When smart execution of major projects is combined with the capabilities of Iran’s manufacturers and contractors, along with international input and participation, the result will be competent contractors on a national and international level," asserted Bijan Namdar Zangeneh, Minister of Oil, in his address praising domestic manufacturers of oil equipment.

Domestic companies have achieved a remarkable standard in the field of engineering and construction, especially in regards to industrial structures and installations. Supporting domestic manufacture of equipment, EPC-creation and supporting public contractors are all links of the same chain that will pull our oil industry to development.

The support for the domestic manufacture of equipment will come in the form of facilitating the transfer of technology through the purchase of tools and equipment, including and activating universities and research centers in the production procedure, ingraining the belief in the minds of our domestic industrialists that they will be supported by the government and in the minds of foreign companies that if they cooperate with Iranian companies they will have a stable and consistent market in Iran and the region. Naturally, products with higher consumption will be given higher priority for this support.

Whilst touring the booths of the Eighth International Oil, Gas and Petrochemical Exhibition (April 2003), Zangeneh said that OPEC’s oil production must be lowered in mid-2003, to create a balance between supply and demand in world markets. Surplus oil already exists in the world markets and if future production is not controlled, we will witness a drop in oil prices in the long term. Iran believes oil should be priced at around $22 to $28 a barrel by mid-2003. With the war on Iraq drawing to a close and the fact that Iraq’s oil wells, facilities and transportation devices were left unharmed, oil has had a declining trend and the only reason prices had a minor escalation last week was due to OPEC’s emergency meeting.

International Oil Companies are welcome to directly invest and manage their programs in Iran’s downstream industry and can take part in buy-back contracts or self-directing financing in the upstream industry, with the guarantee and security assurance of the National Iranian Oil Company (NIOC), within established frameworks.

"Reforming the macroeconomics of the country is a complex process, which calls for changes in our foreign policy, our culture and our foundational laws, such as tax and employment laws", said Esshaq Jahangiri, Iran’s Minister of Industries and Mines. He said that in 1999 the import of some 3,000 tariff items was not possible without permission from the ministry, but today that number has dropped to zero. Moreover, the aggregated added value of 2002 compared to 2001 has reached the 11% mark, and it is expected to experience an even bigger growth this year.

The oil industry is Iran’s most important source of currency revenue and the large volume of projects in the oil industry have a trickle-down effect for many of the country’s other industrial fields. Oil’s downstream industry has an extensive relation with other industries and is considered the feedstock and raw material of these industries.

Steps taken in 2002 to support domestic manufacturers included the allocation of $200 million from the account of currency reserves to the banking systems to provide security for the guarantees of domestic manufacturers in international auctions valued at no more than $1 billion; up to 70% financial backing for domestic contractors in auctions when financing was required for presence in auctions; and reforming of the country’s auctioning system so it is preferential to domestic companies.

On a different note, Mohammad Taghi Amanpour, Managing Director of the Manufacturing Support & Procurement Company, said that $450 million worth of contracts have been signed over the past two years for the manufacture of equipment needed by the oil industry and technology transfer, and some 30 contracts have already been executed.

Drill pipe construction is currently 20% domesticated –thanks to Construction Phase One– and with the completion of several other planned phases will be 100% domesticated. 40% of deep automated rotating top drives are manufactured domestically and will reach 75% in future phases. Valves for the country’s gas network is being purchased with technology transfer and domestically manufactured. This is an indication of the willingness of technologically advanced countries to enter Iran’s market place prepared for technology transfer. In step with the mentioned projects, reverse engineering has enabled us to build massive ‘river’ pumps for drilling systems, cement injecting pumps and a new range of steel and cast iron valves.

Last year, we were witness to the setting up of repair workshops –with cooperation from foreign companies– for pumps on cranes and trucks. The Manufacturing Support & Procurement Company (MSPC) has also prohibited the purchase from abroad any product that can be produced domestically. MSPC’s other main policy is the transfer of technology, whilst taking into consideration the country’s circumstances, in line with the long-term interests of the country’s oil industry.

Production lines initiated and implemented via transfer of technology must not be confined to the rather limited domestic uses; they must also keep an eye on regional and international markets and prepare themselves for competition. We naturally seek markets in return for the market opportunities we provide others with. So we are able to export spare parts or the finished and refined products, depending on the circumstances. After-sales services, advanced repair workshops and the necessary facilities for education and training alongside the production lines are all matters that must be addressed. Fortunately, these issues have been given serious consideration by technology-owners and are on the verge of becoming second nature.

This domestication movement was reaffirmed in 2002 by the closure of MSPC’s office in the United Arab Emirates and its relocation to Kish, in order to encourage technology-owners to set up their repair workshops and production lines in Kish rather than the U.A.E. The first branches of these new companies have already opened.

There is a plan to establish an "Oil Commercial Center" on Kish Island. Where all the foreign companies active in Iran, foreign companies with offices, warehouses or workshops in Iran, as well as the executive organs of the oil industry present in Kish and the MSPC’s representation office will all come together in a super multiplex, and hence coordinate their activities more effectively.