a smoother operation but are not critical to
The Export Pipeline Option
For several years Tehran had plans to build a 900-km
crude oil export pipeline bypassing the Strait of
Hormuz to a terminal outside the range of Iraqi air
attacks. Recent press reports claim that Tehran has
been secretly building a pipeline to a point outside the
Strait near Jask that may be completed this year.
the only pipeline
exceed $1 billion.
project actually approved is a line from the Gorreh
pump station to a planned port facility at Taheri south
of Khark, but we believe this portion may be delayed
because of funding problems. This project could later
be extended to a point outside the Gulf, but we believe
such an expansion could not be completed until at
least 1990. Although the pipeline option is a feasible
alternative to exporting oil from Khark Island, the
overall cost of a pipeline from Gorreh to Jask could
The Tanker Shuttle System
Tehran set up a simple tanker shuttle system in 1985
to reduce the war risks to its crude oil customers and
to control escalating insurance rates. The system
essentially moves the customers' lifting operation
from Khark Island to the eastern edge of the Gulf,
which is much less accessible to Iraqi aircraft (figure
9). Crude is shuttled from Khark in Iranian-leased
or -owned tankers to a point in the southeastern Gulf,
where it is offloaded onto permanently anchored
storage vessels. Customers' tankers then lift their
cargoes from the storage vessel, avoiding the risky trip
up the Gulf (figure 10). Iraq, however, extended the
tanker war in August 1986 by attacking several
tankers anchored at the initial shuttle transshipment
location at Sirri Island. Tehran responded by movin25X1
the transshipment location to a point even farther east
near Larak Island, which was subsequently attacked
in November 1986.
The shuttle system could become a critical bottleneck
for Iranian exports if enough tankers were not avail-
able and most customers refused to lift directly from
Khark. Iraqi shipping attacks have thus far done little
to disrupt Iranian oil exports. To date, Tehran has
had no problem arranging for additional tankers to
replace those damaged, and we believe that the
shuttle system should be able to sustain current
exports as long as loading capacity is intact at Khark
itself. In fact, we estimate that Tehran could continue
to export at current levels with only about 10 tankers
instead of the 15 or so now in use. The extra capacity
in its shuttle system gives Iran more flexibility to deal
with the short interruptions caused by Iraqi attacks
and tanker replacements and the relocation of storage
vessels if the transshipment location is moved.
The biggest challenge for Iran's oil system is main-
taining domestic oil product supplies. Iran's refined
product consumption normally averages about
800,000 b/d, of which about 700,000 b/d is processed
by domestic refineries. The remaining product needs
are met by imports delivered primarily by means of a
tanker shuttle system for oil products-independent
of the crude oil shuttle-and are then distributed
inland by pipelines and trucks (figure 11). Besides the
critical nature of Iran's refineries, they are difficult
targets to protect from air attacks. Since March 1986
Iraq has launched more than a dozen attacks against
Iran's operating refineries, damaging all six. Imagery
analysis indicates that critical components-such as
crude distillation units, steam plants, and power facili-
ties-were damaged in key refineries, probably by
precision-guided munitions in at least one instance.
Refinery capacity fell to a low of about 130,000 b/d
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Figure 9
Iranian Petroleum Shuttles
Saudi
Arabia
Crude oil exports
t'- Product imports
Iran
United
Arab Emirates
no defined
boundary
a Crude oil exports from Lavan Island
have halted as a result of damage
at offshore production platforms.
Oman
L2~
Umm as Semim
(salt marsh)
Selected tanker
terminal
MUSCAT
Boundary representation is
not necessarily authoritative
in September 1986. To help offset its refining capaci- Status of the Refineries
ty losses, Tehran imposed rationing to reduce con- Repairs have been effective in restoring refinery
sumption and increased its imports of petroleum operations to more than 90 percent of normal levels
products to nearly 300,000 b/d in late 1986.F____-] before an August 1987 attack on the Tabriz refinery.
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Further repairs required to return refinery output to
levels near 700,000 b/d-typically reached in early
1986-may not be completed until late 1987, in our
judgment, assuming no additional damage (table 2).
