OEEC: Getting to know the Iranian oil & gas market (Interview)

During this year’s Offshore Energy Exhibition and Conference (OEEC), a member of our team interviewed Mr. Hadi Mortaz, Operations Manager at ARAM Group, which is a member of Netherlands Iran Center of Commerce and Industry also known as NIHIK.

NIHIK is a selected group of Dutch and Iranian companies, a number of them are oil and gas and maritime players, looking for business opportunities in these two economies. Some of the partners in the group are Count Companies, Royal IHC, NedGate, SDS Group, Heerema, KCI, the Badger, and more. 

The interview was a follow-up to a pair of technical sessions during the event that focused on Iran’s oil and gas sector, while the country is looking to make the most out of its large reserves following the lifting of sanctions early this year. Read more about these two sessions here. 

The two-day event also featured the ‘Iran National Pavilion’ and a delegation that consisted of over 70 representatives from Iran’s oil and gas industry.

OET: To begin with, tell us what are ARAM’s biggest challenges in doing business in Iran right now?

Mortaz: It is the remaining effects of previous sanctions, especially in the banking sector. Some of the banks, especially in the Netherlands, are reluctant to do business with Iran. They are trying to do business with Iran, but they are not really cooperating with Iranian banks so we have a problem when we want to transfer the money to Iranian banks. This is the biggest challenge that we have at the moment.

The other issue that we have is about the financing in Iran with different banks asking for different collaterals and things like that. These are the main challenges that we have while trying to enter the Iranian market, but we are looking for solutions and we are establishing joint funds in Europe, together with Iranian partners, and we put money in the funds and finance different projects.

OET: Do you think foreign investments are essential for Iran?

Mortaz: Yes, the investments are essential. In previous years the country suffered from sanctions and many companies stopped their operations in Iran. Energy costs in Iran are smaller and the efficiency of the oil & gas sector is bigger than in any other country in the region.

Onshore production in Iran costs $8 and is incomparable to any other country. There is big potential in Iran and they want to progress fast. The country’s potential is not only in its oil resources but also in the human capital. It’s one of the most highly educated countries in that region and they just need investments to create jobs and to produce more.

It is very important for Iran to get the technology and investments from abroad.

OET: How fast is Iran creating a suitable environment for the foreign companies?

Mortaz: After the sanctions were lifted, they are working really hard to facilitate their rules and regulations. Because foreign companies can now have 100 percent of shares in Iranian facilities, they are assured they can earn back their investments.

OET: According to estimates by Rystad Energy, around $100 billion will be invested in the country’s upstream sector between 2016 and 2020. Do you think this level of investment will bring Iran’s oil and gas industry to the desired level?

Mortaz: Yes. Oil production is growing very quickly and Iran will reach the pre-sanction level very fast. But it’s not just about the oil production, the country has the biggest gas resources in the world, so they are investing very much in gas and LNG projects. The petrochemical sector is also very important for the country.

Regarding offshore sector, Iran has some joint reserves with other countries and they need to invest in those fields to keep up.

OET: Then the plan is to get to an even higher production than before the sanctions?

Mortaz: Exactly. Iran has the plan to become one of the fastest growing countries in that region and they want to do it fast.

OET: Are there any other concerns that investor companies have, except the banking issues?

Mortaz: Investors are looking for a higher return and, at the moment, the country is offering a really good return on investments. The issue is how to can get the money back from Iran.

OET: What steps is the Central Iranian Bank making in that direction?

Mortaz: We are seeing that they are making agreements with different banks. Day by day more banks are getting connected to the Iranian banks and they work together as a correspondent bank. They are working hard on it, but some of the challenges are a little bit political coming from the mindset that belongs to the sanction era.

OET: What advice can you give to other companies who are willing to invest in Iran?

Mortaz: The best advice is to get to know the market. Culturally, things are really different. The business etiquette and the financial system are really different. What I recommend is to go with companies who already have experience in doing business with Iran. Our company has a lot of experience with Iran. We go with a group of companies to Iran, we work together, we complement each other, and we get bigger projects because we share the work. Together, we have the total package.

OET: Before we wrap up, can you tell us a bit more about NIHIK?

Mortaz: NIHIK is a business club that we established together with our partners. These are the companies that are already doing business in Iran or who are interested in doing business with Iran in the future.

It is a closed business collaboration, like the chamber of commerce, so companies need to apply to become a member and there is a small membership fee of about 100 euros. We’re welcoming other companies because we think that if we want to do business with Iran we need to do it together, we need to complement each other instead of competing, and then we can do more.

OET: In conclusion, tell us about your experience here at OEEC 2016. Did it meet your expectations?

Mortaz: It was a really good event. This exhibition is beyond our expectations; many serious companies from Europe are present and interested in investing in Iran. We made some initial agreements to continue the talks in detail about how we can work together. We also had an interesting conference and technical sessions about Iran.

Offshore Energy Today Staff