Total, Iran to Sign Petrochem Agreement

The Persian Gulf Petrochemical Industries Company is close to finalizing an agreement with French energy major Total S.A. to conduct feasibility studies on petrochemical ventures in Iran, the managing director of PGPIC said.

"Serious talks are underway with two multinationals, one of which is Total, to attract $9.5 billion in investment for commencing petrochemical joint ventures," Adel Nejad-Salim was also quoted as saying by NIPNA, the official news agency of National Petrochemical Company on Sunday.

Highlighting the significance of winning foreign investors' trust, Nejad-Salim said, "As long as mega petrochemical ventures are not internationally funded, government and non-government bodies cannot help the potentially lucrative industry flourish."

Asked about the location of plants, the official noted that the Pars Special Economic Energy Zone in Asalouyeh and the Parsian Special Economic Energy Zone in Bushehr Province are being studied by domestic experts and a final decision will be made soon.

Total has reached a preliminary agreement to build three petrochemical plants, with a total capacity of 2.2 million tons in a deal that, if finalized, could see the French oil major investing up to $2 billion in Iran. 

"The first preliminary agreement calls for constructing two polyethylene units plus an ethane cracker unit to convert ethane to ethylene," Nejad-Salim said, adding that the two sides have also agreed on building a unit to manufacture polymeric products.

Reportedly, Shell also signed an agreement with the National Iranian Oil Company last year on expanding cooperation in the key petrochemical industry. 

The Anglo-Dutch company has agreed to invest $350 million in a major petrochemical project in Hamedan Province, but analysts say its venture in Iran's petrochemical sector could soar to as much as $6 billion.

Tehran is making efforts to double annual petrochemical production capacity from the present 65 million tons by opening up the sector to foreign investors. Iran has said it needs $72 billion in foreign investment for 80 major petrochemical projects.

Domestic Capacity 

According to Reza Khayyamian, the head of the Society of Iranian Petroleum Industries Equipment Manufacturers, a meeting has been planned in Tehran this week between Total officials and oil and gas domestic manufacturers to discuss the implementation of Phase 11 of South Pars Gas Field.

Total finalized a deal, worth $4.8 billion, in July to develop South Pars Phase 11. The French company will collaborate with China National Petroleum Corp and Iran’s state-owned firm Petropars to produce 2 billion cubic feet, or 56 million cubic meters per day of natural gas from Phase 11 of the joint gas field. 

"The French major is expected to provide members of the society with a list of equipment for the project," Khayyamian said.

Referring to a recent meeting of Oil Minister Bijan Namdar Zanganeh with oil equipment manufacturers, the official noted he outlined the sector's capacity to the minister and received his approval to negotiate with Total.

According to the terms of the agreement, Total's officials have agreed to make maximum use of Iranian manufacturers' capacity to develop the giant project.

Energy experts, including Khayyamian, believe that new oil and gas contracts with international energy majors are a unique opportunity for domestic manufacturers of oil and gas equipment to enhance their managerial and financial capacities, and establish joint ventures to expand their business overseas.