9 June 2022 - 17:33
  • News Code: 457939
Over 80% of Oil Industry Equipment Locally Sourced

TEHRAN (Shana) -- The chairman of Board of Directors of Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), Ehsan Saqafi, says more than 80% of equipment needed by the petroleum industry is domestically manufactured. In an interview with” Iran Petroleum”, he said that 14-15% of the remaining 20% was not cost-effective to be produced domestically while for 5-6%, the necessary technology is not available.

Here is the full text of the interview Saqafi gave to “Iran Petroleum”.

Would you please first tell us about SIPIEM’s structure?

SIPIEM started out in 2000. Currently, 850 companies involved in the field of manufacturing industry are members of SIPEIM, of which 220 companies are knowledge-based. One of the membership conditions set by SIPIEM is that companies must be on the Petroleum Ministry’s vendor list. The activities of these companies are divided into 10 commodity groups including fixed equipment, instrumentation, rotary equipment, electricity and wellhead installations. Of these companies, 50 member companies of SIPIEM operate in the world class. About 80,000 direct job opportunities have been created by SIPIEM, and according to the set of activities that take place, about 240,000 direct and indirect jobs have been created in the country. There are about 2,000 small and large contracting units in our supply chain.

What are the criteria for SIPIEM manufacturing?

SIPIEM bases its manufacturing on internationally recognized standards. Over 1,400 items of strategic goods required by the oil industry have been designed and manufactured by SIPIEM manufacturing companies. Nearly 80% of the equipment needed by related industries can be provided by SIPIEM. The capacity of our members is not limited to the equipment of the petroleum industry, and its customers are not only oil plants, but also energy plants, industries, mines, steel mills, and so on. But within SIPIEM, the main customers of our member companies are satellite companies related to the oil industry. Ten groups of goods defined in the oil industry in this association are followed by 10 specialized committees on the subject of these goods. On the other hand, there are 12 joint working groups in the field of employers and 4 specialized commissions in this association that deal with issues. On the other hand, there is an independent working group in the association called the Committee of Knowledge-Based Companies, which has a special activity in relation to the activities of the knowledge-based companies of the association. These companies are distributed throughout the country in the field of construction. But in some centers such as Khuzestan, Khorasan, Isfahan, Arak and Fars, the density of these companies is higher. Over recent years, SIPIEM members have made progress. During the years when the Iranian petroleum industry was facing sanctions, our manufacturers were given the opportunity to supply items that could not be made, and they were successful. It can be argued that we owe more than 50% of our progress in domestic manufacturing from 100 items in 2000 to 1,400 items now to developments over recent years.

Did SIPIEM and member companies have no licensing problem?

Obtaining these licenses has not been without problems, although the companies themselves have been pursuing this issue. One of the issues that should be pursued in the oil industry is the preparation of a standard in accordance with Iranian industry. We consider it appropriate to use international standards, but we can create new standards in accordance with our industry. One of the problems our manufacturers face is the insistence of employers on standards that do not conform to the raw materials available to us in terms of supply and manufacturing. These standards may be localized according to the conditions of the country. Of course, I am not saying that for all cases, but for some cases, it can be localized. Manufacturers were like combatants during the embargo, and now it is an economic war. Sanctions ramped up pressure in different ways.

SIPIEM is a private entity while sanctions have mainly targeted state-owned companies. Couldn’t SIPIEM act separately?

Sanctions are divided into several categories. Some were sector-based, and some were person-centered. It is true about persons. Sector-based sanctions on the oil sector apply to all public and private companies, and it cannot be said that these companies could easily operate in this field because they were private, although there were problems in meeting the standards in this area.

But you said that the sanctions created opportunities for you.

Sanctions are like a double-edged sword, one side of which is good for the domestic manufacturer and the other side is bad for the same manufacturer. Yes, it has created opportunities for domestic manufacturers, but we also had problems and issues. For example, the problems we had and still have with money transfer. We had problems with the supply of raw materials and we have still such problems.

Recently, you had a meeting with the Minister of Petroleum. What happened during that meeting?

