China firms push for multi-billion dollar Iran rail and ship deals

Reza Mostafavi Tabatabaei Two Chinese firms are pushing for multi-billion dollar deals with Iran to build a high-speed railway and modernize its shipping fleet following the lifting of most sanctions against Tehran, sources with knowledge of the negotiations said.

State-run China National Transportation Equipment & Engineering Co Ltd (CTC) is close to finalizing an agreement on the $3 billion rail project to connect Tehran with the northeastern holy city of Mashhad, a Chinese source told Reuters.

Dalian Shipbuilding Industry Co, which is also controlled by Beijing, has likewise been in discussions on building container ships and oil tankers for Iran, according to two sources who declined to be identified because the talks are still continuing.

China, Iran’s largest trading partner and long-time ally, has agreed to boost bilateral trade by more than 10 times to $600 billion in the next decade. With Iran no longer subject to international sanctions since January following its nuclear deal with world powers, Beijing sees the country as part of its policy to increase trade and open new markets for its firms as the domestic Chinese economy slows.

For the 930-km (580 mile) rail project, China’s Export and Import Bank (EXIM) is expected to fund 85 percent of the cost, with CTC providing engineering, procurement and construction services, said the source.

China EXIM Bank is Beijing’s designated policy lender for large trade deals and overseas investments by Chinese firms.

Neither the bank nor CTC responded immediately to requests for comment.

Iran’s Tasnim News Agency last month reported a lower cost of $2 billion for the project, which it said would take 42 months to build.

TEHRAN VISITS

A spokesman at China Shipbuilding Industry Corp, parent of Dalian Shipbuilding, did not immediately respond to a request for comment.

However, one of the sources estimated Iran would need $8–12 billion to modernize its fleet of container, cargo and oil tanker ships by around 2022.

Top Dalian shipyard executives have visited Tehran three times since January, meeting their counterparts at the Islamic Republic of Iran Shipping Lines (IRISL) — Iran’s top container and cargo carrier — and the country’s oil shipping operator National Iranian Tanker Co (NITC), the sources said.

IRISL and NITC were not immediately available for comment.

“We’ve had lots of contact with NITC,” said a Chinese shipbuilding executive, declining to be identified because he is not authorized to speak to the media. “Advanced ship models and solid technical support make Dalian Shipping a strong suitor for Iran.”

Previously Chinese shipyards, including Dalian, had built large oil tankers for NITC in an order worth $1.2 billion between 2012 and 2013, Reuters has reported.

State financing and lower costs would make China a dominant player in the Iranian shipping industry versus Asian rivals South Korea and Singapore, said Reza Mostafavi Tabatabaei, president of London-based ENEXD, a firm involved in oil and gas equipment business between the Middle East and China.

“They (IRISL) hope to become one of the biggest shipping lines in the world,” said Tabatabaei, adding that NITC wants to double its tanker capacity within the next six years by buying new ships and overhauling existing ones.

Major international companies are also rushing to establish a position in Iran as the Islamic Republic re-opens for business.

With 80 million people and annual output of about $400 billion, Iran is the biggest economy to rejoin the global trading system since Russia did so following the breakup of the Soviet Union over two decades ago.

(Reporting by Chen Aizhu in BEIJING and Bozogmehr Sharafedin in DUBAI; additional reporting by Engen Tham in Shanghai; Editing by David Stamp)

This post was originally published on Reuters UK

How China Became a Major Producer of Oil And Gas Equipment

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China, the world’s most populous country, became the world’s largest energy producer in 2009, the largest energy consumer in 2011, and the largest net oil importer in 2014. One factor that has bolstered China’s influence in the global energy market is its emergence as a major player in manufacturing and exporting low-cost, high quality drilling equipment.

When I started my work 15 years ago, China was a very different market in the upstream division (exploration and production) of oil and gas. Because major oil-producing countries exclusively purchased equipment with American and European standards, China was barred access to the international market. These standard requirements, at the time, could simply not be met by Chinese companies.

