Domestic Manufacturing in Iran Petroleum Industry
Indigenization and acquisition of state-of-the-art technology have always been a major cause of concern for Iran’s petroleum industry. Over recent years, petroleum industry managers have seriously worked to make maximum benefit from domestic capabilities for meeting the country’s needs. To that effect, the significance and advantages of commercialization and gaining revenues should not be ignored. A simple estimate indicated that 50% to 70% of several hundred billion dollars in investment, envisaged to be made in the petroleum industry in the coming decades, would be spent on the purchase of equipment.
Making policies for overhaul in the four main subsidiaries of Ministry of Petroleum, supervision on petroleum industry standards, assessment of the qualifications of contractors, consultants and manufacturers involved in the petroleum industry, drawing up IPS standards, and compiling vendor list for commodities required in the petroleum industry are among tasks assigned to the Office of Deputy Minister of Petroleum for Engineering Affairs.
Emad Hosseini, deputy petroleum minister for engineering affairs, told Iran Petroleum in an interview that Iran’s Ministry of Petroleum has always prioritized domestic manufacturers and companies.
He said an electronic system has been launched for the supply of commodities for Iran’s petroleum industry.
“The launch of this system was aimed at promoting domestic manufacturing, defining integrated supportive policies, industrial self-sufficiency and preparing integrated ground in all commercial sectors and purchasing centers of petroleum ministry,” Hosseini said.
He said one-phase and two-phase tender bids have been loaded in the system, adding: “More than 2,000 manufacturing and procurement companies in the petroleum industry equipment and services have so far registered in the commodity electronic system.”
He referred to Iran’s 107-year-old petroleum industry and the process of purchase of equipment and commodities over the past century, saying: “By using the electronic commodity system, this process has significantly changed. Before this, state-run companies used to purchase foreign-made products as they knew nothing about domestically made products, while we knew there were similar products made in the country.”
1m Items Identified
Hosseini said this system blocks irregularities in the petroleum industry, adding: “The electronic system of commodities works like a central system whose different modules process demands in a fully mechanized way from the state of demand to delivery and clearance of commodity.”
He said more than 1.1 million items of petroleum industry commodities were identified and coded through this system.
Noting that quantity and quality are two important conditions for using domestically manufactured commodities for the petroleum industry, Hosseini said that Iranian and foreign companies will ,from now on, run for tender bids for commodity manufacturing under equal conditions.
Hosseini said the issue of domestic manufacturing in Iran is an issue outside political factionalism, adding: “Now, given the Western sanctions against our country, supporting domestic manufacturing as a strategy is among Iran’s macro policies.”
Sophisticated Commodities
Hosseini said10 groups of sophisticated petroleum industry equipment are to be manufactured in Iran.
“These 10 groups are divided into 640 items of commodities which are to be manufactured domestically for the first time in Iran in two years. Now, more than 70% of the country’s petroleum industry equipment is manufactured domestically and the remaining 30% which includes hi-tech rotary equipment for whose manufacturing Iranian specialists have made great success,” he added.
Hosseini said improving productivity indices like cutting time and cost for the implementation of projects is a top priority for Iran’s Ministry of Petroleum in light of special conditions prevailing over the country with regard to finance.
He said that expert and specialized committees have been set up at the Ministry of Petroleum to draw up plans for management of knowhow in the petroleum industry.
Hosseini said the costs for the implementation of petroleum industry projects have unreasonably trebled in recent years.
“One of the current causes of concern is the high cost of implementation of projects. Therefore, one of our objectives behind drawing up this bylaw in order to cut costs and time for the execution of oil and gas projects in the country,” he said.
Hosseini said cutting costs for the implementation of petroleum projects would lead to attracting more investment for this industry, adding that petroleum industry experts and university professors from across the country are contributing.
He said a bylaw has been drawn up for managing assets for the petroleum industry, adding: “This issue is being done for the first time in the country and even in the Middle East. This bylaw has 10 main indices, including self-assessment.”
Hosseini said one of basic measures by the administration of President Hassan Rouhani in the petroleum industry was the prioritization of strategic projects.
“For example, this policy was executed in South Pars gas field over the past two years and we saw that 100 mcm/d of gas was added to the country’s output. Based on existing plans, the same amount is to be added to Iran’s production this year,” he said.
Hosseini said involvement of Iranian companies in Phases 12, 15&16 of South Pars are indicative of Iranians’ self-belief with regard to the petroleum industry.
“In these projects, Iranian companies mainly manufactured equipment through reverse engineering. But from now on, domestic manufacturing in Iran is planned to go ahead in a knowledge-based manner,” he added.
