7-Point Plan for Iran-Turkmenistan Trade
More than a century has passed since oil was discovered in Iran, but Iran’s petroleum industry depended on foreign companies for its basic needs until recently. Few people thought that 37 years after the victory of the Islamic Revolution, Iran’s petroleum industry would become self-sufficient in many sectors particularly manufacturing of equipment and commodities while looking for chances in regional and global markets for exporting technical and engineering services.
One of policies pursued by Iran’s Ministry of Petroleum is providing support for export of commodities, as well as technical and engineering services. The ministry has made planning to that effect.
In order to get familiar with the details of these plans, Iran Petroleum has conducted an interview with Mohammad-Taqi Amanpour, who advises Minister of Petroleum Bijan Zangeneh on export of commodities and technical and engineering services.
Q: Would you please tell us about the policies of Iran’s Ministry of Petroleum with regards to export of commodities and technical and engineering services?
A: At present, export of commodities and engineering services is of high significance to Iran’s petroleum ministry. This ministry insists on benefiting from national capabilities in regional markets. That would be possible only by planning through identification of target markets. Iran’s petroleum ministry intends to conduct studies to identify potentialities for investment in oil and gas projects in the region and the world.
Q: You have apparently started with Turkmenistan’s oil and gas market. Why?
A: That is right, because Turkmenistan is rich in natural gas and oil; therefore, we have chosen it as our first target market. Iran is buying $2 billion to $3 billion of gas from this country. As two friendly and brotherly countries, Iran and Turkmenistan favor expansion of bilateral relations and it is possible for Iran to purchase up to $5 billion of gas from Turkmenistan every year. During a recent visit to this country by Iran’s president [Hassan Rouhani], Iran and Turkmenistan agreed to enhance the level of their cooperation. In addition to buying gas, Iran would also provide engineering services and commodities to Turkmenistan and will contribute to the implementation of projects in this country.
Q: What are Iranian petroleum ministry’s plans for exporting technical and engineering services?
A: Iran’s petroleum ministry has drawn up a comprehensive 7-point plan to facilitate export of commodities and engineering services to Turkmenistan. One of these points is that Iranian companies would be introduced to bid for projects in this country. Currently, a $30 billion package of innovative commodities and projects including refineries, power plants and petrochemical plants has been submitted to Turkmenistan. Iran is able to construct all of them. Iran’s petroleum ministry has expressed its support for Iranian companies to get involved in these projects in Turkmenistan and 70 Iranian companies have been introduced. Some Iranian companies have already won bids and are in the process of signing lucrative deals. The second point is about supporting businessmen and intermediaries who are being paid for exporting commodities and handling trading activities but they cannot transfer in this money. This group of investors is supported through barter trade. The third point is about supplying commodities to Turkmenistan through a third party. Based on this, an Iranian company receives these commodities from a third country and in case it commits to exporting Iranian products instead, it could benefit from the support of petroleum ministry.
Turkmenistan has other partners than Iran; therefore, the fourth point would require Iran, Turkmenistan and a third country to reach understanding. Based on this understanding, an Iranian company will finance a project in a third country and then Turkmenistan will charge the third country the equivalent of this investment while Iran would pay for costs. But Iran would not pay in cash to a third country and an Iranian company would be dispatched to this country to handle the process of exports. The fifth plan is that instead of exporting some items to Turkmenistan, we would help this country manufacture its required items and a domestic company would help establish relevant factories in that country.
The sixth plan is about making preparations for Turkmenistan’s investment in some industries in Iran. For example, we may ask this country to invest in an Iranian tire manufacturing company and boost its production capacity in exchange for tires or building a liquefied natural gas (LNG) plant.
The seventh point, known as joint exports, requires joint projects to be defined between Iran and Turkmenistan in the oil and gas, as well as electricity generation sectors, and oil and gas and electricity would be exported from these two countries to across the globe.
These seven points have been designed and they are being followed up on. They can turn bilateral cooperation to multilateral cooperation. In line with these points, Iran has proposed projects to Turkmenistan and relevant talks are under way now. These plans could be implemented both during and after the sanctions. Other ministries could also benefit from these programs for exporting commodities to other countries.
