EUROASIA INDUSTRY | 32 | EUROASIA INDUSTRY

Having diversified its activities following a series of investments into emerging, high-technology sectors, SAFF Group has not only maintained its position as Iran'slargest private offshore oil, gas and petrochemical contractor during challenging economictimes, but also assumed a leading role in a resurgence of oil & gas sector development asIran moves into a post-sanction era. Euroasia Industry catches up with Mr Farshid SeyedHosseini, Managing Director, about the Group's development of an increasingly variedportfolio of activities since last speaking to the magazine back in 2009, and how projectedoil & gas sector investments of over US$100 billion are giving the company good reasonto look to the future with optimism. Written by Marius Goubert.

FUELING DEVELOPMENT

‡

4 | EUROASIA INDUSTRY

Established in 1993 as an offshoreoil services company capable of respondingto the rapid growth of the oil & gas sectorthroughout the Persian Gulf region, SAFF(Sherkat Sanaye Farasahel) has emergedas one of the leading EPC (engineering,procurement and construction) contrac-tors within the Iranian market. With agrowing network of subsidiary companiesoperating under the umbrella of the SAFFGroup organisation, the business has animpressive track-record of increasing bothits capacity and capabilities in responseto the changing requirements of the off-shore, onshore and petrochemical markets.“SAFF represents the only large-scale

Iranian private offshore oil, gas andpetrochemical contractor, and is led byan experienced management team with25 years' experience running the Group'soperations,” begins Mr Hosseini. “TheGroup comprises a total of 23 companiesthat offer a wide range of offshore andonshore EPCI (engineering, procurement,construction and inspection) services tomultiple industrial sectors including oil,gas, petrochemicals, knowledge-basedprojects, investment and infrastructuredevelopment. As a private joint stock com-pany with over 100 shareholders, SAAFGroup specialises in the operation, pro-duction, repair and maintenance of off-shore and onshore facilities.”

In-house expertiseThe Group provides its services througha varied range of subsidiary enterprisesthat demonstrate expertise in everythingfrom the management, general and EPCIcontracts for petrochemical plants, to theengineering of onshore works, offshoreheavy platforms, sub-sea and inshore

pipelines, ports, harbour facilities, andthe fabrication and repair of semi-sub-mersible drilling and jack-up rigs. “SAFFGroup’s major areas of expertise includethe engineering, procurement, construc-tion, installation and commissioning ofoffshore structures, including fixed andmobile platforms,” resumes Mr Hosseini.“We can undertake the fabrication of ves-sels and barges; the installation andmaintenance of offshore and onshorepipelines and cable lines, and have expe-rience providing manufacturing, fabrica-tion, installation, commissioning and repairservices for a range of onshore port andharbour structures.”Having consistently developed its spe-

cialist skills throughout the last 22 years,the Group is able to draw on the capabil-ities of a highly experienced team ofexperts, primarily concentrated at itsyard in Bandar Abbas and main officesin Tehran. In total, the company employs950 staff across those two facilities – thelion's share of which are based in BandarAbbas, where the company's fabricationyard covers a 35-hectare area and pro-vides an annual manufacturing capacityof 45,000 tonnes. Their staff includessite engineers, technicians, welders andlaborers, and are supported by a further150 workers – made up of engineeringdepartment staff (mechanical, civil, elec-trical and structural), project departmentstaff (project managers, project con-trollers), marketing experts, IT supportteams, financial officers, procurementteams and administration staff – locatedat the company's main office in Tehran.“Over the years, our capacity has been

matured to enable SAFF to become oneof the most reputable Iranian companies‡

6 | EUROASIA INDUSTRY

‡

offering detailed engineering services foroffshore and marine structures,” resumesMr Hosseini. “Our procurement teamcomprises skilled specialists able to ben-efit from state-of-the-art software and awell-established network that connectsTehran, Bandar Abbas, Dubai, Malaysiaand Europe. Having commenced its oper-ations as an offshore contractor, the Grouphas acquired valuable experience in thisfield – as reflected by our vast, well-equipped fabrication yard in BandarAbbas, which provides us with a uniquecompetitive advantage. Such capabilitiesmean that SAFF is one of the few Iraniancompanies capable of fabricating heavyoffshore structures of up to 7,500 tonnes.”

Overcoming adversity Additional services provided by the Groupinclude drilling and oil & gas production,as well as the fabrication of stationaryequipment such as reactors, towers,storage tanks, drums, steel structuresand heat exchangers. “We have a fixedequipment manufacturing factory locatedin Ahwaz City, which is well placed toexport to the Persian Gulf and MiddleEast region,” resumes Mr Hosseini, “Thefactory specialises in the design, develop-ment and fabrication of equipment foronshore and offshore oil, gas and petro-chemical industries across Iran and theMiddle East. We have another fabrica-tion yard on Qeshm Island – one of themost modern of its kind in the region –which covers a 28.5-hectare area and hasan annual fabrication of 48,000 tons ofsteel structures, piping and oil & gas equip-ment. The yard can deploy a 1,400-strongworkforce of fabricators, fitters, weldersand their helpers, and is supported by aproductive work force of 300 riggers, scaf-folders and crane operators. Furthermore,the Group has an anti-corrosion and con-crete-weight pipe-coating plant for sub-sea pipelines in the Bushehr SpecialEconomic Zone. While the productionrate depends on the pipe diameter andconcrete thickness, the average produc-tion rate for 32" OD is about 150 unitsof 12-metre pipe per day.”More recently, the Group has expanded

its operations to include a series of knowl-edge-based projects within emerging sec-tors such as biofuels. As Mr Hosseiniexplains, such investments were under-taken in response to the onset of economicsanctions, which, having taken a heavy tollon the organisation's core market, resulted

