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Mohammad Souri, Chairman & Managing Director, National Iranian Tanker Company

In a country that relies heavily on oil revenues, the task of a company that would ship the black gold across the oceans finds great significance. National Iranian Tanker Company (NITC) is a true symbol of prosperity despite adversity. It emerged under sanctions and blossomed under the war.

Mohammad Souri, NITC Chairman of the Board and Managing Director since 1984, is aware of the future challenges of energy markets fueled by globalization. A former chairman of the Islamic Republic of Iran Shipping Lines (IRISL), Souri received his B.Sc. in Mechanical Engineering from Howard University, USA, before taking courses in political science and international air and marine transportation. Publication of several articles and translation of two books indicate that NITC Chairman hasn’t let managerial occupations overshadow his academic career. He admires the courage of the Minister of Petroleum on actively pursuing development projects to increase the country’s production capacity.
In a recent interview with Iran International, Mohammad Souri talked about the past, present and future of NITC. Excerpts:

NITC is a company with $2.05 billion of assets, $1.286 billion of liabilities and $762 million of equities.

Emergence: National Iranian Tanker Company (NITC) was established in 1955 when foreign tankers were banned to ship Iranian fuel. That difficult situation drove the Iranian government to found NITC, buy tankers and resume a vital export of petroleum. Registered overseas, the company was run by German management. After a while, the Iranian statesmen realized that instead of being a royal affiliate, NITC should be under the umbrella of National Iranian Oil Company (NIOC). Therefore, NIOC was prompted to buy all shares of NITC. It was in 1970 that NITC became a full affiliate of NIOC’s Transportation Department.

Tempered by War: In 1975, it was decided that NITC should be an independent company registered under new Articles of Association and owned by NIOC. That opened a new chapter of NITC’s activity until a war was imposed on Iran by Iraq.
The eight-year of Iran-Iraq war in fact marked the most brilliant part of NITC’s performance record. Kharg Island was declared a war zone, and the insurance rate for ships rose to 60% of the ships’ price. If Iran wanted to ship oil from Kharg Island via a foreign tanker, it had to pay an extremely high insurance in addition to the transport fare. As a result, the responsibility of shipping all the crude oil for export out of the war zone was assigned to NITC.
Moreover, since Abadan Refinery and other refineries were attacked and damaged by the enemy, NITC had to ship in 300,000 barrels of oil products per day to meet domestic demands. The port through which these oil products could be linked to the national network was situated in the Persian Gulf. Again, that was within the war zone. To cope with this situation, we used a number of ships as tankers and floating docks in Lavan and Bandar Abbas. That initiative enabled Iran to export oil. Those ships had a special insurance coverage and a very brave crew who received an exceptional package of income. As a result, during eight years of devastating war, not a single day did the flow of Iranian petroleum exports stop. Compare this with Iraq’s oil exports that were cut off only weeks after the war broke out. That accomplishment was owing to the endeavors and self-sacrifices of NITC staff. NITC tankers were directly hit by the enemy in 200 cases which left 163 martyrs and several others injured.

In order to organize a modern and sophisticated fleet, NITC has absorbed some $1.8 billion of credits from international resources and is currently planning to absorb another $3 billion.

Cruising Forward: After the war, we embarked on an effort to modernize NITC and renew the fleet since the company refused buying new tankers under the threat of wartime. NITC received permits from the state to make new investments in building 25 new tankers with the total capacity of 5.8 million tons. Under a development plan, NITC ordered 15 VLCC ships each capable of holding 300,000 tons, five of which have so far been delivered. Ten of these ships are being built: five in Dalian, China and the other five by Hyundai, South Korea.
Orders were also placed for five Suez Max ships each with 158,000 tons of capacity which were delivered to NITC in 2000. In addition, five 98,000-ton Aframax ships were purchased and delivered to the company in 2000-2001. Moreover, there are 10 second-hand ships still operating in NITC fleet. The company also runs 27 vessels that provide different services to oil wells and docks.
In terms of assets, the value of NITC is $2.05 billion and the liabilities of NITC stand around $1.286 billion. In other words, the company’s equities equal $762 million.
At the moment, NITC is an entirely privatized company since 33% of the company’s shares belong to State Pension Fund, 33% to Social Security Retirement Fund and 34% to NIOC Pension and Savings Fund. The only issue that has still remained on the table is for Tehran Stock Exchange Organization to announce the value of NITC without any further delay.