At the same time, countries like Iran were experiencing gaps in the industry after regional warfare disrupted their oil and gas sector. After the Iranian revolution in 1979, oil and gas experts couldn’t recognize the needs of the industry and external constraints prevented expansion. Instead of purchasing equipment, Iran would rent, having no standard for ordering equipment. This weakness was left unconsidered and unresolved for decades.

As an Iranian professional in the oil and gas industry, it was my mission to standardize financing and leasing methods for countries like Iran, and create a road map to resolve these crippling issues.

After recognizing the many unsatisfied needs of the Iranian market, my company started working to address them. At the same time, we evaluated the weakness of the Chinese market in the upstream division of oil and gas. As it turned out, the solution came in linking these subjects together.

First, we helped Chinese manufacturers produce equipment based on European and American standards. This was a huge unmet need of Iran’s market at the time, and Chinese companies had very limited experience with production and the exportation of oil and gas equipment. Still at the early stages of adopting international stages, their activities were limited to China’s domestic market and several other countries.

Helping China shift focus from importation to production was a breakthrough for them as much as it was for their buyers. Costs decreased, and massive job creation led to economic growth. Joint ventures with American companies allowed Chinese manufacturers the benefit of Western technology combined with low labor costs. The record of production for Chinese companies in exportation now exceeds 1,000 rigs; Chinese yards are now building more jack-up rigs than all other yards in the world put together.

At first, many traditional countries around the Persian Gulf were skeptical about using Chinese equipment, but China built trust in the market by offering high-quality products comparable to American and European equipment, but at a much lower price. Products made in China with American quality were introduced in Saudi Arabia, Russia, Iran, Africa, Kuwait and Venezuela, which began to order from Chinese manufacturers in the upstream division.

This increased the sale in upstream along with downstream (refinement, distribution, etc), as the same Chinese manufacturers once struggling in the market started to produce more.  Due to the increase in operating activities my business created, the number of Chinese manufacturers increased tremendously. China created joint ventures with American companies, making them one of the biggest producers of equipment in the upstream division in offshore and onshore equipment.

The boom in China’s economy was helped by the many factories and jobs created to produce equipment and sub-equipment. These factories flourished thanks to China’s major economic strengths: hard working citizens, strong infrastructure and consistent methodology. One cause for concern, however, has been China’s low level of consumerism, which accounts for just 28 percent of its GDP (as opposed to the U.S. 76 percent). Lengthening vacation time was one policy introduced to remedy this.

Encouraging spending has helped the economy grow even more, and experts surmise that consumer spending could reach $67 trillion over the next decade if shopping sees a greater boom. Energy consumption has grown even faster than consumerism: In 2014, China’s oil consumption growth accounted for about 43 percent of the world’s oil consumption growth, more than one-third of the global demand.

A lot has changed in the past 15 years in China, the Middle East, United States and across the globe. The competition for market share of oil and gas equipment, which used to be between American and European companies, has shifted to competition between Chinese companies in the last five years. I contribute this success to the reverse engineering method adopted by Chinese manufacturers.

Today, China is highly invested in research and development to help create more jobs and technology in an upstream market. These investments supported China’s subsequent rise to the second largest manufacturer and exporter of oil and gas equipment and services in the onshore and offshore division. China ranked as the second greatest supplier of oil to their domestic market, a trend expected to continue up until 2025, improving both the country’s GDP and its oil consumption. Because growing demand for oil outpaces their domestic production, China is also building strategic oil reserves to ensure supply remains stable.

China is also the world’s greatest carbon emitter, so the nation has set into motion ambitious plans to diversify their energy sector with renewable energy sources like solar and wind. But as the population continues to climb, it’s unlikely this will hinder oil and gas industry’s significance. We can likely expect the mutually beneficial relationship between Chinese manufacturers, oil-producing nations and suppliers to remain strong, steady and lucrative.

Featured image: Asian Development Bank via Flickr.

