ESTABLISHED JUST AFTER THE ENDING OF THE IRAN-IRAQ WAR

Iran 2017 | ENERGY | VIP INTERVIEW

TBY talks to Masoud Zarringhalam, Managing Director of Sazeh Pardazi Iran Consulting Engineers Co., on moving across sectors, Chabahar Port, and the outlook for the coming year.

How have you managed to become as successfully diversified as you are today?

Sazeh Pardazi was established just after the ending of the Iran-Iraq War. The need for construction at that time was immense. We started with designing specific industrial buildings and structures that were critical to the country, such as silos, cement factories, chimneys, and the cooling towers of power plants. These buildings used to be built by foreign companies, but as the war broke out just after the Islamic Revolution, there was no time to obtain the knowledge from these companies. Marine structures were also among our early focuses, due to the 5,800km of coastline that Iran has. We sent five engineers to the Netherlands to study marine structures, and two years later we became operative in this sector. As Iran's oil and gas fields are located near the sea, there was a logical synergy, so we increased the scope of our work to oil and gas operations. When working for big projects there is a need for technical investigation about land before engineering, so we moved into geotechnical projects. We then increased our knowledge about flood control systems and established our water and environment division. Our entering of new fields of expertise has been natural, by following the needs of our clients. Within the projects in which we are involved, our abilities are not limited to just one process. We can deliver from A to Z in marine and oil and gas projects.

How important is the oil and gas sector for Sazeh Pardazi?

The Iranian economy depends on oil and gas. The cost of producing one barrel of oil in Iran is USD15, which is relatively low. Still, we need an oil price of around USD50 per barrel in order for the government to start to fund new infrastructural and oil and gas projects. Below this price, the priority will be to finish uncompleted projects, but for these projects the consultancy firms have already been hired. In the past year we have unfortunately not seen an increase of new tenders, so all contractors are hoping for a better market environment. The solution lies in investments in the oil and gas industry, but so far the interest in Iranian petroleum contracts (IPCs) has been disappointing, partly because of the uncertainties about the future of relations between Iran and the US. Yet, there are positive signs. During the sanctions period Iran only exported 700,000bpd, and at the moment we are exporting over 2 million bpd. We can feel the economic growth that this generates, although it does not yet meet our expectations. Our energy industry was on hold for 10 years, while our competitors continued, and we have to get market share back. Even though the sector suffers from insufficient funds, it is, for Sazeh Pardazi, still the sector with the most potential for growth. The Port & Maritime Organization, which is the government organization responsible for the construction and operation of ports, stopped the funding of all projects two years ago for financial reasons. It is in need of investments and because there are still problems with bank transactions, we cannot provide sovereign guarantees from our central bank to them.

Drought in Iran has increased the need for smart water management solutions. How can Sazeh Pardazi play a part in addressing this and other environmental issues?

Sazeh Pardazi was the first Iranian consultant in river engineering and flood protection control systems. Climate change creates a big water crisis in Iran. We have projects to construct dams and transfer water from wet to dry areas. Environmental and water projects are not considered as important as electricity or oil and gas projects. The clients responsible for maintaining water structures do not have money. Again, investments are critical here. In oil and gas the investment proposition is clear. You can invest in a refinery and get a return on investment by selling the gasoline or methanol you produce. For water projects the return on investment is not as evident. Sazeh Pardazi still has many projects in water because we are well known in this field. At the moment the government is focused on border rivers because these are critical. If neighboring countries construct dams on common rivers, the portion of water in Iran decreases. After implementing policies on border rivers, we can go toward the mainland of the country.

How can your company enhance its presence in foreign markets?

We established our company in Iraq and Oman because they are neighboring countries. Our engineering technology is acceptable there and the traveling costs are low. In Iraq we stopped our activities again because of the crisis. In Oman we want to proceed, but the market is difficult because of the long presence of well-known foreign companies that have their own office and employees. These companies often work with Indian engineers who are relatively cheap, and it is difficult for us to compete with them. We are trying to get port and oil and gas projects in Oman and closed a partnership with a well-known local partner for two geotechnical projects. One is in Salalah and the other in Muscat.

Are you looking to establish new partnerships with foreign companies?

We were active in the design of the Chabahar Port together with Royal HaskoningDHV and are still in touch with them. Sazeh Pardazi is also registered in Oman, where we work together on a gas pipeline between Oman and Iran with Fugro, an offshore geotechnical contractor. Foreign consultancy firms are also interested in partnerships. Based on Iran's regulations, overseas companies that want to work here should have a local partner that has over 50% of the local contract.

What is your outlook for 2017?

We expect to see some improvements in the following year, especially in foreign markets. This is why we are keen to move into overseas projects.