Maintaining production over the long term, however,
will be complicated by the generally poor condition of
most refineries, caused by Tehran's policy of "push-
ing" production well above design capacity for ex-
tended periods without proper maintenance.
Unlike the production and export systems, Iran's
refining system has no cushion of surplus capacity to
offset the impact of damage. Moreover, Tehran's
policy of operating above design capacity accelerates
maintenance needs and deterioration of equipment,
further reducing flexibility. Key components remain
highly vulnerable, and even periodic attacks could
severely restrict refinery production for as long as a
year, forcing Tehran to import more products for
domestic consumption. Tehran has done about all it
can to protect its refineries and workers, but refinery
equipment is very large and difficult to protect. The
two most exposed and critical areas of any refinery-
the crude distillation unit (CDU) and the steam
plants-could be easily destroyed by air attacks.
Destruction of just four CDUs-two each at the
Tehran (Shahr-e Rey) and Esfahan refineries-would
drop Iranian refinery capacity by more than 500,000
b/d (to about three-fourths of current capacity) for
more than a year
To reduce the vulnerability of its refining sector and
to prevent an overdependence on costly imports result-
ing from a long-term refinery shutdown, Tehran,
is seeking to purchase a
secondhand 125,000 b/d refinery for relocation in
Iran and will probably go ahead with the construction
of a new $2 billion, 200,000 b/d refinery in Bandar
Abbas. Each project will take at least two years to
complete, however, and until then even occasional
Iraqi attacks resulting in only minor refinery damage
could cause problems for Tehran in meeting domestic
oil product needs.
25X1
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Pump stations along pipelines that supply crude oil to
refineries from the oilfields have also been damaged
and remain highly exposed and vulnerable25X1
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Figure 11
Oil Products Subsystem
From
gas-oil separation
plants
Gasoline
production
Product
imports
Kerosene
production
Pump
stations
Crude oil
distillation
units
Pipeline
distribution
network
Diesel fuel
production
Lube oil
production
Truck
distribution
n
Iraqi attacks in late 1986 de- pipeline-would completely stop flow to the three 25X1
largest refineries-Shahr-e Rey, Esfahan, and Tabriz.
stroyed pump houses along pipelines serving refineries
at Esfahan, Tehran, and Tabriz, causing a temporary
loss of flow to all three. Quick short-term repairs, 25X1
pipeline bypasses, and a redundancy in pumping flow reductions could extend beyond six 25X1
capacity permitted the refineries to return to service months if damage is extensive. 25X1
after only a two-week shutdown. Our analysis indi-
cates that destruction of the pump station at Lah Bid The Product Import Option
along the Marun-Esfahan pipeline-or two or three Tehran has increased its capability to import refined
other stations along this line, together with the loss of products to nearly 300,000 b/d. Products are import-
two or three stations on the Ahvaz-Shahr-e Rey ed via a separate shuttle system from Larak to ports
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Table 2
Iranian Refinery Capacity
Design Maximum Operating September 1986 Expected Yearend
Capacity Capacity b Maximum Operating Maximum Operating
(thousands) Capacity c Capacity d
a Abadan, formally Iran's largest refinery with a capacity of more
than 600,000 b/d, was damaged early in the war and has remained
shut down. The Masjed E. Soleyman refinery that fed Abadan has
also been shut down since early in the war.
b Maximum operating capacity represents the volume of product
that can be obtained by operating each refining process at its peak
rate within allowable engineering specifications. Operating at maxi-
mum operating capacity increases maintenance requirements and
the risk of equipment failure without proper servicing.
e Represents month of lowest capacity.
d Assumes no additional damage. Total maximum operating capac-
ity is about 640,000 b/d.
e Restricted by amount of oil that can be delivered by pipeline.
