PARSIAN OIL AND GAS DEVELOPMENT COMPANY
o Established in 2007.
o Current projects worth USD 7 billion.
o Annual exports: USD 4 billion reaching 51 countries.
o Annual revenues: USD 10 billion.
o Workforce (counting all subsidiaries): 19,000. Employees in HQ: 30.
DECK: TOGY talks to Morteza Azizi, managing director of Parsian Oil and Gas Development Company (POGDC), about opportunities in Iran’s oil and gas industry, as well as the company’s growth and diversification and its approach to international integration. POGDC is an oil and gas holding with a large presence in Iran’s downstream sector.
How attractive are the business opportunities in Iran’s oil and gas industry?
We are very optimistic about the market’s momentum, and have great expectations for further activities picking up across the value chain in the coming years. Iran’s petrochemical sector is probably one of the most attractive markets in the world.
There are many market fundamentals to consider, such as the strategic location, not only of the country, but of the petrochemical hubs where large amounts of investment are concentrated. This makes logistics costs very competitive when compared to other major producers such as Russia and the US. Iran has direct access through the sea to China, India and the rest of Southeast Asia, where the largest demand for petrochemical products currently lies.
Moreover, the oil industry has 100 years of history in Iran. This is translated into a very experienced and knowledgeable workforce at a very competitive labour cost. A final fundamental is the vast amount of resources this country has, and the infrastructure developed to transport feed to the facilities at a very reasonable cost.
If we take all of these into consideration, as well as the post-sanctions business environment, I believe we have everything in this industry to experience significant growth in the near future, more than ever before.
How has POGDC grown since its establishment 10 years ago?
This company was established in 2007 with a low amount of capital and ended up growing to become the holding we are. These past years have not been easy, especially if you take into account that more than 70% of POGDC’s life has taken place under the sanctions and in the context of the oil price drop.
Nonetheless, this only made us stronger, and so the company’s present is solid and its future promising. During the sanctions period, our project portfolio was worth USD 2 billion; all of these projects are already concluded. Today, it amounts to USD 7 billion.
What is the holding’s focus across the energy value chain?
As a holding, we have assets spread across the country in both the upstream and downstream sectors of the oil, gas and petrochemicals industry. However, our strongest performance lies in the downstream sector. In this regard, we have grown to become the biggest producer of urea and ammonia in the Middle East, with an output of 6 million tpy, and of methanol in a single plant as well, with 3.3 million tpy.
Furthermore, nearly 27% of shares in Iran’s refineries belong to our group. Tabriz, Shiraz and Bandar Abbas are among the refineries we have shares in.
In upstream engineering, we hold shares in the major contractor OIEC [Oil Industries Engineering and Construction], and we have two subsidiary companies providing engineering solutions as well.
What was the strategy behind POGDC’s past decade of diversification?
When we started this venture, we had a plan to develop the group into a well diversified holding. When the privatisation wave came, we seized the opportunity at the right time and proceeded to acquire strategic assets from the government.
Back then, these assets were unsustainable and running at barely 10% of capacity. Today, their operability has improved, and our exports reach markets from South America to Japan. Thus, the balance is positive. When our peers decided to choose between buying refineries or petrochemical facilities, we decided to venture into both segments of the market.
Then, in our broader vision, we realised that we needed a commercial company within the group’s structure, and so we acquired Petrochemical Commercial Company International [PCCI] to engage in commercial activities and international trade of our products. Under our management, PCCI’s turnover went from USD 200 million to USD 2 billion.
Tackling the services sector came later. It was part of our strategy to manage strategic companies along the value chain. Now we have companies under our scope such as Terminals and Petrochemical Storage Tanks Company, Parsian International Transportation Development Company, Hamoon Sepahan Investment Company and Tejarat Nou Insurance Company, among others.
What is the exports share for POGDC’s petrochemicals production?
Currently, nearly 80% of our petrochemical output goes to export markets because the domestic demand is already satisfied in most of the segments we cover. The specific share varies depending on the product, but if we take for instance urea, the local market demands roughly 1.2 million tpy, and our production stands at 6 million tpy.
The same is seen with polyethylene and methanol: National production of these stand at around 5 million tpy, while the market demand is barely 400,000 tpy.
Thus, looking at the bigger picture, our strategic focus in petrochemicals is export-oriented, as this is where we see the largest potential for growth.
Which of POGDC’s subsidiaries is performing best?
Currently, Tabriz Petrochemical Company is probably our most efficient company. It is producing at its full capacity and it exports to Russia, Turkey and the eurozone. Its performance has been of great benefit to the holding.
What is your current international approach?
We are integrated into international markets through our access to 51 countries to export our products, as well as our access to all the licences we need to operate at our best according to the utmost international standards (excepting some licences related to US companies).
Furthermore, we are currently holding negotiations with three major European companies that may invest in some of the projects we are involved in here. We are still waiting on the banking system to resolve issues for Iranian companies. But the stage is set for foreign investment to be channelled into strategic developments in the industry.