FUELING DEVELOPMENT 2 EUROASIA INDUSTRY EUROASIA INDUSTRY 3

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1 FUELING DEVELOPMENT Having diversified its activities following a series of investments into emerging, high-technology sectors, SAFF Group has not only maintained its position as Iran's largest private offshore oil, gas and petrochemical contractor during challenging economic times, but also assumed a leading role in a resurgence of oil & gas sector development as Iran moves into a post-sanction era. Euroasia Industry catches up with Mr Farshid Seyed Hosseini, Managing Director, about the Group's development of an increasingly varied portfolio of activities since last speaking to the magazine back in 2009, and how projected oil & gas sector investments of over US$100 billion are giving the company good reason to look to the future with optimism. Written by Marius Goubert. 2 EUROASIA INDUSTRY EUROASIA INDUSTRY 3

2 Established in 1993 as an offshore oil services company capable of responding to the rapid growth of the oil & gas sector throughout the Persian Gulf region, SAFF (Sherkat Sanaye Farasahel) has emerged as one of the leading EPC (engineering, procurement and construction) contractors within the Iranian market. With a growing network of subsidiary companies operating under the umbrella of the SAFF Group organisation, the business has an impressive track-record of increasing both its capacity and capabilities in response to the changing requirements of the offshore, onshore and petrochemical markets. SAFF represents the only large-scale Iranian private offshore oil, gas and petrochemical contractor, and is led by an experienced management team with 25 years' experience running the Group's operations, begins Mr Hosseini. The Group comprises a total of 23 companies that offer a wide range of offshore and onshore EPCI (engineering, procurement, construction and inspection) services to multiple industrial sectors including oil, gas, petrochemicals, knowledge-based projects, investment and infrastructure development. As a private joint stock company with over 100 shareholders, SAAF Group specialises in the operation, production, repair and maintenance of offshore and onshore facilities. In-house expertise The Group provides its services through a varied range of subsidiary enterprises that demonstrate expertise in everything from the management, general and EPCI contracts for petrochemical plants, to the engineering of onshore works, offshore heavy platforms, sub-sea and inshore pipelines, ports, harbour facilities, and the fabrication and repair of semi-submersible drilling and jack-up rigs. SAFF Group s major areas of expertise include the engineering, procurement, construction, installation and commissioning of offshore structures, including fixed and mobile platforms, resumes Mr Hosseini. We can undertake the fabrication of vessels and barges; the installation and maintenance of offshore and onshore pipelines and cable lines, and have experience providing manufacturing, fabrication, installation, commissioning and repair services for a range of onshore port and harbour structures. Having consistently developed its specialist skills throughout the last 22 years, the Group is able to draw on the capabilities of a highly experienced team of experts, primarily concentrated at its yard in Bandar Abbas and main offices in Tehran. In total, the company employs 950 staff across those two facilities the lion's share of which are based in Bandar Abbas, where the company's fabrication yard covers a 35-hectare area and provides an annual manufacturing capacity of 45,000 tonnes. Their staff includes site engineers, technicians, welders and laborers, and are supported by a further 150 workers made up of engineering department staff (mechanical, civil, electrical and structural), project department staff (project managers, project controllers), marketing experts, IT support teams, financial officers, procurement teams and administration staff located at the company's main office in Tehran. Over the years, our capacity has been matured to enable SAFF to become one of the most reputable Iranian companies 4 EUROASIA INDUSTRY

3 offering detailed engineering services for offshore and marine structures, resumes Mr Hosseini. Our procurement team comprises skilled specialists able to benefit from state-of-the-art software and a well-established network that connects Tehran, Bandar Abbas, Dubai, Malaysia and Europe. Having commenced its operations as an offshore contractor, the Group has acquired valuable experience in this field as reflected by our vast, wellequipped fabrication yard in Bandar Abbas, which provides us with a unique competitive advantage. Such capabilities mean that SAFF is one of the few Iranian companies capable of fabricating heavy offshore structures of up to 7,500 tonnes. Overcoming adversity Additional services provided by the Group include drilling and oil & gas production, as well as the fabrication of stationary equipment such as reactors, towers, storage tanks, drums, steel structures and heat exchangers. We have a fixed equipment manufacturing factory located in Ahwaz City, which is well placed to export to the Persian Gulf and Middle East region, resumes Mr Hosseini, The factory specialises in the design, development and fabrication of equipment for onshore and offshore oil, gas and petrochemical industries across Iran and the Middle East. We have another fabrication yard on Qeshm Island one of the most modern of its kind in the region which covers a 28.5-hectare area and has an annual fabrication of 48,000 tons of steel structures, piping and oil & gas equipment. The yard can deploy a 1,400-strong workforce of fabricators, fitters, welders and their helpers, and is supported by a productive work force of 300 riggers, scaffolders and crane operators. Furthermore, the Group has an anti-corrosion and concrete-weight pipe-coating plant for subsea pipelines in the Bushehr Special Economic Zone. While the production rate depends on the pipe diameter and concrete thickness, the average production rate for 32" OD is about 150 units of 12-metre pipe per day. More recently, the Group has expanded its operations to include a series of knowledge-based projects within emerging sectors such as biofuels. As Mr Hosseini explains, such investments were undertaken in response to the onset of economic sanctions, which, having taken a heavy toll on the organisation's core market, resulted 6 EUROASIA INDUSTRY

