More than 85% of the much-needed equipment in oil, gas and petrochemical industries are manufactured with indigenous know-how, but most producers are facing insolvency due to the huge economic impact of the coronavirus and lack of specialized raw materials, the head of the Iranian Oil Equipment Manufacturers Association said.
"An estimated 1,100 companies are active in manufacturing oil/gas equipment and can meet a large proportion of local requirement. However, they are forced to reduce production capacity due to a lack of liquidity in this sector," Majid Mohammadpour was also quoted as saying by Mehr News Agency.
“Domestic firms are capable of producing a wide range of equipment, including valves, boilers, turbines, pipes, bearings, electric brakes, traction motor, casing wrench and fluid pump, which comply with international standards.”
Mohammadpour noted that close to 80,000 people are directly and 120,000 indirectly employed in the oil/gas equipment manufacturing sector.
Despite the remarkable potentials of oil, gas and petrochemical industries to generate revenues, equipment manufacturing firms are operating at half the capacity not only due to the pandemic but also because of raw materials held up in the customs for no valid reasons.
"As long as incomplete oil and gas projects do not get back on track, we will receive no orders. In short, our production lines will close down one after the other," he added.
The government is struggling with a ballooning budget deficit due to low oil prices and lack of revenue from selling crude because of the US sanctions.
The official noted that all this leads to lack of liquidity for this sector and more difficulties for manufacturers, as they are forced to reduce production capacity and furlough workers.
Industrial Policy
Those in charge of industrial policy are not producers themselves and the bloated domestic bureaucracy is undermining the present and future markets for domestically-made oil equipment and parts despite their good quality, the IOEMA chief complained.
Echoing protests of most stakeholders in the private sector, he said, "We meet regularly with the Ministry of Industries, Mining and Trade [but nothing gets done]. Problems cannot be solved with hollow slogans."
Mohammadpour said as long as middlemen and brokers participate in oil and related tenders, private enterprise will not be able to assert itself, play its destined role and contribute to economic growth.
Domestic companies have indigenized almost 85% of petroleum and gas processing and production equipment. The rest cannot be made domestically either due to lack of high-tech equipment, or unavailability of specialized materials.
There is no country that can be 100% self-reliant, and setting up new production lines for some parts and equipment is simply not cost-effective.
“Self-reliance does not mean that a country must produce all its needs at home,” he said.
When the world emerges from the coronavirus plague, hopefully sooner rather than later, some big players like airlines to energy companies will face a new reality that could force them to merge or go out of business.
