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 commercially.
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 complete form.”
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 contracting group.
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.
BY Shamseddin
Mousavi, CEO of Payandan Oil Co.
Courtesy of
Iran Petroleum