The emerging industrial gas market in Iran is on the cusp of an eruption in growth in the coming years.
The future expansion of the petrochemicals and steel industries, coupled with further investment in the oil & gas sector in the Middle East, appears set to drive an increased demand for industrial gases in the Republic.
Those are the sentiments of Iraj Ghorbani, Managing Director of Iran’s Delvar Afzar Industrial Gases Co. Based in Tehran, Delvar Afzar (DA) has been in business since 1999 and as the key innovator in the country’s gases industry, the company has undergone a series of significant developments over the past decade.
Indeed, in 2009 DA Industrial Gases posted revenues of $100m, and that’s just one company of the DA umbrella of services. Although DA began life as an oxygen generating manufacturer in 1999, the company is now active in three key areas: the production of industrial gases; EPC contracting for a range of different projects; and the manufacture of both equipment and cryogenic & high pressure vessels.
These core activities are undertaken via 10 different DA companies, we understand, with each company specialising in a particular field. This allows DA, as a leading independent player, to provide customer-focused services for all manner of industries and applications. To understand these many end-users is to understand the value and wave of growth ahead for industrial gases in Iran; a potential that our esteemed interviewee has high hopes for.
“Delvar Afzar is a group of companies, including 10 separate companies and with each company specialised in a different field of activities,” Ghorbani explained.
“For example DA Oxygen Industries co. is responsible for manufacturing PSA oxygen generators, DA Tank Manufacturing CO. is responsible for manufacturing the tanks, DA Gas Distribution is responsible for selling gases in Iran, and DA Industrial Gases Co. (which is the major company in the group) is responsible for the production and installation of ASUs in Iran.”
“There are also some other fields and activities run by other DA companies.”
“A highly potential market exists in Iran for industrial gases in different industries such as steel, petrochemicals and cement. These will be the main key to success for DA.”
“DA anticipates to have a great role in the Iranian market,” he continued, “in terms of the construction and erection of cryogenic plants. Also, its Gas Division is currently selling gases from its plant in Ahwaz to the market. Future expansion of the petrochemical and steel industries in Iran provides a further opportunity for DA to play an active role in selling industrial gases in both Iran and the wider region.”
And who better to ask about industrial gas in Iran than our entrepreneurial intervewee? Ghorbani’s credentials and expectations are without question – DA is Iran’s leading gases & equipment group and a prominent player in the Middle East market.
Further still, DA boasts a partnership with one of the industry’s major players among other projects, and a number of global gas & equipment luminaries were keen to listen to the thoughts of Mr Ghorbani at gasworld’s very own Middle East conference in Abu Dhabi last year.
Back then, Ghorbani described a blossoming Iranian gases market and explained how this is expected to grow rapidly over the next 10 years. Ghorbani reaffirmed this belief during our interview, revealing how the characteristics of Middle East industry and the region’s natural resources are inspiring increased demand for industrial gases. Economic factors, such as generally upward fluctuations in the price of oil, are also aligned to a chain of investment that eventually filters down to industrial gas consumption.
“The Iranian industrial gases businesses has been showing strong growth over the past few years and looks to be growing at the same rate in the future. The growth is mainly due to the expanding market for industrial gases in Iran, and the same trend would be forecast for the future,” he declared.
“The increase in the price of oil brings an opportunity to the country to invest more in oil and gas, petrochemicals and the metal industries. Most of these industries are huge consumers of industrial gases and therefore a considerable growth is expected in this field. The Middle East has natural resources that are related to the oil and gas industry and downstream products. Low energy costs have, in the past, led to development of high energy processes such as steel, cement and aluminium production.”
“The region,” Ghorbani assures, “is still attracting investment in basic raw materials and value-added downstream products, making it a significant emerging market for the gases industry. Petrochemical plants are increasing in this area. All of these industries use industrial gases as a raw material in their process.”
“As mentioned before, many projects in the field of oil & gas, petrochemicals, and the steel and copper industries are now active and related plants are under construction. Most of those plants are major consumers of industrial gases – and a reasonable growth in equipment delivery and the gas markets is foreseen in the next few years.”
Such value-added applications and downstream investment was very much on the agenda at that conference in Abu Dhabi, and is clearly in still on the tip of the tongue of many within the gases industry.
What might not have been so apparent is an emerging application for nitrogen that Ghorbani elucidates during our interview. The 45 year-old Managing Director and founder of DA described how an added window of nitrogen consumption could be on the horizon in Iran the Middle East as a whole.
Again, intrinsically linked to the ever-booming oil industry, Ghorbani explained, “Another very important project, which is completely new in this area, is the substitution of natural gas with nitrogen for pressure maintenance (EOR) in oil reservoirs. By improving this application, a great amount of nitrogen consumption will be created in the region.”
“Imagine the scene, a hundred million cubic meters of natural gas is injected everyday in oil reservoirs – and if only a part of this replaced with nitrogen, then a great amount of nitrogen will be needed in this region for the future.”
