Any move to reduce natural gas supply to petrochemical facilities is a recipe for disaster, as it will deprive the flourishing industry of foreign exchange revenues, the secretary-general of Iran's Association of Petrochemical Industry Corporation (APIC) said.
“Not delivering sufficient natural gas as feedstock to petrochemical factories will reduce the production level, because of which exports will drop sharply,” Ahmad Mahdavi was also quoted as saying by ILNA.
“The National Iranian Gas Company has cut gas delivery to petrochemical companies by 30% and more restrictions will be imposed sooner rather than later unless households reduce consumption in the cold season,” he said.
“We have long- and short-term contracts with domestic and international firms and a restriction on feedstock will not let us fulfill our commitments, which will also tarnish our reputation.”
Close to 43 million tons of petrochemical commodities are expected to be produced by 67 petrochemical companies, of which 33 million tons will be exported by the end of the current fiscal year (March 2021-22) and revenues generated from the sale of petrochemical products in domestic and foreign markets are predicted to reach $21.5 billion in the period.
“Such goals cannot be attained unless we are provided with sufficient feedstock,” he underlined.
Mahdavi complained that the state-run NIGC is supposed to deliver 70 million cubic meters of gas to petrochemical producers per day, but they receive less than 50 mcm/d.
Shared Problem
Although petrochemical units share the same problem as cement factories and thermal power stations in terms of lower gas supply, the situation of the former is worse.
According to the APIC official, while cement and power plants continue to operate by replacing natural gas with liquid fuels such as mazut, petrochemical companies are forced to stop or reduce production since there is no substitute for the gas feedstock.
Currently, 67 petrochemical plants are active in different regions with an annual output of around 66 million tons, half of which is consumed domestically in various industries and half of it is exported.
Close to 350 types of petrochemicals are produced in Iran, for which there is high international demand. Many countries, including neighboring states, China, India, Southeast Asia and Europe, buy Iranian petrochemicals.
Shutting down petrochemical units will have a negative effect on local market as well as exports.
“Curtailing feedstock supply to the petrochemical sector to provide households with more gas is a wrong policy, as the latter wastes the valuable fuel and the former converts it to value-added goods,” he said.
NIGC announced last week that household gas consumption has reached a record 650 mcm/d while gas output was 850 mcm/d. The residential sector is the largest consumer (and the top priority), followed by power plants, industries and petrochemical companies.
Almost all households in cities and close to 80% of rural residents are linked to the national grid.
Close to 18 million households in urban areas and 4.5 million families in rural regions are linked to the Iran Gas Trunkline. Domestic gas consumption has been rising constantly in the cold season.
“One cubic meter of gas costs less than 3 cents for households and the same volume is sold at 20 cents to petrochemical plants,” he said.
Low Prices
According to Mahdavi, as long as gas is sold at low prices, the household sector will continue to waste it.
However, NIGC recently increased gas tariffs by 40% for redeeming a part of production and distribution costs, and encouraging subscribers to consume less.
“The export of 27 million tons of products earned $10 billion in 2019,” Behzad Mohammadi, the former managing director of National Petrochemical Company, said.
According to Mohammadi, the inauguration of new plants, including Kaveh Methanol Company in Bushehr Province, olefin units in Ilam Petrochemical Complex in Ilam Province, Bidboland Persian Gulf Gas Refinery in Behbahan County, Khuzestan Province, Hegmataneh Petrochemical Plant in Hamedan, Miandoab Petrochemical Complex in West Azarbaijan Province and Kangan Petro Refining Complex, helped NPC raise its production capacity by 25 million tons in 2020.
“Petrochem plants across the country received 40 million tons of feedstock, including condensates, ethane, natural gas and naphtha, in the last fiscal year [ended March 20, 2021], which was equivalent to 1 million barrels of crude per day that will rise to 2 million barrels per day in 2025,” he added.
With the inauguration of new complexes over the next four years, the number of petrochemical plants will reach 77, up 15% compared to the current situation.
“NPC has invested close to $80 billion in petrochemical plans over the past four decades,” he said, adding that $25 billion are expected to be invested in the key sector in the next four years.
He noted that petrochemical revenues from exports and domestic sales in seven years exceeded $110 billion.
“Of the total earnings, $80 billion included exports worth $30 billion,” he said.
Reports say 67 petrochemical companies contributed 40% of the currency traded in the secondary foreign exchange market, known locally as Nima.
“As petrochemical production rises, less crude oil will be exported,” Mohammadi said, announcing that local sales have risen by 700,000 tons compared to a year ago.
