Iran is looking for US$85 billion in investment for its petrochemicals sector and aims to increase production by a third this year.
Moayed Sadr Hossein, the chairman of the Iranian parliament’s petrochemical subcommittee, was quoted as saying by the official Fars news agency yesterday that the country needs such an investment, some of which has already been earmarked for this year.
Of all the country’s export sectors, the petrochemicals one is expected to get the quickest boost from the agreement to lift nuclear-related sanctions on Iran, which was reached earlier this month by the United States and five other countries involved in negotiations.
The government’s National Development Fund of Iran has already committed $5bn to the sector, and a further $2.5bn is needed to boost production from 45 million tonnes annually to 60 million tonnes, according to Abbas Shari Moqaddam, the head of National Petrochemical Company (NPC).
NPC had previously targeted a production rate of at least 50 million tonnes annually by next March.
Along with lowered sanctions, Iran’s ability to produce additional petrochemicals at competitive international prices will be boosted by significantly larger quantities of natural gas feedstock coming on-stream from its sizeable South Pars offshore gasfields this year.
Ali Mohammad Bosaghzadeh, another senior NPC executive, said yesterday that ethane delivery to petrochemical plants was forecast to rise by 1.4 million tonnes to 4.2 million tonnes this year because of additional South Pars feedstock gas.
Mr Shari Moqaddam, who is also the deputy oil minister, said that Iran had already begun to court international companies to invest in the petrochemicals sector.
NPC last week held talks with two German international chemicals companies, BASF and Linde Group, about potential investment.
“We must provide the infrastructure in such a way that things are OK for the return of foreign companies and investors in the petrochemicals sector,” Mr Shari Moqaddam said after the meeting. He added that the government needed to finalise both the feedstock pricing formula for petrochemical plants and the regulations that will apply to attract investment.
“These three steps must be taken for foreign investors to return to the country. Otherwise investors shall not be willing to come to Iran,” he told Shana, a government-controlled energy news network.
Another investment initiative is to offer feedstock discounts of up to 30 per cent for plants located in the more remote regions of the country, NPC officials said.
Although there are obstacles, including political pitfalls that could roll back the deal, “the Iranian nuclear agreement paves the way for a revival of the Iranian petrochemicals industry with export-led growth”, a report from BMI Research said.
“Sanctions have severely impeded petrochemicals output and investment, preventing the country from reaching its target of 100 million tonnes annually of petrochemicals capacity by 2015, of which 75 per cent was to be exported,” BMI said. “The post-sanctions outlook looks brighter.”
Mr Shari Moqaddam said that $70bn was needed to finish the petrochemical projects already begun, which if completed would bring output capacity to 180 million tonnes annually.
Iran is one of the most important suppliers of key petrochemicals to the world market, especially of methanol.
Investment in its gas sector is also key to boosting petrochemicals exports.
The country vies with Russia as holder of the world’s largest gas reserves, but chronic lack of investment has meant they are under-exploited. Iran still is a net gas importer for domestic consumption, and priority has been given to gas reinjection into its oilfields to boost production.
“In the long run, Iran’s realisation of its petrochemical ambitions hinges on it attracting capital, technology, equipment and construction expertise to build its natural gas infrastructure,” said Matthew Thoelke, senior the director of chemicals analysis at IHS.
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