EUROASIA INDUSTRY | 9

in a decision to diversify the Group'soperations. “In the five years since thecompany was last profiled by EuroasiaIndustry, the impact of economic sanc-tions has become increasingly severe. A decrease in industrial developmentthroughout Iran led many EPC companiesto either close down completely or lay off the majority of their manpower.“Clients faced a critical situation

whereby they had lost access to financialresources, and that meant a significantnumber of ongoing and upcoming proj-ects had to be cancelled. Yet, the strategyadopted by SAFF's management teamwas to diversify the operation in order toendure throughout the increasingly hos-tile environment, and to do so in such away that the manpower and experiencedeveloped over the years could be pre-served, so that the Group would be in aposition to take on new projects whenthe sanctions were lifted. So, while SAFFhad previously been wholly dependent onoffshore oil, gas and petrochemical proj-ects for its revenue, in order to remainprofitable the board of directors took adecision to modify the company charterto include investment in innovativeknowledge-based projects”.

Knowledge development That important decision led to SAFF'sacquisition of five additional subsidiaryenterprises specialising in the researchand development of advanced technology-based projects in emerging fields such asmicro-algae biotechnology, gas-to-liquid(GTL) conversion and the manufactureof chemical catalysts used in the produc-

tion of biodiesel, pharmaceuticals andcosmetics. “To extend SAFF’s portfolioof business activities, those new lines of business were introduced to add addi-tional sources of revenue, and each R&Dteam now supports and contributes to thedevelopment of additional knowledge andexpertise to enhance the Group's opera-tions,” states Mr Hosseini. “Highlightsinclude our recent acquisition of QeshmMicroalgae Biorefinery (QMAB) Co.,which represents the first and largestmicro-algae biotechnology company inthe Middle East. The company is dedi-cated to the cultivation of unique, patentedmicro-algae species to deliver the mostadvanced technologies and bio-productsto the pharmaceutical, nutraceutical, cos-metic, food, feed and biofuel industries.”In 2014, the Group established GTL

QESHM Company to construct the firstGTL plant in Qeshm Island. “Gas-to-liquidconversion produces similar hydrocarbonproducts to those produced from crudeoil but the process is completely envi-ronmentally friendly,” he continues.“The plant will produce 3,000 bbl/day of various hydrocarbon products includingLPG, naphta, diesel and wax. This projectis progressing well and we are currentlyundertaking the basic engineering designwith co-operation from RIPI (ResearchInstitute Petroleum Industries). Theprocess simulation, catalyst bulk pro-duction, testing, site mobilisation, anddetailed EPC of the steam reformer arestill ongoing. Alongside that project, wehave also established Lamerd GTL – tobe located in the State of Fars in Lamerd’sspecial energy zone – which will operate‡

EUROASIA INDUSTRY | 11

a similar production facility to GTLQeshm and produce similar products.”Further developments include an indi-

rect investment into the SARV Oil & GasIndustry Development Co. – the firstproducer of high performance catalystsin Iran. “That company was establishedin 2004 and, due to its high quality cata-lyst products, quickly became a leadingbrand in the oil, gas, petrochemical andsteel industries,” points out Mr Hosseini.“It provides services to other R&D proj-ects, and represents a knowledge-basedprivate company with over 120 scientistsinvolved in the development and produc-tion of various types of catalysts. Its cur-rent production capacity is over 1,000tons per annum (tpa), which will rise to2,100tpa during 2015. The main activi-ties are divided into four categories:research, development and production ofcatalysts for industry; research and devel-opment in the oil, gas, refinery, petrochem-ical and steel industries; design,manufacturing and installation of indus-trial GTL units and the provision of EPCservices. This company is also activelyinvolved in the R&D of GTL technology,and we have made great achievements inthe design, manufacturing and installa-tion of industrial GTL units.”Further investments include the

Group's acquisition of a 34 per cent sharein Soroush Oil Refinery Co., which isplanning to establish a refinery in QeshmIsland capable of refining 30,000 barrelsof extra heavy crude oil per day, sourcedfrom the Soroush and Norouz oil fields.The technology of that refinery has beenprovided by Austrian Pörner Co. and itsmain activity will be the production ofhigh-quality bitumen for the exportmarket. “SAFF Group will participate inthe execution of that project, with part ofits share price being covered by the pro-

vision of services,” he continues. “SAFFGroup has also purchased a 40 per centshares of Lian Chemical DevelopmentCompany, which will produce sodiummethoxide from Bushehr special economiczone. The sodium methoxide will be pro-duced from methanol and caustic soda,which can be purchased locally at a verycompetitive price. Sodium methoxide isused as a catalyst during the production ofbiodiesel, pharmaceutical, and cosmetics,and the majority of the production willbe exported, with the anticipated IRR ofthe project predicted to be 28 per cent.”

