Mohammad Banae

The phase 11 deal will provide a shot of confidence for those who are still doubtful about investing in Iran’s oil and gas industry.

Mohammad BANAE Managing director and chairman Delta Offshore Technology

A shot of confidence in Iran

February 13, 2018

Mohammad Banae, managing director of Delta Offshore Technology, talks to TOGY about the Iranian oil and gas industry’s post-sanctions recovery, the company’s goal of participating in South Pars phase 11 and expectations for the project’s impact on the offshore sector. Delta Offshore Technology provides engineering, construction, installation and management services for offshore oil and gas projects.

On opportunities: “At the moment, maintenance services for offshore structures are the most dynamic activity in the market for players like us. That will be the case at least until new projects, such as phase 11, fully start. Topsides, pipelines, jackets – all of these require periodical maintenance to ensure efficient operability. Some facilities at South Pars are more than 10 years old. Since we already have the engineering experience in these areas, our short-term opportunities in the offshore lie in this segment.”

On the company’s focus: “We are currently focusing on shallow-water projects, such as seawater intake, jetties, jacket installation and so on. This is mainly due to the current oil prices, which certainly impact deepwater exploration and production activities given their high costs. When the price is below USD 60, investors are reluctant to place their capital in this area since projects are less feasible.”

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What are the greatest challenges Iran’s oil and gas industry has dealt with since the sanctions were lifted?
There are many factors that have influenced oil and gas dynamics in Iran over the past year and a half. Activities in the sector have failed to pick up at the pace that we were expecting back when the JCPOA was implemented.
First is the oil market context. The lifting of sanctions and the consequent IPC [Iran Petroleum Contract] announcement took place in the middle of the drop in oil prices. This drop led to a series of negotiations within OPEC to limit production right when Iran was pushing to reach pre-sanctions rates.
Under current prices, large investments in field development – the IPC’s core focus – tend to take longer because margins are smaller and companies decide to be more cautious and smart regarding the investments they make.
Moreover, uncertainty in the market due to elections both in the US and Iran also affected the closure of these deals. With the continuity of this administration [of President Hassan Rouhani], which has the IPC as one of its flagship initiatives, and given that we now have a clearer political landscape, we should be in a position to transform investors’ interest in actual contracts and thus have a boost in oil and gas activities in the near future.

 

How do you expect the South Pars phase 11 deal to impact Iran’s offshore sector?
From my perspective, this deal will have two immediate impacts on the sector. First, we expect the development of phase 11 to contribute to improving the engineering know-how and operational standards of domestic offshore players. For instance, this project will require the offshore operator to handle 20,000-tonne topsides, which is something new in our market. So this is going to be technically challenging for the Iranian contractor.
Second, we also look at this deal with great optimism because of the impact it will have on the future of the IPC. I believe that, just as we saw happen for the first time 20 years ago – with Total being the first major Western IOC to venture into Iran – the phase 11 deal will provide a shot of confidence for those who are still doubtful about investing in Iran’s oil and gas industry. For this reason, we are very positive on its effect on the many other potential development contracts that are currently under study.

How is Delta preparing to tender as the domestic offshore contractor?
At Delta we are confident of our background experience and engineering capabilities to carry out challenging projects such as phase 11. This is what made us earn recognition in this competitive market. Even though it has not yet been released, we are aiming to participate in the tender.
We are a knowledge-based company and always looking for new ways to grow in our technical expertise. Our track record of projects and clients confirms this. Thus we are very well prepared to carry out offshore activities under the most demanding engineering standards.

In the low-price context, what has been the company’s market focus?
We are currently focusing on shallow-water projects, such as seawater intake, jetties, jacket installation and so on. This is mainly due to the current oil prices, which certainly impact deepwater exploration and production activities given their high costs. When the price is below USD 60, investors are reluctant to place their capital in this area since projects are less feasible.

Where do you currently see the biggest opportunities in the market for Delta?
At the moment, maintenance services for offshore structures are the most dynamic activity in the market for players like us. That will be the case at least until new projects, such as phase 11, fully start. Topsides, pipelines, jackets – all of these require periodical maintenance to ensure efficient operability. Some facilities at South Pars are more than 10 years old. Since we already have the engineering experience in these areas, our short-term opportunities in the offshore lie in this segment.

 

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