When the second phase of Iran Shipbuilding & Offshore Industries Complex Company’s (ISOICO) expansion project is complete it will be able to construct big VLCC and LNG ships. The contract for the construction of six cargo ships has already brought the complex’s capacity to 70,000 tons. The heavy industry of shipbuilding is no longer rough and coarse and new electronic gadgets and automation has breathed new life into this industry, adding efficiency and technological and mechanical capabilities.

Reza Veyseh, Managing Director of the Industrial Development and Renovation Organization (IDRO) signed a contract for the construction of two ships to carry oil consignments between ISOICO and Iran’s National Oil-Carrier Company (NOCC) and remarked: "If domestic ship companies want to stay in the market they must constantly renovate and upgrade their fleet and can even order new ships to meet market demand. Since ISOICO is a contractor committed to employer satisfaction, it has adopted a customer-satisfaction policy and I believe this is the right thing to do. My advice to other ship building companies is to always fulfill their obligations in a timely manner, as that is the key to expanding their shipbuilding business".

NOCC currently owns fifteen 300,000-ton VLCC vessels, five 150,000-ton Suezmax ships, five 98,000-ton vessels, a number of 69,000-ton Panamax ships, several 25,000-ton cargo ships, an LPG-carrier, and an assortment of 27 offshore vessels that provide services to the offshore oil platforms and jetties. The company’s net income is between $350 and $700 million per annum, and the company has returned a profit in every year except for 1999. 95% of the personnel employed by the company are Iranian.

The reason for ordering the construction of two 35,000-ton floating vessels is shipping oil products to ISOICO and the need to transport oil consignments between the country’s southern ports, as well as, the export of oil products such as gasoline, furnace oil and LNG, which is procured from the South Pars Complex. When South Pars commences production at full capacity, each of its 14 phases will produce 40,000 barrels of condensate natural gas, most of which will be exported. This means there will be 20 million tons of condensate natural gas to export every year; and it is for this purpose that 35,000-ton ships are being ordered. Ordering even bigger carriers for this purpose in the future is under consideration.

Some 12 million tons of petrochemical products are produced every year in Iran, but only 1.5 million tons is being exported. The plan is to bring the total petrochemical output to 25 million tons in the next four years and subsequently export up to 10 to 12 million tons. More than 80 petrochemical carriers are needed to transport this volume.

Iran intends also to export liquefied natural gas (LNG). When the gas is cooled to minus 164 degree (Celsius) it liquefies and can be shipped in a similar manner as crude oil. There are plans for achieving annual exports of 28 up to 32 million tons of LNG. It is hoped that LNG exports will begin by 2007, and NOCC needs 12 LNG carriers to meet its share of LNG transport. The country needs a total of 30 LNG carriers to meet its requirement, and it would be nice if some domestic companies received orders for LNG carrier construction.

It is not only shipbuilding and its works that ensure the success of shipbuilders; they also require support from banks, customs and ministries of commerce and industries. The rules and regulations controlling the import of parts for vessels must not be so restrictive so as to prolong construction time. Another issue is the unrestrained travel by Iranian experts who must frequently travel abroad, or foreign experts who must come to Iran to facilitate the transfer of construction technologies. The ministries of employment and foreign affairs should facilitate ease of travel for these experts.

Shipbuilding is a huge and heavy industry that requires a number of different machinery. A major part of construction relates to machinery, and our first step should be importing the required machinery. Shipbuilders should not be disheartened if they are constructing ships at a loss, instead they should try to make their first ships their best ones, as a similar scenario has played out in China. The Chinese are trying to prove to the Viennese that they lack nothing in their shipbuilding capabilities. If this same method is pursued in our country it will earn us a great reputation.

"A strategy used by foreign shipbuilders to detract from Iran’s domestic market is the granting of long-term low-interest loans. The efforts of IDRO, the Management and Planning Organization (MPO) and the Marine Industries Association (MIA) have led to a bill that has been approved by cabinet. The bill stipulates that when a shipbuilder or buyer produces 10% of the required investment for a ship, they can receive a long-term loan with an appropriate interest rate for the remaining 90%. The bill also envisages tax exemption, concession and subsidies for the marine industry. It is worth mentioning that many countries, such as Korea and Germany, give concessions to their shipbuilders, but the rate of these subsidies differ depending on their purpose. So it is clear that the main problem this industry faces is in the fields of management, investment and attracting markets in the marine industry. It is hoped that these problems can be addressed and our shipping industry can emerge as a dynamic force in the world markets."

"The loan granted to shipbuilders will be financed from two sources, first (in accordance with clause 60 of the bill) from the currency reserves account and second, from banks. Under the by-law passed by the board of ministers, commercial banks are obliged to finance the loans required by shipbuilders. Since the government’s objective is creating employment, these loans will also be paid to foreign investors. Foreign orders will only start coming in when our ships are built on time and with quality. We have been surveying the region’s markets and have been partaking in exhibitions and setting up offices abroad to take the initial steps in attracting foreign orders. In countries like Syria, where we enjoy a level of political support, we were placed first in the auction we participated in. However, we weren’t awarded the tender because we didn’t have the 16% subsidy enjoyed by Chinese shipbuilders. When this bill is implemented we will be able to find our place in the global market; and receiving subsidies is contingent on getting orders, and if no orders are achieved, then obviously no subsidies can be received."

"However, this bill is not free of defects. For example, the bill stipulates that shipping companies must support the domestic industry by allocating 5% of their income to a fund set up by the Marine Industries Association (MIA) for the construction of new vessels. If this bill is passed with this clause, it will be in conflict with the law of free trade. Shipping companies cannot compete under these conditions. The bill can cause major problems, and will never let our shipbuilders become capable and independent shipbuilding, as well as, running our shipping companies out of the market. However, the support envisaged in the bill is very helpful for shipbuilders".