If the banks come into the country, the lack of financing for energy projects should disappear.

Amir PARSAIENEJAD Managing Director NARDIS COMPANY

Focus on finance

August 8, 2017

Amir Parsaienejad, managing director of Nardis Company, talks to TOGY about the South Pars phase 11 deal, the company’s new activity in securing project finance and its approach to market challenges. Nardis is an EPC provider engaged in oil, gas and petrochemicals projects.

• On securing project finance: “The challenges that remain involve the presence of large international banks. The projects we manage are normally the mega-projects in Iran, which need large amounts of resources. These resources have to come from equally large banks such as Scotiabank, Bank of America and Mitsubishi Bank.”

• On the South Pars phase 11 deal: “Projects of this magnitude bring opportunities for many players across the board, and EPC companies are among the ones that benefit most.”

Previously a part of the Farab Company but independent since 2007, Nardis Company is an EPC provider engaged in oil, gas and petrochemicals projects. The company has also recently undertaken activities in project finance. Farab owns 51% of the shares while Iranian Offshore Engineering and Construction Company holds 49%. Nardis has been providing EPC for Iranian NOCs for projects such as the Foroozan Offshore Complex Renovation and Reconstruction for IOOC and Kish gasfield development (Phase 1) for NIOC, as well as its subsidiaries including Pars Oil and Gas Company and Iranian Central Oil Fields Company.

How do you expect the South Pars phase 11 deal to improve the market landscape for EPC contractors in the mid-term?
After the deal is signed, the consortium led by Total will need Iranian partners in many stages of the phase’s development. We expect a positive impact on EPC activities as the segment will become more active since contractors and/or subcontractors will be required, not only for offshore works but for the related onshore activities.
Projects of this magnitude bring opportunities for many players across the board, and EPC companies are among the ones that benefit most.

What did Nardis Company focus on in the past year?
Our activities this past year were focused on project management and finance. As the amount of projects which have government sponsorships have been decreasing, we have shifted our role from mere EPC contractor to a more proactive one, meaning we go out to seek the investments needed to develop these projects in all of their different stages.
For that reason, we are aiming at cost-effective budgeting schemes. There are plenty of opportunities in Iran. However, due to lack of funds, the government was not able to develop all of the projects.
We are looking at different sources of funding both domestically and internationally. For different projects, we are in a position to facilitate the way of bringing in investors and financiers. In this new period, we are consolidating better conditions under which to negotiate with our clients.

 

Under this new approach, which projects will be priorities for Nardis?
These could be the projects for which we already have a contract with the owners, such as the utility units of the Kharg NGL project and the sweetening units of the Iran LNG project. Another one could be the Kish gas refining project’s phase one, which we have been looking at since 2015. We had done the costing of its development and we are preparing the financing for the project.
We have also been working on the Kangan Gas Compressor Stations. The Ministry [of Petroleum] needs such compressor operations, but these operations need funding. For this one, we are aiming to bring in assistance from Japan or Europe in terms of both financing and specialised equipment.
We are also paying special attention to the Mokran Petrochemical Complex, the new hub for petrochemicals located in the southeast of Iran near Chabahar. We are speaking with clients of Negin Mokran Development Company and the relevant subsidiaries to develop parts of this project such as the utilities or processes.
That said, they also need the financing. Thus, we are approaching different companies for financing so that, as one entity, we can deal with both financing and contracting for the Mokran group.

What are the remaining challenges in securing the necessary finance for these projects?
The challenges that remain involve the presence of large international banks. The projects we manage are normally the mega-projects in Iran, which need large amounts of resources. These resources have to come from equally large banks such as Scotiabank, Bank of America and Mitsubishi Bank.
Due to the sanctions and the resulting uncertainty, these large banks remain more reluctant when conducting business in or around Iran. They will eventually come, but slowly. Korean investors seem to be the ones that will break the ice by fully entering the market. We expect this will be followed by the Japanese and the European banks and financial institutions as well. If the banks come into the country, the lack of financing for energy projects should disappear.

How would you describe Nardis Company’s strengths and competitive advantages in meeting the complexities of the market?
We have engineering resources for detail design all the way to downstream projects. Our engineers are experts and well trained. Our costs are more competitive than those seen in Europe. Prices for engineering services in Europe are a minimum of EUR 100 per hour, while our price is EUR 25 per hour. This gives us an incredible advantage. This is also the case for construction. We are more competitive than foreign companies.
Also, in terms of market knowledge, we offer more know-how of the different sectors across the Iranian market than foreign companies, especially in regards to procuring local items. These are our strengths: engineering, construction and procuring items within the Iranian market.

Which type of EPC projects are bringing the company the most revenues?
For Nardis, the oil refineries, gas compressor stations, oil pump stations, utilities and petrochemicals are the strongest segments.

What is Nardis’ mid-term strategy to overcome the current challenges in the market?
We are aiming at consolidating our finance to start making investments of our own. This is part of an overall strategy in which we would be seeking to participate in projects not only as EPC contractors, but as potential investors.
In this regard, we would start investing in smaller projects by ourselves, looking to progressively grow the portfolio and eventually invest in larger projects with our partners. Regarding these partnerships, for instance, if a Japanese company enters the Iranian market, we would aim to participate with them as local investment partners by successfully guiding them toward projects that could be substantially profitable for the investors while at the same time generating more jobs in the country.
Of course, we are also targeting work as local EPC partners or general contractors/subcontractors for companies such as Toyo Engineering, Samsung or Hyundai, for example, providing them with our vast market knowledge and network.

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