The Iranian petrochemical industry's revenue-generating potential notwithstanding, the 60-year-old sector has long been grappling with problems that have slowed down its development, the head of Energy Commission at Tehran’s Chamber of Commerce, Industries, Mines and Agriculture said.
“Low diversity of products, lack of investment, sanctions, slow pace of completing value chain projects, absence of long-term plans and constant change of policies have posed formidable obstacles to the industry,” Reza Padidar was also quoted as saying by the Persian economic daily Donya-e-Eqtesad on Thursday.
The official drew a parallel between the petrochemical industries of Iran and South Korea and said although South Korea’s petrochemical sector started to operate 20 years after Iran’s, they are producing close to 240 kinds of products, while Iranian product basket is limited to 40.
In fact, domestic companies have never prioritized diversification of commodities.
According to Padidar, long-term plans are missing from Iranian policymaking.
“Decision-makers' shortsightedness has posed several challenges to the sector, one of which is that potential investors have lost interest in Iranian development projects, because of which a plan that normally becomes operational in three years in neighboring states cannot see the light of day after a decade in Iran,” he said.
“In a country where with every change in government, all managers change and new approaches are adopted, we cannot be hopeful of the development of a sector that requires an integrated management system.”
Iran’s annual petrochemical capacity was supposed to reach 85 million tons in 2021, yet it is still below 65 million tons.
The official noted that the US sanctions have also created thorny problems, one of which is that Iranian traders cannot negotiate with international companies directly.
“We cannot use global banking systems to transfer money that has severely hindered Iran’s presence in international markets,” he added.
Policy Changes
Padidar said frequent policy changes and adoption of anti-export strategies will become a recipe for disaster for a sector that has proven to be a domestic money-making industry.
Some policymakers have proposed the imposition of taxes on exports and the parliament will go through the bill’s details and make any necessary changes before it is passed into law.
Such wrong policies will have detrimental effects on exports and many firms could file for bankruptcy and transfer their investment to neighboring nations like the UAE where exports are exempted from taxes.
The rapid expansion of regional rival Saudi Arabia in the petrochemical sector also poses a real challenge to Iran's market share.
It is high time stakeholders in the key sector "mobilize and get their act together in the realm of policymaking and determine pricing structures", he said.
"Saudi Arabia is our main competitor in the Middle East and North African petrochemical market. We need all our petrochemical producers to follow integrated policies to regulate supplies and decide pricing structures to counter the Saudis."
The state-owned National Petrochemical Company is the top regulatory body of the industry.
The official criticized the high price of natural gas delivered to petrochemical companies as feedstock and noted that each cubic meter of gas is sold at 20 cents.
Ebrahim Asgarian, the head of the board of directors at Kaveh Methanol Complex in the Persian Gulf port city of Bandar Dayyer, Bushehr Province, believes that operations have no economic justification any longer, as the National Iranian Oil Company has started to sell each cubic meter of gas at 20 cents, while the same amount of feedstock is sold at 15 cents in Europe.
The production of each ton of methanol costs the firm $430, yet it can be sold at a maximum price of $310 in foreign markets.
Asgarian said the company is incurring losses of $120 per ton, because of which it will halt operations until further notice.
Kaveh Methanol Complex, which became operational in 2020, increased Iran’s annual methanol production by 2.3 million tons to reach 14 million tons.
