Qeshm Island is part of the Iranian government's Free Enterprise Zone, specifically targeting foreign investment. The area contains a number of the country's oil and gas fields and has been put forward for refinery construction before.
In 2002 a new refinery with a capacity of about 120,000bpd was to be constructed by Tehran Berkeley but the $1.8bn project never got off the ground. With relations worsening between Iran and foreign investors the project was shelved.
"Qeshm Island contains a number of Iraq's oil and gas fields."
In January 2007 the interest in developing a refinery at Qeshm Island was revived. The Iranian Oil Ministry has agreed to allow the private sector to construct two refineries in Qeshm. This was announced by the managing director of the National Iranian Oil Refining and Distribution Company (NIORDC) Mohammad Reza Nematzadeh.
A gas condensate and a crude oil refinery, with capacities of 120,000bpd and 160,000bpd respectively, will be built in Qeshm.
A crude oil conveyance pipeline is currently being constructed from Qeshm to the Bandar Abbas Refinery. This project is being implemented by the private sector and the Oil Industry Investment Company (OIIC) (contractor is Tehran Jonoob Technical and Construction Company).
The pipeline project has required an investment of $140m and is 70% complete in terms of earth-moving operations; it is expected to come on stream in early 2008.
Iran has a fast-growing domestic demand for middle and light distillates, so it is likely that the Qeshm Island facility may be used to serve this market.
Iran is determined to increase the domestic production of fuel products to lessen its dependence on foreign refining. As the refinery is in the heart of a zone of rapid economic development, it may also find markets in the immediate area. However, it is also likely to find it more difficult to sustain a workforce of skilled employees. The refinery is likely to employ around 3,000 people.
The island is the centre of a huge amount of infrastructure investment. Among other things, the enhanced port facilities will be useful to the refinery both during its own construction and during its operation.
"The Qeshm Island refinery is in the heart of a zone of rapid economic development."
An international airport was also completed in 2007 at a cost of $84m.
The two refineries are expected to take 24 months to construct. As the projects were put forward in 2007, it estimated that they will come online by 2009 at the earliest.
There are two vast gas fields near the Qeshm Island. One is 'Gurzin' field which yields two million cubic metres of sweet gas annually for the power plant of Bandar Abbas and the other is the untapped field of 'Salakh' whose reserves are believed to be more than the former field. The proximity of Qeshm Island to huge oil fields also makes it possible to establish oil refineries. According to the public authorities, the oil to be found near the plant is low in sulphur.