Hosseini said development of knowledge-based companies is a priority of petroleum industry in the future, adding: “With the removal of international sanctions and renewed entry of international companies into petroleum industry, Iran should manage knowhow in its projects so that we would use it in the future projects. Unfortunately, that has not been done as it should in the past.”
Bolstering Iranian Contractors
Hosseini referred to the capabilities of Iranian companies and contractors in the past years, saying: “Now, given the fact that Iran’s petroleum industry is weak with regards to contractor companies, one of our future policies is to devise required mechanisms for upgrading these companies. Of course, Iranian companies can be engaged in joint cooperation with foreign companies.”
Hosseini said technical regulations are being revised and projects under construction in Iran’s petroleum industry are to be implemented.
“This revision is in conformity with the country’s conditions, world standards, spatial planning and value engineering. In case of promulgation by the minister of petroleum, a very effective step would have been taken in this industry,” he said.
“Long-term priorities of Iran’s petroleum industry are development of joint oil and gas fields in the upstream sector. Currently, a large segment of these financial resources of this industry is directed towards these fields,” he added.
Hosseini said IPS standards are being updated in the petroleum industry every five years, adding: “With the signature of a memorandum of understanding between Ministry of Petroleum and National Standards Organization, standards applied to this industry would be focused upon further. These standards are to be used in petroleum industry commodities and equipment; therefore, they would be a combination of domestic and international standards.”
Hosseini said British Petroleum (BP) has named Iran as the largest holder of gas reserves in the word.
“By relying on these resources, numerous plans will be implemented for preventing crude sales and developing downstream industries. Siraf refineries project is a case in point,” he added.
Hosseini highlighted the petroleum minister’s support for Iranian manufacturers and contractors, saying a proposal was recently submitted to the government for the establishment of a fund for supporting Iranian manufacturers and contractors. He said 10% of NDFI would be funneled into this fund.
Corrosion Management Document
Hosseini said a document has been drawn up for managing corrosion in the petroleum industry. “Execution of the strategic document of corrosion management in the petroleum industry would enhance gross national product (GNP) by five percent. The final objective of this document is to avoid waste of assets and boosting GNP,” he added.
Hosseini said executive committees have been established in the four main subsidiaries of petroleum ministry, as well as other companies and directorates for the execution of this document.
He said this document has been drafted for protecting physical assets of the petroleum industry and reducing accidents stemming from corrosion and minimizing financial and environment damage from corrosion.
Hosseini noted that corrosion is one of the most important factors causing destruction of industrial equipment. He said that corrosion is known as one of the most harmful things in the industry.
Corrosion is a natural process, which converts refined metal to their more stable oxide. It is the gradual destruction of materials (usually metals) by chemical reaction with their environment.
In the most common use of the word, this means electrochemical oxidation of metal in reaction with an oxidant such as oxygen. Rusting, the formation of iron oxides is a well-known example of electrochemical corrosion. This type of damage typically produces oxide(s) or salt(s) of the original metal. Corrosion can also occur in materials other than metals, such as ceramics or polymers, although in this context, the term degradation is more common. Corrosion degrades the useful properties of materials and structures including strength, appearance and permeability to liquids and gases.
Hosseini also said that a bylaw has been adopted for managing physical assets of the petroleum industry in both upstream and downstream sectors.
He said this bylaw has been drafted following scientific studies and comparative surveys in leading oil companies in the world.
Hosseini said this model is an appropriate facilitator for re-engineering and improving the productivity of procedures for protecting the assets of petroleum industry.
He cited the example of ISO 55000 which is an international standard covering management of physical assets. Initially a Publicly Available Specification (PAS 55) published by the British Standards Institution in 2004, the ISO 55000 series of Asset Management standards was launched in January 2014.
Hosseini said this bylaw will be obligatory for all companies after being promulgated by the petroleum minister.
“Given the accumulation of physical assets and their scattering on vast swaths of land in the country as well as the problems related to procurement of commodities and equipment, optimal maintenance and maximum use of existing facilities and equipment is a must,” he said.
Hosseini said this strategic document would bring about valuable integration and synergy in all management and maintenance activities related to the petroleum industry.
The tangible results of joined-up, risk-based, whole life cycle asset management are increasingly proven around the world. They include:
Alignment of processes, resources and functional contributions (instead of departmental silos and competing, short-term priorities);
Creating a transparent audit trail for what is done, when and why;
Better understanding and usage of data and information to provide informed and consistent decisions;
Improved planning (especially capital expenditure);
Consistent, prioritized and auditable risk management;
Alignment and coordination of existing initiatives, including competency development; and
Greater engagement of the workforce, including leadership, communications and cross-disciplinary teamwork.