Reza Mostafavi Tabatabaei is an entrepreneur, investor, activist and international businessman who specializes in the oil and gas industry. He is an admirer of Middle Eastern art, culture, and philanthropy, which you can read out more about on his adjacent website RezaMostafaviTabatabaei.org

The Inner Workings of an Oil Drill

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Oil and gas are hugely valuable resources that power not only our cars, cities, and homes, but major economies around the world. Today I will discuss the mechanics of the oil drill, used to extract oil and natural gases from beneath the earth’s crust.

Offshore and onshore rigs operate similarly, though the former are configured to allow drilling in a marine environment as opposed to land. Both have the same major function: to create holes in the earth’s subsurface in order to extract and process oil and gas. Though some rigs are operated manually (these are called augers), most are massive structures with dozens of important parts.

The rig itself has many components that support drilling and extraction. Most oil rig systems consist of large diesel engines, which power the electrical generators, which in turn power the mechanical drilling system. The mechanical system is supported by the derrick, a tall support structure which holds the drilling apparatus and allows new sections of pipe to be added during the drilling process. The rig also has a blowout preventer, a valve that relieves pressure and prevents gushing; a mud pit, pump and pipe which store and circulate fluids; and a drill string, which contains the drill collar and bit. Most rigs also have hoisting systems to lift heavy loads.

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So, what’s the drilling process itself like?

First, a surface hole is drilled. The drill bit, collar, and drill pipe are placed into the hole, just above where the oil is thought to be located. When the turntable (which drives the rotation motion) and the kelly (a pipe attached to the turntable) are fastened, the drilling can begin. As the drilling progresses, mud is circulated through the pipe and out of the bit to float rock cuttings out of the hole. As the hole gets deeper, new joints of pipe are added. The pipe, collar and bit can all be removed when a pre-set depth is reached.

Casing pipes are then placed into the hole to prevent it from collapsing, and cement is pumped through and allowed to harden. The entire process (drill, pipe, cement) is repeated until the piping reaches the well’s final depth.

360px-Wellhead-dual_completionAt this point the drilling apparatus is removed so the crew can test for oil, which they do by examining formation, pressure, and rock samples. If they confirm their findings, a perforating gun is lowered into the depth of the reservoir to create holes in the casing through which oil can enter. Tubing is run into the hole as a conduit for the oil to flow through, with a device called a packer used to seal it. A multi-valved structure called a Christmas tree (pictured on the left) is connected to the top of the tube and casing to control the oil flow.

Lastly, special fluids are pumped down to pressure the reservoir rock into releasing the oil flow. The crew puts a pump on the wellhead, and a gear head moves the lever up and down to create suction. The oil obtained is known as crude oil, which is refined to get a final commercial product.

Reza Mostafavi Tabatabaei is an entrepreneur, investor, activist and international businessman who specializes in the oil and gas industry. He is an admirer of Middle Eastern art, culture, and philanthropy, which you can read out more about on his adjacent website RezaMostafaviTabatabaei.org

 

 

Oil in Abu Dhabi: A Brief History of the Industry

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Abu Dhabi, capital of the United Arab Emirates (UAE), holds 94 percent of the country’s oil reserves, and about 9 percent of the entire world’s. The populous region’s oil industry has transformed the city it from a poor fishing town into one of the richest cities on the planet.

The industry began to show glimmers of promise after the decline of the city’s pearl trade, when an agreement to start exploration for oil was made in 1936. The Petroleum Development (Trucial Coast) signed this agreement with the ruler at the time, Sheikh Shakhbut.

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In 1939, a seventy-five-year concession was signed with a number of foreign oil companies (FOCs), but things were far from smooth sailing: WWII stalled the operation for years, and local communities suffered from economic hardships, malnutrition and disease.

Gravity surveys finally began in 1946, but stalled in 1950 when the region’s desert terrain and sand dunes proved too much for exploration vehicles. Then, a drilling attempt of Ras Sadr turned up dry, and more drilling off the seismic coast had to be plugged and abandoned.

