A substantial reduction in gas supply to petrochemical plants, the sale of more goods in Iran Mercantile Exchange and a price slump in international markets have reduced the petrochemical sector’s revenues, the secretary-general of the Association of Petrochemical Employers Unions said.
“The production of some key products, including urea and methanol between January and February, experienced a decline of 5 million tons compared to the same period of a year ago,” ILNA also quoted Ahmad Mahdavi-Abhari as saying.
Due to the noticeable drop in output, the sector’s revenues from exports fell by $1.5 billion in the 60-day period, he added.
According to the official, petrochem plants are offering 30% more goods to IME compared to last year due to which they are not able to inject as much foreign currencies as last year to the Integrated Forex Deal System, locally known as Nima, a platform where exporters sell currency earnings at prices lower than open market rates.
Petrochem goods account for 40% of Iran’s non-oil exports and formulating a pricing mechanism for feedstock is of great importance, he added.
The official noted that the petrochem industry comprises 60% of Iran's capital market and any changes in feedstock prices could give rise to wild fluctuations in the market.
According to Mahdavi-Abhari, as long as the National Petrochemical Company does not adopt a coherent and long-term policy regarding feedstock prices, efforts to attract investment (either foreign or domestic) will be in vain.
Unreasonably High Prices
Criticizing the unreasonably high prices of domestic natural gas as petrochem feedstock, the official said, “Their prices are as expensive as those of European importers of natural gas. Why should we be paying the same price, given the fact that Iran is exporting the commodity?”
Comparing gas prices for petrochemical units, cement factories and power plants, Mahdavi-Abhari said petrochemical firms have to purchase each cubic meter of gas for 20 cents, while the cement plant pays 1.3 cents for the same volume and power plants get the feedstock for free.
“The 55 petrochemical companies in Iran use 35 million tons of natural and liquefied gas as feedstock annually to produce 31 million tons of products,” he added.
According to Morteza Shahmirzaei, managing director of the National Petrochemical Company, the total output of Iran’s petrochemical industry reached 40 million tons in 2022, of which 40% or 27 million tons were sold in international markets.
“NPC earned close to $26 billion totally, $16 billion of which were generated by exports, and the rest [$10 billion] was received from selling 13 million tons of goods to domestic firms,” he said.
“Plans are underway to increase the current nominal annual production at 65 million tons by 23% to reach 80 million tons in 2023. If ongoing projects to boost feedstock delivery to 67 major petrochemical complexes, mostly concentrated in the cities of Mahshahr [Khuzestan Province] and Asalouyeh [Bushehr Province], become operational on time, both output and revenues will rise substantially.”
According to the NPC chief, this year, petrochemical feedstock will increase and 5 million tons will be added to the production capacity of the petrochemical industry.
“The nominal output is expected to reach 80 million tons and this will increase exports which, in turn, will lead to higher revenues,” he said.
He noted that last year, the gas feed capacity of petrochemical complexes was equal to 98 million cubic meters per day, which will increase this year to help raise output.
Value Chain
Shahmirzaei said the focus is on completing the value chain of petrochemical products to reduce the sale of raw materials and semi-finished products, create more added value and eliminate the need for imports, which currently stand at $1.5-2 billion.
Hassan Abbaszadeh, NPC’s director for planning and development, said due to the lower attraction of foreign investments in the past few years, the main burden has been borne by holding companies and they invest about $4 billion annually in the petrochemical sector.
Since almost all big holding companies are semi-private, the official hoped that the real private sector would also invest in the petrochemical industry.
“Currently, 140 types of products are made by petrochemical complexes across the country and an additional 20 products are planned in the next five years,” he added.
According to Sajjad Khalili, deputy oil minister for planning and supervision of hydrocarbon resources, refineries and petrochemical plants across Iran are operating at half their capacity due to the lack of feedstock.
“Iran holds 33 trillion cubic meters of the world’s natural gas resources. Regretfully, most petrochemical firms and gas processing facilities, including the Persian Gulf Bidboland Gas Refinery in southern Khuzestan Province, are facing problems in completing the value chain of their products because there is no feedstock,” he said.