4 in a decision to diversify the Group's operations. In the five years since the company was last profiled by Euroasia Industry, the impact of economic sanctions has become increasingly severe. A decrease in industrial development throughout Iran led many EPC companies to either close down completely or lay off the majority of their manpower. Clients faced a critical situation whereby they had lost access to financial resources, and that meant a significant number of ongoing and upcoming projects had to be cancelled. Yet, the strategy adopted by SAFF's management team was to diversify the operation in order to endure throughout the increasingly hostile environment, and to do so in such a way that the manpower and experience developed over the years could be preserved, so that the Group would be in a position to take on new projects when the sanctions were lifted. So, while SAFF had previously been wholly dependent on offshore oil, gas and petrochemical projects for its revenue, in order to remain profitable the board of directors took a decision to modify the company charter to include investment in innovative knowledge-based projects. Knowledge development That important decision led to SAFF's acquisition of five additional subsidiary enterprises specialising in the research and development of advanced technologybased projects in emerging fields such as micro-algae biotechnology, gas-to-liquid (GTL) conversion and the manufacture of chemical catalysts used in the production of biodiesel, pharmaceuticals and cosmetics. To extend SAFF s portfolio of business activities, those new lines of business were introduced to add additional sources of revenue, and each R&D team now supports and contributes to the development of additional knowledge and expertise to enhance the Group's operations, states Mr Hosseini. Highlights include our recent acquisition of Qeshm Microalgae Biorefinery (QMAB) Co., which represents the first and largest micro-algae biotechnology company in the Middle East. The company is dedicated to the cultivation of unique, patented micro-algae species to deliver the most advanced technologies and bio-products to the pharmaceutical, nutraceutical, cosmetic, food, feed and biofuel industries. In 2014, the Group established GTL QESHM Company to construct the first GTL plant in Qeshm Island. Gas-to-liquid conversion produces similar hydrocarbon products to those produced from crude oil but the process is completely environmentally friendly, he continues. The plant will produce 3,000 bbl/day of various hydrocarbon products including LPG, naphta, diesel and wax. This project is progressing well and we are currently undertaking the basic engineering design with co-operation from RIPI (Research Institute Petroleum Industries). The process simulation, catalyst bulk production, testing, site mobilisation, and detailed EPC of the steam reformer are still ongoing. Alongside that project, we have also established Lamerd GTL to be located in the State of Fars in Lamerd s special energy zone which will operate EUROASIA INDUSTRY 9

