To know when and at what cost
projects are implemented, is of paramount significance from the viewpoint of
management methodology. When such analysis and assessment materialize about
projects it would become clear that procrastination in the implementation of
the projects and their extra costs do not result merely from sanctions; rather,
untimely decision-making or even no decision-making, mismanagement, empathy and
integration within an organization and such factors are instrumental in the
timing and the costs of implementation of a project.
It is noteworthy that
international sanctions do not imply a new crisis for our country although
their degree of toughness has varied during different periods following the
1979 Islamic Revolution.
The imposition and the toughening
unilateral US sanctions against the Islamic Republic of Iran, particularly
so-called D’Amato and the recent ones, necessitate development of new solutions
to counter such restrictions.
Since these recent sanctions are mainly
aimed at affecting Iran’s oil and gas industry and banking network non-application
of methods to counter them, they could inflict serious harms on the country’s
economy by targeting its generative sector.
Construction of oil refineries (particularly
small-scale ones),building petrochemical plants to produce and export petrochemical products,
improving the quality of gasoline, gasoil and other petroleum products through
sweetening and desulfurization, strengthening tie with strategic partners for
the purpose of exporting crude oil and petroleum products, boosting gas trading
through expanding gas transmission networks particularly pipeline construction,
diversification of crude oil sales methods (swap, oil blending, sales on the oil
stock exchange, boosting the capacity of shipping industry, etc.), relying on
domestic potentialities in the implementation of oil and gas projects, not
waiting for the presence of foreign companies, maximizing the value-added chain
and preventing the waste of hydrocarbon resources (preventing the flaring of
associated petroleum gas), improving productivity and reducing the energy
consumption index through boosting the output of equipment and industries, are
among methods which could be utilized under the aegis of Iran's present potentialities to minimize
impact of the sanctions.
Iran’s oil export is under
embargo. Construction of small-scale refineries would require $20 million to
$40 million in investment, which is nothing compared to the investment needed
for big refineries. The necessary technical license for small refineries may be
obtained from East Asian companies. An advantage with such refineries is that
they would be built in a quite short period and on strategic spots located on
the route of crude oil and fuel transit, which would be fed by crude oil, which
Iran cannot export due to the sanctions.
The world gas reserves total 187
tcm, 18% of which belongs to Iran. Based on the current gas price, Iran’s gas reserves
are valued at €7,000 billion. In addition to these God-given resources, Iran is
geographically and geologically located in a golden and strategic spot - known
as the regional energy intersection – vital for gas trade.
Iran’s gas transmission grid,
which has 36,000 km of high-pressure pipeline, can handle 800 mcm/d of gas.
This figure is planned to reach 1,100 mcm/d by 2025 once 9,000 km of extra
pipeline would have been constructed. Meantime, the number of production
centers will rise to 74 from the current 40, and gas compressor stations will
number 130, up from the current 79.
Meantime, there are currently
about 3,000 km of offshore gas pipeline only in the South Pars gas field and
310,000 km of urban gas transmission line. Gas makes up 70% of Iran’s energy
mix. Gas is fed into 120 power plants generating 50 GW of electricity.
The above-mentioned figures make
it clear that Iran’s economic development depends on gas. Therefore, as long as
Iran remains under sanctions, gas is a relative advantage for national economy.
Petroleum Industry Dependence
In Iran, there is technical
potential as well as specialized manpower and capacity for the manufacturing of
petroleum industry equipment. In case necessary management legal mechanisms are
worked out for the implementation of agreements and legal obstacles are removed,
major objectives of petroleum industry would be achieved.
Iraq and Saudi Arabia, both major
producers of oil, may never want or even be able to reach such objectives, but
Iran’s petroleum industry is able to manage itself completely owing to the previously
mentioned technical, scientific and engineering potentialities.
Iran’s progress is highly tied to
national consensus and organized relationship between the public and private
sectors. Considering the private sector as enemy will not help run the
industry. Is it possible to resolve the problems of this industry (from
financing to the purchase of commodities, equipment and service) by relying
only on traditionally state-run clients? The government must only serve as the
policymaker, supplier of infrastructure and supervisor of projects.
The monetary, financial and
banking system must serve as a tool for facilitating development projects of petroleum
industry. The banks are able and required to assist the petroleum industry in
expanding its activities instead of making profits by converting public assets
and savings into hard currency to become a paralyzing arm of the economy.
Petroleum industry is a major and
strategic industry whose windows must be open so that Iranian companies and the
private sector could get involved in it.
Once necessary resources have
been provided, good events will occur technically, economically and
A major competitive factor in
global investment markets is oil and its related services and utilities. Iran’s
oil and gas reserves have naturally high rates of return on investment (RRI).
For instance, the South Pars gas field has an RRI of 70-80%, which means that
if we sell gas and condensate at global prices, we will recoup 50-70% of the
money spent in the project in one year. Therefore, the necessary ground is
prepared to raise RRI for Iranian companies under the aegis of national
consensus so that banks would be interested in funding such projects.