SIPIEM’s relations with the Petroleum Ministry, although was without any difficulty before, have been facilitated since Mr. [Javad] Owji took office. We announced that we are ready to be a good liaison between the ministry and manufacturers, regulate bylaws and instructions to provide the necessary support for domestic construction. It was also decided that communications with associations should be followed up on by the Office of Deputy Minister of Petroleum for Engineering.

Are employers directly signing agreements with manufacturers?

Yes, manufacturers contract directly. SIPIEM is a facilitator and guide and acts as a regulator. Many projects do not want to be involved in the builders in detail, and it has been suggested several times that we hand over equipment that is in a group setting. They were considering consortia, but since these consortia have not responded in Iran, we are looking to establish a company in SIPIEM, whose shares belong to manufacturers. For instance, this company should sign a contract in the commodity group and take it from the employer companies and give it to the manufacturers to facilitate the work, as a result, the manufacturers' interaction with the companies will be easier.

How much of the capacity of these companies is used?

At present, on average, 50 to 55 percent of our total capacity is occupied, of which about 45 percent of the activities are allocated to the oil industry.

Why is this capacity idle? There is no capability?

No, there is capability, but active projects are few, and another challenge is related to the liquidity problem, because the capacity of the private sector is very low without paying at the right time. There are also problems with exchange rate fluctuations. During the exchange rate fluctuation, it was very difficult for the manufacturers.

But the Office of Deputy Minister of Petroleum for Engineering, Research and Technology undertook some measures to control forex rate fluctuations, didn’t it?

Yes, of course a number of changes were made, but they were not commensurate with the economic conditions. Of course, it was better than nothing. The issue of exchange rate fluctuations is a problem for domestic manufacturers because it is not possible to supply 100% of the projects inside, some equipment and parts are built inside and others have to be imported from abroad.

How is SIPIEM communicating with universities and scientific centers?

The connections are good. Academic Center for Education, Culture and Research (ACECR) is a member of SIPIEM. We have also signed an MOU with the Presidential Office’s Innovation Fund. There are 220 knowledge-based companies among our members.

What was the result of SIPIEM’s activity in establishing a joint working group with the four main subsidiaries of the Petroleum Ministry?

The demands of the related areas of the employer are conveyed to us. Defects are reported if they are in the field of manufacturers and vice versa. If there are any shortcomings, we tried to eliminate them. The SIPIEM’s arbitration board, in addition to the dispute resolution committee that exists in NIOC, reviews the cases that are announced to this committee, and if a member is found guilty three times, its membership in the society will be suspended. SIPIEM considers the industry and national interests while taking into account the interests of its members. If members are at fault, it decides about them. The output of the working groups has been facilitation and synchronization with industry.

What strategic commodities have SIPIEM manufacturers produced?

We were innovative in all product groups. In cold boxes and in the last 5 years in a variety of catalysts. It can be noted that 50% of the catalysts used in the petrochemical industry and refining and distribution could be supplied domestically. We were innovative in compressors and rotating groups, in the manufacture of instrumentation panels, and in drilling rigs and wellhead equipment, although we need support in the innovation sector. We are able to supply 80% of the equipment locally, of the remaining 20%, there is up to 15% of the manufacturing capacity available, but it is not economical. For the remaining five percent, the technology is not available.

Have you signed any agreements with other countries?

We have signed contracts with Syria, Iraq, Venezuela and Tajikistan, which are currently in force.

Prior to the sanctions, we had signed agreements with Azerbaijan. The credit line between Iran and Syria must also be activated. The lack of this credit line has caused the Russians and Turks to take the market from Iranian companies.

What do these agreements involve?

Supplying equipment to the oil and power sectors.

Are SIPIEM members teaming up with foreign companies for technology transfer?

Yes, they team up with European and East Asian, as well as Chinese companies.

Have sanctions been effective?

SIPIEM members have largely circumvented the sanctions.

Do you have any plans for presence in the Russian market following President Ebrahim Raeesi’s official visit there?

Yes, of course. We can reach agreement with the Russians. Russian firms attended an exhibition in Sari and some memorandums were signed with them, which are yet to be implemented.

Interview by Mahnaz Mohammad-Qoli

Courtesy of Iran Petroleum

News Code 457939

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