5 a similar production facility to GTL Qeshm and produce similar products. Further developments include an indirect investment into the SARV Oil & Gas Industry Development Co. the first producer of high performance catalysts in Iran. That company was established in 2004 and, due to its high quality catalyst products, quickly became a leading brand in the oil, gas, petrochemical and steel industries, points out Mr Hosseini. It provides services to other R&D projects, and represents a knowledge-based private company with over 120 scientists involved in the development and production of various types of catalysts. Its current production capacity is over 1,000 tons per annum (tpa), which will rise to 2,100tpa during The main activities are divided into four categories: research, development and production of catalysts for industry; research and development in the oil, gas, refinery, petrochemical and steel industries; design, manufacturing and installation of industrial GTL units and the provision of EPC services. This company is also actively involved in the R&D of GTL technology, and we have made great achievements in the design, manufacturing and installation of industrial GTL units. Further investments include the Group's acquisition of a 34 per cent share in Soroush Oil Refinery Co., which is planning to establish a refinery in Qeshm Island capable of refining 30,000 barrels of extra heavy crude oil per day, sourced from the Soroush and Norouz oil fields. The technology of that refinery has been provided by Austrian Pörner Co. and its main activity will be the production of high-quality bitumen for the export market. SAFF Group will participate in the execution of that project, with part of its share price being covered by the provision of services, he continues. SAFF Group has also purchased a 40 per cent shares of Lian Chemical Development Company, which will produce sodium methoxide from Bushehr special economic zone. The sodium methoxide will be produced from methanol and caustic soda, which can be purchased locally at a very competitive price. Sodium methoxide is used as a catalyst during the production of biodiesel, pharmaceutical, and cosmetics, and the majority of the production will be exported, with the anticipated IRR of the project predicted to be 28 per cent. Partnering for growth While such innovative projects have provided SAFF with a crucial boost as it negotiates the challenges of Iran's recent economic climate, the Group is also becoming increasingly optimistic about the future potential of the Iranian oil & gas sector, particularly as the projected investment has soared to between US$100 and US$180 billion. We are watching the market very carefully, and have the resources available to contribute services worth a minimum of one per cent of the required investment, continues Mr Hosseini. The reality is that the offshore industry is still very young in Iran, and 20 years ago the required offshore industry expertise was only available via non-iranian companies. The recent industrial decline in Iran has meant that no new projects have been defined over the last five years, and the offshore experience of Iranian companies has been disconnected from the latest trends and technologies unfolding within the world market. This has not disheartened SAFF's resourceful engineers and technicians however, and our workforce has been proactive in its efforts to fill the knowledge gap. This enabled SAFF to successfully finish the EUROASIA INDUSTRY 11

6 Building for the boom From a domestic point of view, SAFF intends to expand its business to Chabahar in the southeastern corner of Iran, just north of the Sea of Oman. This strategically located port can be used for oil exports should the Strait of Hormuz face any issues. The Iran government is also pursuing a policy of decentralised development and poverty eradication, and that part of country has been deprived of development for many years. Now, however, it is becoming a development hub, and one clear example is the current agreements between Iran and India to invest US$200 million into Chabahar port. The Group has been alerted to such initiatives and has already begun making investments into the port. SAFF was also recently awarded a contract to fabricate two 100- metre-high jack-ups in Bandar Abbas by a consortium of Iranian companies. The conceptual design phase has been done by SAFF and patent has been approved by Korean Register. The jack-ups will be leased by NIOC after fabrication for a period of five years. At the moment, the contractual negotiation is ongoing between the owner and NIOC. Based on the lease contract, NIOC will commit to lease the jack ups for the mentioned period to insure the owner for the return of investment. SAFF, as a contractual counterpart to the owner, will facilitate the process of arranging the finance of US$340 million, and is looking for financiers for this project who can also become part of a joint venture for the EPCC package. The Group's main strategy is to position itself to play a major role in upcoming oil, gas and petrochemical projects as Iran enters a post-sanction era. As announced by the strategic planning director of the ministry of oil, the required five-year budget for planned developments is US$ billion, and SAFF's intention is to claim a significant market share of the upcoming oil & gas projects over the next 5 to 10 years. That budget should be secured through foreign investments, and SAFF is eager to enter mutually beneficial partnership with international market leaders to exploit such opportunities to the fullest extent. Our doors are open to the international oil, gas and petrochemical companies to realise the high potential of such a co-operation and to define joint strategies to exploit Iran's post sanction opportunities in the oil & gas industry, he concludes. o commissioning phase of South Pars Oil Layer and South Phase 15 projects in early 2015 and to deliver those projects to the high standards expected by our clients, which include major international companies such as Shell, Total and ENI. As it looks towards the future, the company is eager to co-operate with world-leading oil, gas and petrochemical companies, and is currently negotiating with several European technology providers in an effort to secure local and international partnerships. To facilitate such aims, we have established a public and international business relations department that is actively communicating with the world industry leaders to draw attention to our potential and cultivate future partnerships, stresses Mr Hosseini. We are also looking diligently at the Middle East market, and recently established two new companies in Iraq and Oman to facilitate the acquisition of new projects in the region. Furthermore, SAFF's tenders and marketing department is negotiating various partnerships with European companies to execute oil, gas and petrochemical projects within the international sector. SAFF is also very keen to expand its scope of activities to knowledge-based projects like the micro-algae bio-refinery and GTL plants, given the high demand for more sustainable fuel throughout the global market. Many European countries are setting very high standards for the fuel, and leading aviation companies like Airbus and Rolls Royce have defined projects to develop jet engines that will use algae biofuel. As a result, SAFF is planning to enter partnership with companies that can provide finance and contribute to each phase of the EPC of such projects. 12 EUROASIA INDUSTRY EUROASIA INDUSTRY 13