Q: In addition to Turkmenistan, does Iran’s petroleum ministry envisage any other regional countries for presence in their oil and gas projects and export of technical and engineering service?
A: There are currently plans under way for presence in Iraq’s market. A large number of Iranian companies are also active in Iraq, but unfortunately due to the fall in oil price, Iraq has seen its financial resources decline. Moreover, due to lack of security in this country some Iranian companies are reluctant to be present in Iraq. However, the Iranian and Iraqi governments are much willing for cooperation, and Iran can help this friendly country in many oil and gas projects.
For a strong presence in world markets, we need to have a good knowledge of them and Iran’s petroleum ministry has no intention of entering foreign markets without having any knowledge of them. For this reason, some groups at universities and scientific centers have been assigned the task of identifying and reviewing global markets.
This ministry is also working a new mechanism for activity in oil, gas and petrochemical projects overseas and it intends to create a market for itself. The office of commodity and engineering services exports at petroleum ministry is not seeking to eliminate traditional methods of presence in foreign markets like contribution to oil and gas industrial projects in other countries. It only seeks innovation in a bid to create market for Iranian companies. Iran’s petroleum ministry is a leading body with regard to supporting commodities and engineering services and it welcomes cooperation with all reputed foreign companies.
Q: Having made necessary plans for the presence of Iranian companies in projects in other countries, which measures should be taken for the strong presence of these companies in oil projects?
A: As you know, after victory of Islamic Revolution in Iran, certain measures have been undertaken for transferring technology from abroad for manufacturing components and equipment in compliance with API standards and establishing consulting engineering companies. The ground is now paved for Iranian companies to attract financial resources from inside or outside the country and participate in petroleum industry projects. Therefore, domestic companies are expected to be able to define themselves projects besides contributing to these projects. Iranian companies should be equipped with state-of-the-art technology for presence in projects like construction of refineries and development of oil and gas fields. This important objective could be achieved through transfer of technology from abroad or development of technical knowhow. However, Iran’s private sector is not fully professional; therefore, holding companies should take shape to manufacture components and equipment and a technology company should assemble these components to develop the main product. Holding companies are needed to be set up so that employers would be happy with manufactured items and progress of projects. Formation of these holdings requires knowledge, self-belief, capital and influence, which are all emerging in Iran.
Q: What are the requirements for Iranian companies to be present in regional markets?
A: Private companies in Iran should follow technical and professional, scientific and specialized training courses in order to upgrade their knowledge. Financial engineering is another important category which covers a group of branches of science and brings credit to the companies. Management is also important for these companies. They need to know the market environment in order to manage the market effectively, win a good share of the market and develop a new market. Domestic companies should be able to develop knowhow in order to be able to manage their money supply and human resources and benefit from these potentialities in regional and global markets.
Q: Now let’s talk about domestic manufacturing. Have the imposition of sanctions against the petroleum industry and the refusal of foreign companies to sell equipment and components to Iran forced the country to focus on domestic manufacturing?
A: No. Domestic manufacturing did not stem merely from the imposition of sanctions. Many Iranian companies turned to manufacturing after the victory of Islamic revolution. Over the past 36 years, good measures have been taken for progress in domestic manufacturing. Until recently, Iran faced restrictions for importing thick slabs due to the sanctions. Once we dreamt of manufacturing thick slabs in the country. Now Ahvaz Oxin factory is producing these slabs and the manufacturing of these slabs is clearing the way for the manufacturing of pipelines in the country. Currently, many pipelines needed for the petroleum industry are supplied domestically.
Q: Which categories of pipelines can Iran manufacture for petroleum industry?
A: Iran is able to manufacture metallic pipelines, polyethylene and composite pipelines. Currently, Iran can manufacture more than four million tons of metal pipes which are largely used in the oil and gas industries. An Iranian company is currently manufacturing GRP pipelines and is among the leading companies in the world. This company has one plant in Iran and another one in Turkey. The quality of products of this company is increasing every day. Alloyed seamless pipes are not currently manufactured in Iran and three Iranian factories have volunteered to produce them. Projects have been defined to that effect.
Q: Where does Iran stand in terms of manufacturing industrial valves?
