Economy, Domestic Economy

Fixing the Inept Bitumen Industry

Fixing the Inept Bitumen Industry Fixing the Inept Bitumen Industry

Global demand for bitumen is expected to reach 137 million tons by 2020, growing at an annual rate of 2.7% from 2014 to 2020. This level of increase in demand arises largely from the rapid growth in infrastructure development in China and the Asia-Pacific region, with special focus on road construction.

The vast majority of refined bitumen is used in construction, primarily as a constituent of products used in paving and roofing applications. According to the requirements of the end use bitumen is produced to specification. This is achieved either by refining process or blending.

It is estimated that the current world use of bitumen is approximately 102 million tons per year. Approximately 85% of all the bitumen produced is used as the binder in asphalt for roads. It is also used in other paved areas such as airport runways, car parks and footways.

Iran is ranked as the first exporter of bitumen in Middle East and second in Asia after South Korea. On the global list Iran is the seventh producer and fourth exporter of this important petroleum product with exports from Iran accounting for 3.8 percent of global demand. This is while, hamstrung by a litany of punitive sanctions, Iran is exporting bitumen at a lower price compared to other countries in the region - such as Bahrain - with a much lower production/ export capacity.

In an article in the Persian economic daily, Donya-e-Eghtesad, Mohsen Delavizi, managing director of Pasargad Oil Company -- one of the biggest bitumen manufacturing companies in Iran  – reviewed some factors undermining Iran from fully realizing its potential in bitumen production and export despite being a key player in the growing global market.

According to Delavizi, bitumen manufacturing plants were separated from oil refineries as part of the privatization process more than a decade ago. "Whether the privatization process has helped the bitumen industry grow or reduced the efficiency of refineries by eliminating heavy distillates and residuum from the industrial process remains a matter of contemplation."

The expert pointed to the visible absence of an authority to deal with the bitumen industry as the main cause for the confusion in the sector. "Raw material for bitumen production is supplied through the oil ministry; whereas production is handled by the ministry of labor cooperatives, labor and social affairs. And mind you the end consumer is the ministry of roads and urban development."

As a result of the privatization process which began a decade ago, close to 100 small and medium companies entered the industry and are now active in bitumen packaging and sales. The sheer scale and size of the units make monitoring and quality control almost impossible, paving the way for low quality bitumen in the global markets, and in the long-run threatening the reputation of Iranian bitumen, Delavizi observed.

  Making Economic Sense

He also referred to the absence of Iranian bitumen manufacturers and exporters in international forums (major conferences and seminars) as yet another reason why the Iranian bitumen industry has not received the status it deserves. Wisdom and economic sense would demand that "we start promoting bitumen on the global level through science-based business approaches and create brands for Iranian bitumen."

While acknowledging the adverse effects of the unjust sanctions (imposed on Iran by the western powers and  the UN Security Council to force Iran to suspend its uranium enrichment program) that cut both export price and volume of Iranian bitumen compared to other exporters, Delavizi believes the industry should regain its rightful place in the market through "discipline, integrity, efficient export policies (especially quality control), avoiding unhealthy competition and interacting with other regional players."

Moreover, in the absence of suitable authority to oversee the industry, some oil refineries are still producing bitumen and bituminous products, despite having transferred the responsibility to manufacturing units a decade ago, he recalled. "As heavy distillates and residuum are not the prime products of refineries, not enough attention is paid to quality control of such products in refineries."

In light of the challenges Iran's bitumen industry continues to face, the Pasargad Oil Company CEO called for a consensus between all sectors active in bitumen production to help introduce Iran's high quality bitumen in international markets. He suggested founding a special body on the lines of OPEC (Organization of the Petroleum Exporting Countries) to help secure efficient and regular supply of bitumen.