As noted in a recent Stratfor report (subscription required), Iran’s national oil company announced plans to build eight new oil refineries with the ultimate goal of becoming a net exporter of refined oil products.

“….The world’s fourth-largest exporter of crude oil, Iran ironically depends on the world market for 40 percent of its gasoline due to a shortage of refining capacity… With a population of more than 70 million, Iran also has to deal with robust and ever-increasing domestic needs; consumption is about 20 million gallons per day, a figure that has been rising more than 10 percent a year for the past five years.

…Faced with the international condemnation over its nuclear program and potential economic sanctions that could include gasoline imports, Iran needs to resolve its dependence on foreign imports fast. At the moment, Iran’s nine refineries have the capacity to process 1.7 million barrels per day (bpd) of oil, with upgrades currently under way aimed at expanding this figure to 2 million bpd. The proposed eight new refineries would raise this figure to 3.4 million bpd.

Solving the refining capacity shortage, however, is not going to be easy. The problem is enhanced by two factors: lack of technical know-how and a shortage of willing foreign participants.

Iran has been unable to build refining capacity on the scale possible before its 1979 revolution, when it had access to U.S. technology, which made projects such as the massive 400,000 bpd Abadan complex possible. Since then, Tehran received help from a consortium of foreign companies in completing the 150,000 bpd Arak refinery in 1993 and from Japan’s Chiyoda Corp. and Italy’s Snamprogetti in building the 232,000 bpd Bandar Abbas complex in 1998. The foreign investors left the Bandar Abbas project in 1994 due to lack of financing, and local contractors struggled to bring the refinery online, causing four years of delays. Tehran also received help this year from Chinese government oil company China Petroleum & Chemical Corp. on upgrading the Arak refinery, further illustrating its dependence on foreign know-how.

…Attracting foreign assistance and technical expertise necessary to build an entire refinery from scratch, however, might prove to be nearly impossible in the future. India’s Essar Group announced the week of Oct. 18 that it would build a 300,000 bpd refinery in Bandar Abbas, only to back away Nov. 2 because of the international embargo (and in order to protect its investments in the United States). Russia’s Gazprom announced in early October that it is considering building a refinery in Armenia mainly to serve the Iranian market, but that would not resolve the issue of Iranian dependence on imports. With a dearth of willing foreign partners, it remains unclear how Iran intends to boost its refining capacity, an essential variable in weathering a U.N. embargo. Iran’s quest for energy independence could therefore cost it the ability to play nuclear politics and engage in international brinkmanship.”