Cooperation between banks and companies for the development of petroleum industry
projects requires the parties to contracts to respect their obligations. In
other words, in addition to appropriate investment, development projects are
required to be acceptable while companies are required to have an effective
project management structure. When a project is agreed to come online in five
years, it should not be delayed for a decade because delaying the startup of a
project will harm both the client and the contractor. Another issue that could
result in the growth and excellence of these companies is their increased
international interactions. Definitely, without communicating with their
foreign counterparts, which are highly capable and without partnership with
financers, these companies will not be able to grow satisfactorily. Furthermore,
they can seek the advice of foreign experts and senior advisors in other
sectors. In fact, Iranian companies are able to operate projects beyond borders
while increasing their interactions at different levels. According to a veteran
petroleum industry official, “We do a project alongside experienced foreigners
once, but next time we will do it on our own at a better quality and in a more
Strategy is the tool for
realizing objectives. We have to work out our strategies such that they would
attach great significance to the strategic approach vis-à-vis society, system,
management and organization.
Primarily, national and
international conditions, facilities, potentialities and resources should be
studied. Then we need to make plans and move ahead. Whatever we do in practice
is required to be in conformity with our capacities, objectives, capabilities
and resources or we need to develop plans for capacity building, financing and
provision of facilities.
Strategic View of Projects
The main crisis striking the
petroleum industry, as well as public and private organizations is the absence
of strategic view of organization and management. Strategic view of a project
is as vital as strategic view of business and organization. Such an attitude
should be reinforced in the approaches of senior managers. Meanwhile,
convergence between this issue and organizational empowerment, motivation and
health result in a better performance and competitive advantage. Capabilities,
potentialities, resources, capacities, motivational system, transparency system
and organizational health are required to be viewed from a high level. Then
they should be prioritized before authorizing projects.
Lack of a strategic view would
lead to the squandering of national resources due to ignorance of restrictions
of resources and capacities and lack of attention to priorities.
A strategic and important result,
which is needed to come out of a strategic attitude, is synergy.
In light of Iran’s special
conditions in the oil, gas and petrochemical industry, numerous companies have
been established. Assessing the strengths and weaknesses of project management
among engineering and contracting organizations involved in Iran’s oil, gas,
petrochemical and refining industries and building capacity for the development
of the petroleum industry is a must. Management, control and supervision on the
performance of projects and application of project management software tools,
as well as developing a standard methodology for project management could
facilitate access to the objectives of the golden project triangle, i.e. time,
cost and quality, in the best quality and according to timeframe.
Should the client meddle with the
least significant aspects of the project it would be useless to name a contractor.
The reason for a client to assign a project to a contractor is that the client
lacks sufficient potentiality, specialty and human resources for doing it and
it has only necessary resources to spend. Therefore, it chooses a competent
Iran is now familiar with
EPC-style execution of projects. Under such framework, the general roadmap is
given to the contractor as the basic plan and then the contractor provides a
detailed plan to be executed step by step. A monitoring committee is also
engaged to exercise control over the implementation of the project.
Now, the paradigm of project has
changed. In light of conditions prevailing over our country and many others,
the client is just a regulatory body. In other words, the client specified what
products or services are needed, but it does not have even the necessary money
for the project.
Today most projects are EPCF or
EPC+F, where for instance in the development of a gas field a consultant is
hired, but the implementation of the project and necessary financing are
assigned to a competent company involved in such sectors. Project management
brings together management of discipline and methods. If project management is
implemented properly, the possibility of an acceptable output will increase. It
is noteworthy that project management is the only way to convince us about the
successful implementation of the project.
Project management is an
effective method in management for dealing with the unique phases of new
projects and striking a balance to the processes and activities related to the
project, expenditure and quality within the framework of time and in an
environment fraught with diverse risks.
Decision-makers and project
managers have yet to find a new analysis of knowledge management, foresight and
competence and meritocracy. When it comes to the implementation of projects in
the country, most choices in project management have a traditional basis while
this branch of science is progressing rapidly.
The most significant issue, which
the client has to take into consideration, is to learn lessons from what he has
learnt. It is necessary to prepare a team to transfer the experience of each
project to the next project to prevent the repetition of the past mistakes and
in a way that the procedure of implementation of the project would improve.
Project management is an
indicator in assessing the capabilities of a company. The ability to manage a
project makes clear whether or not a company would be able to handle a project.
Last but not least, while it is
believed that the organization cycle is like a human being, I have to say that
an organization is born and then is developed to reach maturity. Every
industrial, manufacturing or service organization will experience the same
process. When an organization reaches the stage of maturity if no fundamental
development is made for its survival that organization is doomed to fail. In
other words, if at this turning point, the strategy of the organization is not
coordinated with environmental changes the relevant organization will
definitely fail. Based on the Greener Model’s seven phases, after each stage of
growth, a crisis will happen. Therefore, managers are required to identify the
crisis before its emergence and find a proper solution to counter it with a
view to proceeding with their own survival and growth. If not, they will be
down on the path towards failure and destruction.
Shamseddin Mousavi, CEO of Payandan Oil Co.
Courtesy of Iran Petroleum