Could be artificially increased to about 100,000 b/d by use of drag
reducing agents injected into oil at pump stations.
from Turkey.
products may now be imported through Khark Island,
using pipelines formerly used to export crude. Some
limited additional products are delivered by truck
imports, and
at Bandar-e Bushehr, Khark, and the largest import
location at Iman Hashan. In addition, ports at
Bandar-e `Abbas and Bandar Beheshti (Chah Bahar),
which is 180 miles east of Jask, also directly receive
Shuttled products at Ras Bahregan are received at
offshore SBMs and delivered to the mainland through
underwater pipelines. In late 1985 or early 1986,
Tehran constructed a 125,000-to-150,000-b/d-
product pipeline from Ras Bahregan to the Ahvaz
area, where it ties into an existing pipeline to Tehran
and surrounding areas. Various press reports indicate
that part of the offshore equipment at Ras Bahregan
may have been damaged in an Iraqi air attack in late
November 1986, which might have restricted imports.
Even with the recent expansion of its product import
system, we doubt that Iran could meet all of its
domestic needs through imports if its main refineries
were out of operation for an extended period
Iran's ability to cope with the increase in Iraqi air
attacks and its steps to reduce its vulnerability de-
crease the risks that Iraq will disrupt oil exports for a
significant period. If Iraq continues its current air war
strategy and launches only sporadic attacks against
the Iranian oil system, Tehran should be able to
maintain its recent export rates of 1.5-2.0 million b/d.
Certain attacks might depress exports below that level
for a short time, but Tehran has demonstrated the
ability to recover lost capacity and to cushion effec-
tively the impact of damage through a variety of
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means. We believe that Tehran's strategy to reduce its
system vulnerability will probably prevent actual ex-
ports from dropping below 1 million b/d for more
than 30 days in response to Iraqi attacks on either
export or production facilities.
The market experiences from the Iran-Iraq war have
probably served to temper the volatility often caused
by speculation associated with risk of supply disrup-
tions. Iran's ability to maintain its exports demon-
strates that, while individual petroleum facilities are
highly vulnerable, it is difficult to disrupt supplies for
an extended period
Despite the resilience of the Iranian oil system, a
sustained Iraqi campaign might have a dramatic
impact. An Iraqi air campaign at the level of intensity
achieved between August and October 1986 would
cause severe economic problems in Iran after about
six months, in our view. A combination of lower
exports and increased refined product shortages would
cause a sharp loss of income and possibly lead to civil
unrest.
Iran's refineries remain the most vulnerable areas in
the Iranian oil system. Even under the current attack
strategy, a series of successful Iraqi attacks could
easily reduce Tehran's refining capacity to levels that
would force increased rationing, reduce the distribu-
tion of durable and consumable goods, and possibly
affect the supplies of fuel for the military. We believe
that Tehran will try to expedite the purchase and
construction of new refineries and locate them out of
easy range of Iraqi aircraft, but we expect Iraqi
attacks to cause additional hardships until the new
refineries are commissioned.
The impact of Iraq's air campaign against the Iranian
oil system hinges more on Baghdad's will than its
capabilities. Although Iran's new strategy to reduce
its vulnerability may raise the cost to Baghdad of
cutting the oil lifeline, we believe Iraq retains this
capability. Iraq has demonstrated its ability to reach
targets deep in Iran and inflict substantial damage to
key components. We believe, however, that Baghdad
would be reluctant to launch an effective, long-term
air campaign on the Iranian oil system-largely be-
cause Iraqi leaders are sensitive to even minor aircraft
Opportunities for Foreign Companies
We believe that the damage to oilfield equipment and
refineries, the need for oil well maintenance, and
Tehran's desire to expand its gas network both for
domestic and export purposes increase the need for
foreign equipment and services. The bulk of these
projects, however, will probably be won by Korean or
Japanese firms because of lower costs and the possi-
bility of barter deals.
majority of the labor required for most projects will
probably be Iranian, with technical assistance from
the winning firms.
losses. Among the options acceptable to Baghdad, a
resumption of attacks against refineries offers the best
potential to disrupt Tehran's war effort.
Iraq is likely to continue to use its superiority over
Iran in the air war and the threat to Iranian economic
facilities as a counterbalance to Iran's advantage in
the ground war. Further Iranian success in the war on
the ground would raise the likelihood that Iraq would
intensify its effort against the Iranian oil system. Iraqi
attacks, however, are likely to provoke further Iranian
retaliation against Iraqi economic targets and popula-
tion centers and against the oil export operations of
Baghdad's Gulf allies.
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Secret
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