Siemens sees $100mn investment opportunity in Iran

Shana — Peter Adam, Vice President for Oil & Gas in the Industrial Applications Division of Siemens, has been visiting Iran for more than two decades…

Peter Adam, Vice President for Oil & Gas in the Industrial Applications Division of Siemens, has been visiting Iran for more than two decades. He has conducted a large number of projects and he is well familiar with ups and downs in Iran’s energy sector. He analyzes Iran’s oil and gas sector very meticulously and unlike some analysts, he believes that Iran’s lack of access to cutting edge technologies could not be attributed merely to international sanctions. He says the trend of investment in Iran has been a key factor in this regard.
In his view, Iranian companies would be able to flex muscles on domestic market after finding a rival in global market.
The following is the text of the interview of “Iran Petroleum” with Mr. Adam.
Q: How has Iran’s oil and gas industry changed over recent years?
A: It is really regrettable that due to the sanctions we could not have cooperation with Iran for so many years. But now I think that if all companies are ready to start projects and financial and banking processes are back to normal, Iran will be flooded by investment.
Q: What is your estimate about investment in Iran’s oil and gas industry?
A: I think that it might be more than $100 million. I have a simple reason to justify this estimate. I don’t think that under current circumstances another country could present such big opportunities for investment like Iran to tempt oil companies. When a deep sea floater was to be built in the Gulf of Mexico, experts estimated that the oil price should hover around $85 a barrel in order to be able to build this structure. But as far as Iran is concerned, given technological progress such floater could be constructed at much lower costs with more profitability. Therefore, I think that many oil companies will invest in Iran. However, the quality of technology in Iran needs to be upgraded.
Q: Apart from that, what is the most important reason for investment in Iran?
A: We are really surprised by the quality of manpower in Iran. The quality of work and its details, as well as reasonable price of services in Iran are really extraordinary, when compared with other countries. Good quality, good price and efficient manpower make Iran an ideal place for investment by foreign oil companies.
Q: What do you think is the challenge lying on the way of cooperation with Iran?
A: In my view, Iran is a tightly bureaucratic country and it makes the work process difficult. However, the most important problem regarding cooperation with Iran pertains to financial and banking affairs. Iranian officials are willing to negotiate. The sooner we reach agreement the faster we can start our activities.
Q: A major problem faced by Iran over recent years is the issue of technology transfer. Technology was transferred into Iran very late due to sanctions. What method do you think should be pursued to make up for this loss?
A: I don’t think Iran is behind other countries in terms of technology. Siemens recently signed an agreement with MAPNA on a new technology applied in other countries as well.
Q: Currently new technologies are being brought into Iran very fast. But during years of sanctions Iran faced other problems like aging wells and non-recovery from jointly owned reservoirs.
A: In my opinion, this problem has nothing to do with technology and mainly pertains to investment. Technology exists everywhere, but there was in fact no budget to purchase it. I know quite well that Iran’s petroleum industry equipment is outdated and needs to be phased out. But to do so, budget and capital are needed.
Q: During years of sanctions many domestic companies started manufacturing parts and/or devices to provide services to different sectors of energy industry. That is why Iran has become self-reliant in this regard. In your view, how would it affect the future of operation of foreign companies in Iran?
A: We really hail technological progress by Iranian companies during years of sanctions. The problem with the sanctions was that after foreign companies pulled out of Iran, domestic companies tightened their monopoly; therefore, prices grew automatically. But currently as sanctions have been removed, domestic companies should reduce their costs as well as the price of their commodities and services in a bid to be able to compete in the market because in global markets competitiveness depends on the levels of prices. That is why Iranian suppliers must be powerful at global level before being able to take over Iran’s market. Otherwise, customers will have to pay higher costs and that would not be acceptable to them. In my view, this process is done smoothly in Iran. As you can see in other countries, concentration on domestic markets has ended in failure. In these countries the government has tried its best to support domestic companies; therefore, they have become lazy while increasing the price of commodity and service. Such companies will be driven out of international cycle.
I think that by providing an acceptable level of quality and low prices, these companies are very likely to become active on international scene, too. Iranian suppliers will be able to compete with Chinese and South Korean companies.
Q: How much time do you think Iranian manufacturers need to be able to compete with Chinese and South Korean companies?
A: In the very near future.
Q: What projects has Siemens been involved in, in Iran? Does this company have any plans for future cooperation? 
A: We are active in different sectors of the energy industry. We have signed an agreement for cooperation with MAPNA. We also intend to deepen our relations with this company. Moreover, we are ready to operate in other sectors and we have held talks to that effect.

Courtesy of Iran Petroleum