With such a bounty of growth potential laying ahead for the Iranian industrial gases scene, gasworld had to ask, what are the barriers to this wave of development, if any?
The global recession, we understand, has not been quite as acute as a barrier to progress in the Middle East as it has in other Western countries, largely due to the ongoing high interest and investment in the region’s oil & gas industry.
For DA in particular, a balanced portfolio across a range of different industries and applications has helped to offset any negative impact of recession.
One aspect that may yet prove to be fundamental to the gases business in Iran is political stability; Ghorbani suggests that a resolution to any political situation in the region will be necessary for the smooth progression of projects and installations.
“Because of the current political situation, the progress and implementation of the projects will not be as smooth as expected. Solving this political situation is very important and can play an effective role,” he comments.
And of the recession as a barrier to growth in the Middle East? Ghorbani adds, “The Iranian market has been affected by the economic downturn too. But because of the fact that DA is involved with many different gas-related activities, we had a considerable growth rate during the past few years. Obviously we could have had more growth if the situation of the world economy was stable. In fact, DA did however compensate for the effects of economic recession by extending its field of activities.”
“The price of oil and gas is still very high in this area and this forces those countries to invest mainly in the oil and gas industry. Regardless of the economic recession, there is still hope and high potential for growth in the Middle East.”
While there’s high hopes for the Middle East, there’s also a great deal of potential for Iran and DA in particular.
Ghorbani notes that the Iranian market ‘still has big demand for industrial gases and the market has not yet been saturated’ and DA does not harbour any export business hopes just yet, instead intending to ‘expand its business in the region [Iran] a time and circumstance allows’.
Focusing solely on its domestic market should ensure that DA continues apace in its position as the leading pioneer in Iran, having already achieved a number of firsts in the country in its formative years of business.
The past decade has seen the company come on leaps and bounds with a number of significant developments or ‘firsts’. In 2003, in only the company’s fourth year, DA expanded through the establishment of its dedicated Industrial Gas Division to invest in the construction and erection of large ASUs in Iran.
Just one year later and DA had already installed the largest ASU plant in the country’s private sector, a plant which is firmly in operation as we speak, producing both liquid and gaseous oxygen, nitrogen and argon in large capacities.
In the same year (2004), DA signed a protocol with CMP Arles of France for the design and manufacture of cryogenic flat bottom tanks in Iran – a deal which has since seen DA participate in many other projects for the steel and petrochemicals industries as either an investor or EPC contractor.
In another first, Ghorbani explains, DA became the first gases company in Iran to sign a BOT contract with a governmental steel company for onsite business. “According to this contract, DA installed an oxygen plant with its own investment. The steel company guarantees the purchasing of gaseous product transferable by pipeline. By signing this project the BOT and BOO contracts and onsite business are going to be more interesting and attractive for consumers.”
And not content with already pushing the boundaries in Iran, DA holds high ambition for 2011 and beyond. We understand that DA currently has an EPC contract with Fajr Petrochemical Company for a double train 12000 NM3/h gaseous oxygen production plant. The production plant site is located at the Fajr petrochemical complex in Mahshahr and is also capable of producing gaseous nitrogen and liquid argon.
DA has also signed contracts with Golestan and Lordegan petrochemical companies to provide steam reformers for their urea & ammonia plants. “Iran has a huge potential market for crackers and steam reformers and in an exclusive partnership contract in particular, Delvar Afzar is playing an active role in this market too,” Ghorbani explains.
Among many other projects of varying sizes under progress, DA has a contract with one of the key petrochemical plants to provide high-pressure vessels for hydrogen storage. In addition many cryogenic flat bottom and vacuum insulated cryogenic tanks and other high-pressure vessels should be delivered to different steel and petrochemical companies.
Ghorbani had already expressed earlier in our interview how ‘DA anticipates to have a great role in the Iranian market’ in the future. When probed further about the company’s plans for 2011 and beyond, he added, “To continue to play an active role in the Iranian market for the provision of a comprehensive line of gas products and associated services, for different industries like steel, petrochemicals and cement.”
“DA also intends to expand the manufacture of cryogenic flat bottom and vacuum insulated tanks. This would be a giant step for this industry, to manufacture cryogenic tanks at a lower cost and in turn, lower the dependency of the Iranian end-users on the foreign suppliers.”
“DA is an exclusive partner of a Tier 1 player in installing ASUs and manufacturing cryogenic tanks in Iran and it brings a lot of opportunities for the growth of the company in this area. Having the financial ability to invest in BOO and BOT projects expands opportunities for the company. And by having production facilities, distribution centres and manufacturing workshops, DA is the major player of this industry in Iran.”
Concluding, Ghorbani closes, “As explained before, if the aforementioned projects are materialised, demands for industrial gases will increase rapidly.”