Most of our current activity is driven by casing, tubing and pipelines.

Hamid GHASHGHAIE Managing Director PETRO SADR ALBORZ

Financial strength in Iran

June 12, 2018

Hamid Ghashghaie, managing director of Petro Sadr Alborz (PSA), talks to TOGY about the current and future trends of the oil country tubular goods (OCTG) sector and the areas where the most demand will come from for goods that it supplies. PSA is a supplier of different types of steel pipes, casing and tubing, valves and fittings for the oil, gas, petrochemicals and water sectors.

• On the future of oil and gas: “Perhaps in the near future we will begin focusing on new energy equipment for solar power plants and the like. In the near future, the demand for oil and gas will decrease greatly, as will the supply. In perhaps 10 years, many oil and gas-producing countries will have enough oil and gas only for themselves.”

• On financing: “At present in the Iranian market, it is difficult to acquire funds from end users and EPC contractors, meaning you have to finance projects yourself. PSA finances more than 80% of its projects. After completing the projects and delivering the materials, we follow up and get our money. This is a problem not just in Iran but all over the world. In Europe, the Middle East, Korea, China and Japan, most companies need money before they can place orders.”

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Where do you see the largest demand coming from?
Our most recent projects have been with NIOC [National Iranian Oil Company] and NIGC [National Iranian Gas Company] and their subsidiaries. Most of our current activity is driven by casing, tubing and pipelines.
The demand changes all the time. It depends on the Iranian government’s policies for investing in various industries. For example, over the past two years, most of the refineries’ development projects have slowed down because of infrastructure repairs and equipping and renewing of systems besides upgrading. As such, demand for fittings, flanges and valves is very low.
The Iranian government is also looking at the upstream market – meaning wells that will require a lot of casing and tubing. At present, the Iranian policy is to develop local gas pipelines, meaning that a lot of line pipes, such as ERW, LSAW and seamless pipes, are required.

What is your assessment of the environment of competition in Iran, particularly in your field of activity?
Our key potential in this market is our financial capacity, which we built during the past 10 years. If you do not have sufficient financial support or credit, you cannot grow in the current market.
At present in the Iranian market, it is difficult to acquire funds from end users and EPC contractors, meaning you have to finance projects yourself. PSA finances more than 80% of its projects. After completing the projects and delivering the materials, we follow up and get our money.
This is a problem not just in Iran but all over the world. In Europe, the Middle East, Korea, China and Japan, most companies need money before they can place orders. All the EPC contractors and suppliers need money to place orders with the mills. All factories need money to agree to produce equipment.
Perhaps only around 2% of our competitors have a financial potential similar to ours. Our company is one of the 10 Iranian companies with the highest capacity for procurement. After all, we have no debts.

 

What are the company’s activities in the Iranian energy industry?
We have supplied equipment to projects across the Iranian energy industry, such as to oil and gas refineries, oil and gas pipelines, power plants and petrochemical complexes.
Our main activity is to supply OCTG, such as all kinds of welded pipes, seamless pipes, casing and tubing. Another area of focus is all manner of fittings, flanges and the accessories for these types of equipment for the oil and gas industry. We also supply manual, control and safety valves.
Our company is registered in Iran in all oil and gas vendor lists, such as those of NIGC and NIOC and all of their subsidiaries, as well as with gas refineries such as Jam Petrochemical Company and Parsian Refinery. We are also registered with Iranian petrochemicals companies as a supplier.
Our purpose in this industry is to supply the best quality at an acceptable price for our clients and end users. Most of our end users are governmental, although we also have a close relationship with EPC contractors in Iran such as Kayson, SEKAF, Nardis, OEID [Oil and Energy Industries Development Company] and ODCC [Oil Design and Construction Company].
We supply equipment in two categories. The first is welded pipes produced in Iran. Normally, we produce our pipes in the Ahvaz Pipe Mills Company, which is famous in Iran. Another partner is Safa Industrial Group Pipe Mill & Saveh Rolling and Profile Mills Company (S.R.P.M)
The other category is seamless pipes and casings. Every year, we take on many projects and participate in many tenders to supply casing and tubing for the oil and gas industry. Our casing and tubing are generally sourced from top-quality mills in Europe, Japan and China. In general, the end users are NIOC and its subsidiaries.
PSA has become well-known in Japan, Western Europe and the UAE. We never ever engage in business regarding products that are blocked by sanctions or which are used in military systems. That’s because we are thinking about our long-term business goals rather than just thinking about Iran and our own business.
We are an agent for valve manufacturers in Iran that supply companies all over the world, including in Korea and China. Our valves are used in the oil and gas industry and in power plants.

Where is your raw material supplied from?
In general, we source the raw materials to produce pipes from mills, which are then used in our projects and tenders. Our supply of raw materials depends on the requirements of the clients.
Our raw material orders depend on demand; we place orders with Foulad-e-Mobarakeh Steel Company for coil and plates – sometimes ordering 10,000, 20,000 or 30,000 tonnes. We procure coil from Foulad-e-Mobarakeh to produce ERW [electric resistance welded] pipes in either the Ahwaz or Safa mills.
We sometimes procure our raw materials from markets outside of Iran, such as South Korea, China, Japan or Western Europe. The prices in Western Europe are higher than in East Asia, while the quality is usually the same.
We generally use first-class mills regardless of the area, because our policy is to supply from mills with the best-quality equipment. We have a close relationship with Korean, Japanese and Western European mills in terms of procuring raw materials for welded pipes.

What is your approach to overseas involvement and what is your current international network of manufacturing partners?
We have offices in Shanghai, the UAE and Germany. In most countries, we have local partners who are working with us. Our offices and partners outside of Iran engage in two types of business. The first is doing business in their local market. The second is to find sources of material outside of Iran for us, support us in supplying goods and aid us in placing orders with mills and buying the materials for import to Iran.
Our orders outside Iran are based on vendor lists; we use all the mills that are registered on the Iranian oil and gas vendor lists. For instance, there is Sumitomo in Japan, Tubacex in Spain and TPC or Baosteel in China.

What is your strategy for the coming five years?
Perhaps in the near future we will begin focusing on new energy equipment for solar power plants and the like. In the near future, the demand for oil and gas will decrease greatly, as will the supply. In perhaps 10 years, many oil and gas-producing countries will have enough oil and gas only for themselves.
Many things are changing in the automotive sector. In the past, the capacity of most cars was 4,000 cc, then it dropped to 2,500 cc. Most cars in Europe are small these days, while hybrid and electric cars are being considered. We are thinking about participating in this new industry.
We are also considering exporting equipment and goods, such as welded pipe, coil and HRC plates. The same goes for equipment associated with water, gas and oil transmission. We would firstly target Middle Eastern countries, and then South Africa, China and others.
We are participating in a pipeline project in Iraq, while we also have demand from the UAE and Iran’s neighbours, as it’s more advantageous for them to import from us than from China, Japan or Europe.

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