Main Business: NITC is active in offshore wells production, support of oil exploration and production activities, and distribution of by-products such as fuel oil, kerosene, gas oil and LPG around Iranian ports. But crude oil transportation is the main activity of NITC. During the year 2000, the company carried 46,000,000 metric tons of crude oil either from Kharg Island or from other neighboring countries’ terminals to different destinations. NITC fleet has made 633 voyages and sailed 1,600,000 miles during the year 2000.

Switching to Gas: The total capacity of Iran’s discovered gas resources reaches 928 trillion cubic feet (TCF) which is 16.6% of global gas resources. That makes our country home to the world’s largest gas reserves, second to Russia. Nevertheless, Iran is yet to become a gas exporter, either through pipeline or via tankers. Domestic consumption is still the major use of gas and Iran runs the world’s fourth-largest network of pipelines in a global ranking.
Holding 4% of the entire global capacity, Port Assaluyeh is the world’s single largest gas reserve. Located in the South Pars region, it plays a fundamental role in the future of world energy. Possessing such a wealth, Iran is making long-term plans to export 30-35 million tons of LNG per year to target markets namely India, China, Japan and Korea. Therefore, South Pars will be a main energy corridor to the world within a short time. Facilities for exploration, production and even loading the LNG are very complicated. All pipes and tankers must be capable of maintaining the LNG’s temperature at suitably low levels. By operating LNG tankers, a country can claim that it has achieved a high standard in shipping industry. Both high-tech and expensive, LNG tankers bring prestige to the fleet. Japan, South Korea, Spain, Finland and Italy are known for their know-how in building LNG carriers.
Today, an LNG tanker with about 130,000 tons of capacity costs about $180 million. Therefore, if NITC aims to be involved in exporting 12 million tons of LNG, it must sign a contract for building 12 LNG tankers at a cost of $2.16 billion. Building an LNG tanker requires a 25-year agreement between the buyer, the supplier and the shipping company so that everyone realizes that a specific number of tankers are being built for shipment of a specific amount of LNG from port A to destination B. Given such prerequisites, and having conducted two years of comprehensive research, NITC is waiting for future agreements of NIOC to see which country should be named as the port of destination. In its negotiations with international companies, NIOC is expected to stress on the involvement of NITC to create employment opportunities, enforce Iranian supervision on transactions, bring in profitability, transfer technology and establish downstream industries.
NITC operates pretty much independently in shipment of crude oil. As an indication, two-thirds of the crude oil carried by NITC in year 2000 was between overseas ports. However, LNG is different. It requires a commitment from all parties involved.

Conclusion: NITC is aware of the fact that along with the country’s determination to play a more important role in the global energy business, it should also endeavor to boost its capabilities. In order to organize a modern and sophisticated fleet, the company has absorbed some $1.8 billion of credits from international resources and is currently planning to absorb another $3 billion.
Worldwide contribution is a necessity to oil and gas projects. There was a time when art and literature were the most effective instruments to bridge the gaps between different nations. In the new millennium, business relationships will play a dominant role in synthesizing of global cultures.

NITC Headquarters 88-67 Shahid Atefi St., Africa Blvd., Tehran P.O. Box 19395-4733 Tel: (+98 21) 222 90 93, 222 90 94 Fax: (+98 21) 222 30 11, 222 45 37 Tlx: 215793, 213938, 213543