It wasn’t until 1958 (on the Umm Shaif field) and 1959 (Merban No. 3, later named Bab) that drillers struck commercially viable oil. Oil production and exports started in 1962 and 1963; after 1966 the city amassed enough wealth to transform the region and support the formation of the UAE in 1971.

In 1971, the state-controlled Abu Dhabi National Oil Company (ADNOC) was formed, strategically aligned with Western oil companies like Exxon, Shell and BP. Two oil refineries opened by ADNOC in the early 1979 and 1981, making the UAE entirely self-sufficient in petroleum production.

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Western alliances helped bring Abu Dhabi the best technology for decades more of momentous discoveries. The original concession ended in 2014, so ADNOC is currently allowing the original foreign oil companies it partnered with to continue working before all FOC bids are evaluated and new agreements are reached.

Though the heyday of oil discovery may be over for the time being, expansion continues. Today Abu Dhabi has the sixth largest proven oil reserves (92 million barrels), and remains the eighth biggest oil producer in the world, with an output roughly 3 million barrels per day.

5 Steps Great Leaders Take When Things Go Wrong

A great leader is usually defined by what they do in the times of distress as they know that those heavy decisions not only have an affect on themselves but the people they lead. When things don’t necessarily go as planned, these are five things great leaders do to make the most out of the situation in route to a positive outcome.

Great leaders accept that failure is inevitable:

“The only real mistake is the one from which we learn nothing” – Henry Ford

If you’ve ever tried at something, you’ve experience failure to some capacity. But failure is a major step in the road to success. Every accomplishment or failure is a learning lesson, success and failure are both great teachers. Leaders listen when mistakes are made so that they can better their decisions the next time a similar circumstance arises.

Great leaders confront failure:

Evaluate the situation head on because confronting a failure can turn it around into a success in another form. Don’t shy away from your mistakes or keep them at bay because your own wrong decisions could prove to be your best teachers.

Great leaders are vulnerable:

You’re human! Everyone has made mistakes, it’s moreso about how you respond to these mistakes. Great decision makers don’t hide their mistakes because everyone is susceptible to them, but you can also be vocal about how you’ve responded and overcome. Admitting to your mistakes creates an environment where your team can openly admit failures to and be welcoming to advice that will help them in the future.

Great leaders recover fast:

Often the burden of a mistake can linger and result in future issues. Leaders don’t let this burden them because it can have an adverse affect on their team and the environment they operate within. Seek to recover and use the things you’ve learned to help steer a faster track towards where you want to go.

Great leaders are aware of their responsibility:

Know your duties and how they differentiate from others because decisions or actions may be called of you and you only. Appreciate the duty that comes with the responsibility because you are making decisions not only for yourself but decisions that directly affect your business or your team. Keeping your responsibilities in mind helps you stay focused on what’s important.

 

Abu Dhabi Bio Jet Fuel Project Nears Test Stage

Abu Dhabi seeks to make a move towards a more community conscious airport in Renton, Washington. Boeing, in works with Etihad Airways has been working on developing a biofuel in emirate since early 2014. The goal is to produce a more environmentally friendly jet fuel that their airlines can implement and utilize in all of their planes

The counterparts are looking to expand the production of this bio fuel’s use as it nears it’s testing stage. Boeing and Etihad Airways have started construction for the fuel producing plant on a one-acre trial farm location. In Abu Dhabi, a plant called salicornia bigelovii generates oil that can be used to make the biofuel so it will be planted in the test farm. A Boeing executive says that the plant is expected to be completed in the next three to four months.

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The team expects a relatively soon turn around because they’ve also been in the works with Abu Dhabi National Oil Company’s Takreer and the Masdar Institute and Total.

Julie Felgar, Managing Director, Environmental Strategy and Integration at Boeing Commercial Airplanes, informed reporters that the new bio fuel will be put to the test soon. A small pilot project will run after the test farm’s construction is through and complete.

“We’ll take one year to 18 months to run through a couple of harvest rotations and see what the opportunities are in being able to scale that up,” Felgar told reporters.