Partnering for growth While such innovative projects have pro-vided SAFF with a crucial boost as it nego-tiates the challenges of Iran's recenteconomic climate, the Group is alsobecoming increasingly optimistic aboutthe future potential of the Iranian oil &gas sector, particularly as the projectedinvestment has soared to betweenUS$100 and US$180 billion. “We arewatching the market very carefully, andhave the resources available to contributeservices worth a minimum of one per centof the required investment,” continuesMr Hosseini. “The reality is that the off-shore industry is still very young in Iran,and 20 years ago the required offshoreindustry expertise was only available vianon-Iranian companies. The recentindustrial decline in Iran has meant thatno new projects have been defined overthe last five years, and the offshore expe-rience of Iranian companies has beendisconnected from the latest trends andtechnologies unfolding within the worldmarket. This has not disheartened SAFF'sresourceful engineers and technicians how-ever, and our workforce has been proactivein its efforts to fill the knowledge gap. Thisenabled SAFF to successfully finish the‡

12 | EUROASIA INDUSTRY

commissioning phase of South Pars OilLayer and South Phase 15 projects in early2015 and to deliver those projects to thehigh standards expected by our clients,which include major international com-panies such as Shell, Total and ENI.”As it looks towards the future, the

company is eager to co-operate withworld-leading oil, gas and petrochemicalcompanies, and is currently negotiatingwith several European technologyproviders in an effort to secure local andinternational partnerships. “To facilitatesuch aims, we have established a publicand international business relations depart-ment that is actively communicating with

the world industry leaders to draw atten-tion to our potential and cultivate futurepartnerships,” stresses Mr Hosseini. “Weare also looking diligently at the MiddleEast market, and recently establishedtwo new companies in Iraq and Oman tofacilitate the acquisition of new projectsin the region. Furthermore, SAFF's ten-ders and marketing department is nego-tiating various partnerships with Europeancompanies to execute oil, gas and petro-chemical projects within the internationalsector. SAFF is also very keen to expandits scope of activities to knowledge-basedprojects like the micro-algae bio-refineryand GTL plants, given the high demand

for more sustainable fuel throughout theglobal market. Many European countriesare setting very high standards for the fuel,and leading aviation companies like Airbusand Rolls Royce have defined projects todevelop jet engines that will use algaebiofuel. As a result, SAFF is planning toenter partnership with companies that canprovide finance and contribute to eachphase of the EPC of such projects.”

Building for the boom From a domestic point of view, SAFFintends to expand its business to Chabaharin the southeastern corner of Iran, justnorth of the Sea of Oman. “This strategi-

cally located port can be used for oilexports should the Strait of Hormuz faceany issues. The Iran government is alsopursuing a policy of decentralised devel-opment and poverty eradication, and thatpart of country has been deprived of devel-opment for many years. Now, however, itis becoming a development hub, and oneclear example is the current agreementsbetween Iran and India to invest US$200million into Chabahar port. The Grouphas been alerted to such initiatives andhas already begun making investmentsinto the port. SAFF was also recentlyawarded a contract to fabricate two 100-metre-high jack-ups in Bandar Abbas bya consortium of Iranian companies. Theconceptual design phase has been doneby SAFF and patent has been approvedby Korean Register. The jack-ups will beleased by NIOC after fabrication for aperiod of five years. At the moment, thecontractual negotiation is ongoingbetween the owner and NIOC. Basedon the lease contract, NIOC will committo lease the jack ups for the mentionedperiod to insure the owner for the returnof investment. SAFF, as a contractualcounterpart to the owner, will facilitatethe process of arranging the finance of

US$340 million, and is looking for financiers for this project who can alsobecome part of a joint venture for theEPCC package.”The Group's main strategy is to posi-

tion itself to play a major role in upcomingoil, gas and petrochemical projects as Iranenters a post-sanction era. As announcedby the strategic planning director of theministry of oil, the required five-yearbudget for planned developments isUS$100-200 billion, and SAFF's inten-tion is to claim a significant market share

of the upcoming oil & gas projects over thenext 5 to 10 years. That budget should besecured through foreign investments, andSAFF is eager to enter mutually benefi-cial partnership with international marketleaders to exploit such opportunities tothe fullest extent. “Our doors are opento the international oil, gas and petro-chemical companies to realise the highpotential of such a co-operation and todefine joint strategies to exploit Iran'spost sanction opportunities in the oil & gas industry,” he concludes. o

EUROASIA INDUSTRY | 13