A: Today, many companies in the country are capable of manufacturing valves in compliance with API standards. Only globe valves may not be produced in the country. However, the necessary measures are under way for their manufacturing. Until several years ago, we were unable to manufacture some wellhead valves like Christmas tree, but now, several Iranian companies are producing these valves for up to 15,000 psi pressure. Domestic manufacturing of these components is a breakthrough for Iran’s petroleum industry.
Q: As you know, drilling rig is a key equipment of petroleum industry. What’s your assessment of the activities of Iranian companies for building rigs?
A: In the past, building rigs was unimaginable for us. But today, under the aegis of support by Iran’s petroleum ministry, University of Science and Technology and several private companies have made good progress in building rigs and its components. Some time ago, Iran’s Tieco and a Norwegian company jointly produced top drive. Another important piece of equipment in drilling rig is mud pump which is being currently manufactured by some Iranian companies. Also during a period of time, a domestic company was suggested to repair a number of pump trucks owned by National Iranian Drilling Company and this knowledge-based company announced its ability to manufacture pump trucks.
Therefore, Iran is able to build top drive, derrick, and mud pump and pump truck. Over the past five years, many measures have been undertaken for building the major components of onshore and offshore rigs.
In the section of jackets and oil platforms, Iran Marine Industrial Company and Iranian Offshore Engineering and Construction Company (IOEC) are among competent companies and Iran has reached self-sufficiency in this sector. Iran is able to build crane-mounted vessels.
Q: Where do we stand with regard to pump, turbine and electro-engine manufacturing?
A: Today, there are many Iranian companies capable of manufacturing pumps for oil and gas pipelines and refining processes. Except for some wellhead and downhole pumps, other pumps are manufactured domestically. Moreover, Ministry of Petroleum has made good investment in turbine manufacturing. Oil Turbo Compressor Company (OTC) is now able to build 25-megawatt turbines. Once it was not possible to repair turbines in the country and this equipment was sent abroad for reparation, but now many of these components of turbines like blade and rotor are manufactured in the country and the necessary measures are under way for other components. Regarding electroengine manufacturing, in addition to Jamco, other Iranian companies are also active in this arena. A private company is also able to manufacture electroengine below 4 megawatts.
Q: You highlighted good points, but given the extent of petroleum industry and its daily growing needs, there is still equipment towards which domestic manufacturers are needed to be directed. What do you think of that?
A: Many pieces of equipment and components needed in the petroleum industry are manufactured domestically and only 10 groups of commodities are not produced in the country. Ministry of Petroleum has listed this group of commodities and equipment including drilling bits, wellhead and downhole pumps, alloyed seamless pipes, turbines and anti-explosive electroengines. The petroleum industry will reach self-sufficiency in many sectors after manufacturing most of these pieces of equipment. Only these 10 groups of petroleum industry items are imported and we are not now able to build them, but necessary planning has been made for their manufacturing.
Q: Is Iran’s Ministry of Petroleum only seeking to meet domestic needs through domestic manufacturing or it is holding an eye on regional or world markets, too?
A: Ministry of Petroleum has always made it clear to domestic manufacturers that the objective behind the manufacturing of equipment and components should not be limited to supplying petroleum industry needs, but also these companies should prepare the necessary infrastructure for entry into regional and global markets. This objective is achievable because many pieces of equipment and components manufactured domestically can rival foreign prototypes in terms of price and quality. Regulations should be drawn up in the country for supporting domestic manufacturing companies. These supports may include procuring low-cost raw materials for manufacturing companies, providing them with necessary technology, offering insurance, banking and customs services, awards, formation of consortiums and avoiding unhealthy competition between manufacturing companies.
Q: What has been the policy of Iran’s new administration for exporting domestically manufactured parts and equipment?
A: The Supreme Council of Exports has been established in the country to support exporters. It is headed by the first vice-president. The minister of industry, mine and trade is the vice-chair of the council. In its first meeting in the current calendar year, the council authorized the establishment of an office for export of commodities and engineering services and the responsibility of exporting products and engineering services was assigned to deputy minister. This council is fully aware of the problems of exports and is determined to continue support for Iranian manufacturing companies.