This environmentally focused project is a great addition to Boeing’s arsenal. But Boeing is majorly active in this particular industry as The Abu Dhabi project is just one of 19 global biofuel projects underway for the organization. Their team has the inherent focus to develop jet aviation fuel based on biological processes like agriculture or waste in route to reducing the industry’s carbon footprint.

 

Kuwait to Start Offshore Oil Exploration in Two Years

Kuwait prepares to get into oil exploration as they set their sails on an offshore program planning to start in two years. Kuwait expects the program to boost oil output capacity for the country.

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Kuwait Oil Company’s Manager of Planning, Bader Al Attar, said the country’s plans are to add more than 700,000 oil barrels per day from offshore and onshore sources. Currently, most of the country’s oil production originates from the onshore Burgan field, which is the second largest in the world.

Attar told the media that Kuwait wants to up the production capacity of barrels per day to 3.5 million by the last quarter of 2015. He went to say that he expects an output capacity of 4 million bpd by 2020. One of the reasons that there is such a sense of urgency is that KOC hopes to make up for the production lost from two shut oil fields of theirs.

Attar and Kuwait have high hopes for increasing their oil production capacity in their search for new areas. In the meantime, they plan to milk their other energy investments.

The State of Health Care in Iran

The Iranian president, Hassan Rouhani, has promised health care for the entire country for the next four years. Rouhani asserts that the health care plan would be partially backed from funding created through cutting government subsidies.

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Rouhani spoke in a live broadcast interview on Wednesday, Sept. 30th about his mission to create a nation where Iranians are protected under a universal health insurance program. In route to bettering the country’s state of health, Rouhani said that at least five million citizens who are living under the poverty line will be attended to first.

Rouhani continued to say, “Our people face a number of difficulties in their health protection and when they enter a state-run hospital they usually have to obtain their medicine, tests and medical equipment from other places.”

Iran’s health program financing is often referred to as ‘mixed-financing’ because there are different financial privileges for different types of fundraising. General revenue financing, social health care insurance and out-of-pocket payments make up the health care system of Iran, but these plans mainly constitute secondary coverage for those residents insured by social insurance.

In Rouhani’s interview, he also apologized to Iranian citizens who have suffered through certain environments. With this proposed new health program, he plans to fix both health and social issues.

In the current healthcare system, it is difficult to reach universal health care, especially for those living in rural areas of Iran. There have been multiple studies that point to vast inefficiencies in the healthcare system in Iran’s rural society, representing an impairment of the current institutions put in place.

Rural healthcare is a priority at the World Health Organization (WHO), as the issue has led to much international discussion. Though half the world lives in rural areas, most do not receive the same care as their urban counterparts. Though the demands of these rural communities are demanding this inequality be resolved, there is difficulty in its implementation. Chiefly, the health problems in rural regions are different from what individuals experience in urban areas. In the ideal state of “universal health care,” one would expect there to be uniformity across all healthcare institutions, but this is simply not the case. More often, the impoverished regions obtain less quality in their healthcare systems.

Iran’s healthcare system is set to improve the health care institutions in rural areas by establishing health houses responsible for a specific rural region. These health houses are equipped with a staff of healthcare providers called, behvarz, that are employed by their local communities. The behvarz have been instrumental in improving the healthcare system in Iran though various rural community healthcare systems are experiencing difficulties trying to keep up with the changing landscape of Iran’s volatile political, social and environmental ecosystems.

Considering the difficulties that the healthcare system is facing in rural areas of Iran, individuals are encouraged to donate and volunteer. Funds and time can be donated in various capacities: education of healthcare providers, institutional developments, new health house construction, new technology development and community volunteering.

Reza Mostafavi Tabatabaei has focused his philanthropic endeavors on developing healthcare institutions in the underdeveloped regions of Iran. In assisting in the development of new health houses across the country, Reza has aided in improvements in the industry; however, there is still much more that can be done to improve the healthcare system in Iranian rural communities.