Steep Decline in Oil Equipment Production, Exports

The SIPIEM‘s export capacity has declined to 2% from 5%.
The SIPIEM‘s export capacity has declined to 2% from 5%.

A top official in the oil industry warned on Tuesday that Iranian manufacturers of oil and gas equipment are working at almost one-third of their production capacity.

“Domestic oil and gas equipment producers are working at merely 35% of their real production capacity. It is indeed regrettable that the rest of the potential is not being used,” Reza Padidar, chairman of the board of the Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM) told Shana on Tuesday.

Padidar added that the export capacity of the association has declined further to 2% from a meager 5%. He did not specify the timeline during which the exports declined.

Iran was deprived of much-needed equipment and technology to develop its oil and gas industry after international restrictions were tightened in 2011 and 2012, which ostensibly targeted Tehran’s nuclear program but significantly undermined its economy, foreign trade and banking relations.

Referring to the SIPIEM’s short-term, medium-term and long-term plans for empowering local producers of oil equipment, the official said by 2025 Iranian manufacturers will have the ability to produce equipment that will comply with international standards.

“Fortunately, after talks with the Ministry of Industry, Mine and Trade, the import of 70 oil industry equipments has been prohibited,” Padidar noted implying that the ban should help domestic companies to assert themselves and meet the needs of the oil and gas sector.  

The National Iranian Oil Company has identified 100 items as primary oil equipment, of which around 70 are produced by Iranian companies.

  IPC Impact

The official also stressed that domestic manufacturers have pinned their hopes on the implementation of the new model of oil and gas contracts, known as Iran Petroleum Contract, which is expected to create demand for Iranian oil equipment in dozens of new energy projects.

NIOC signed this month an agreement, the first under the IPC framework, with Persia Oil and Gas Industry Development Co. on developing three oilfields.

According to the contract, worth $2.2 billion, POGIDC is commissioned to develop Yaran, Koupal and Maroun Oilfields in the southern oil-rich province of Khuzestan via the enhanced oil recovery methods. Iran plans to seal several IPC deals with multinationals by March 2017.

According to Padidar, SIPIEM has more than 1,300 members, of which 700 companies are active in providing the oil industry with the much-needed equipment.

In a statement in August, Oil Minister Bijan Namdar Zanganeh urged domestic producers of oil equipment to double their efforts and tap into regional markets.

However, some officials and experts argue that Iran’s opaque regulations in the financial and banking sectors and the government-dominated economy have left little room for private companies to boost exports and encouraged rent-seeking.

Iraq, Afghanistan and CIS countries are seen as the biggest markets for Iran's oil equipment.

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