Iranian energy players say sanctions provide the best opportunity for startups to show off.

Iran’s petroleum industry has been into ups and downs particularly following the US’s 2018 unilateral withdrawal from the 2015 Iran nuclear deal and the ensuing reimposition of sanctions.

The United States has left no stones unturned to zero Iran’s oil exports and slow down the pace of projects in this industry. However, the experience of sanctions shows that Iran’s petroleum industry knows how to transform threats into opportunities.

During the first round of sanctions imposed on Iran under Mahmoud Ahmadinejad, many foreign companies left Iran. However, Iranian contractors developed some phases of the giant South Pars gas field and set records for project startup in this massive offshore gas reserve shared with neighboring Qatar.

Now the conditions have become tough for the activity of international companies. Therefore, a new business is taking shape in the petroleum industry. Relying on technology and creativity, this new business can address some petroleum industry challenges without having to spend enormous money.

Oil startups have just started their activity and the Ministry of Petroleum has offered its full support for these companies. The Office of Deputy Minister of Petroleum for Research and Technology is tasked with facilitating the activity of these companies in the petroleum industry. Oil industry experts are optimistic about the activity of these companies currently active in Iran.

No Huge Finance Needed

Mehdi Mirmoezzi, CEO of Pasargad Energy Development Company (PEDC) told "Iran Petroleum" that in the light of sanctions, the ground is prepared for new businesses, particularly startups.

“Modern businesses are technological and creative in nature. Therefore, they need new idea and thoughts with small capital,” he said.

Mirmoezzi, a former CEO of National Iranian Oil Company (NIOC), added: “Sanctions will harden conditions for high-tech and big capital activities because the necessary ground is not prepared for them. But the time is now ripe for us to get involved in startups, because it is related directly to creativity and innovation without having to provide big finance.”

Iran holds events about the activities of startups. That indicates state and private organs’ special support for new businesses. However, the engagement of startups in high-risk oil and gas sectors is totally new. Add to this the confidentiality of significant parts of these technologies for at least a specific period of time.

Iranian startups are stepping into a sector for which there is not much experience. However, the companies that manage to step into the phase of commercialization by developing new ideals will be holding the bargaining chip in the competitive atmosphere of Iran’s petroleum industry.

Iran’s petroleum industry currently needs investment and modern technologies to enhance productivity. The new model of oil contracts – Iran Petroleum Contract (IPC) – was developed to attract investment and transfer technology into this industry.

Now as the sanctions get tougher, new restrictions are created for foreign investors. The question here is to know if startups can get involved in the upstream sector.

Mirmoezzi said: “In the upstream sector, particularly surface equipment and installations, there is good ground for the activity of startups. Of course, we are studying options to see where we can step in so that we would develop our strategies in such direction.”

Negotiations with Universities

Mohammad Mostafavi, a startup chairman, said: “We are still at the beginning of the way. But since the downstream sector needs less investment and is less controlled by state, I think that there are more opportunities for the activity of startups. We are looking to provide the necessary ecosystem for innovation in the petroleum industry. Cooperation with universities on using innovation could be the first step.”

But CEO of Dana Energy Mohammad Iravani, also the Board member of the same startup, said: “Decrepit petroleum industry equipment has increased production costs in this industry, while productivity remains low. Startups can help cut these costs.”

He said: “We have to make efforts for the startups to become active in the energy sector, in which case we would hope for the formation of more startups and accelerators in this sector.”

He added: “We are currently in talks with the University of Tehran, Sharif University of Technology and Amir Kabir University of Technology to start work in the energy startup sector.”

High-Risk but Profitable

Sanctions will not remain on the petroleum industry for good. There are numerous opportunities for investment in Iran’s oil sector in light of great potential in this industry. Given the Ministry of Petroleum’s insistence on the use of modern technologies and methods that would help reduce costs or overcome some challenges and problems, startup companies take advantage of this chance and supply commercial commodities by engaging creativity and idea.

Iravani said: “There are many opportunities in Iran’s petroleum industry, where no serious activity has been done. Owing to our potentialities in Iran we can create new ideas to reduce production costs.”

He said there is potential in the downstream sector where due to the high risk of license, no company has so far entered. He added that startups can step into this sector, develop their own brands and work for commercialization.

Iravani said: “Currently startups are a high-risk business. They fail in 80% of cases, but if 20% accomplish their energy projects, they will be definitely influential.”

He touched on the achievements of Iran’s petroleum industry during years of sanctions, saying: “Although due to sanctions, we are lagging behind in the transfer of technology, the fact is that Iranian contractors built South Pars. Taking benefit from startups we can reduce our costs and boost productivity.”

Ambitious Plans with Startups

Iravani touched on Silicon Valley startups, saying they are ambitious projects. “The main feature of startups is their ambitiousness. I believe that we have to be ambitious in this regard, but move reasonably and rationally.”

Asked if Iranian startups would be able to operate outside Iran, he said: “Startups will be successful when they have their markets. If we want to create new business we have to engage experienced people and create value. Big companies have their own model in this sector and we can definitely compete with those outside Iran, too.”

Mostafavi said: “Startups are not costly. Although we are facing financing and capital attraction problems in the petroleum industry due to sanctions, the technology sector would need changes in the attitudes towards the petroleum industry rather than costs.”

He said: “The Ministry of Petroleum is influenced by global conditions. Until 10 years ago, there was no talk of petroleum industry. But now the Ministry of Petroleum is determined to benefit from new and creative ideas for overcoming petroleum industry challenges. Startups must be able to create ideas which would be commercialized.”

“In the new business environment, we welcome every new idea in the petroleum industry. We think that these ideas would be more successful in the downstream sector. However, we face no obstacle for activity in the upstream sector,” he added.

MOU to Support Startups

Last December, Dana Energy, Oil Industry Investment Co. (OIIC) and PEDC signed an MOU to develop the startup ecosystem, support new businesses and set up a venture capital fund in the energy sector. The MOU first led to the establishment of Apadana Ventures as a startup.

The Board of Directors of Apadana Ventures recently held a meeting. Mostafavi, Board chairman, highlighted the neglected role of technology in Iran and stressed the need for paying attention to innovation in the petroleum industry.

He said: “The issue of startup innovation and ecosystem is new in the petroleum industry and its stability requires empathy and time by all actors in the state and private sectors.”

Mehdi Gholamloo, CEO of Apadana Ventures, said plans had been made for launching energy innovation centers in cooperation with reputable universities.

“This company is determined to fulfil its role as a private sector developer of startup ecosystem in the petroleum industry and welcomes all actors in this sector,” he added.

Mir-Moezzi touched on new chances for innovative activities in the petroleum industry, saying: “What’s clear is that all petroleum industry sectors including upstream, downstream and midstream energy sectors have great potential. The presence of startups can be helpful for all of them to step into these sectors.”

Iravani pointed to productivity and cost reduction, saying innovative activities and startups would be a good solution for cost reduction.

Courtesy of Iran Petroleum