Petrochem Fund on the Back Burner

Petrochem Fund on the Back BurnerPetrochem Fund on the Back Burner

A total of 67 incomplete petrochemical projects need an estimated $40 billion to come on stream, but  financial constraints have necessitated new approaches such as project funds to attract public capital to help develop the petrochemical industry, deputy manager of the National Petrochemical Co. (NPC), Mohammad Hussein Peyvandi said Monday.

Major projects obviously need huge financial input which cannot be supplied by small institutions, Tasnim news agency quoted him as saying. "Thus, setting up special funds for petrochemical projects seems the best option." He noted that the stock exchange could also help in attracting interest and investment in the key sector. "Promoting such ventures also demands incentives…introducing  economically-viable projects first and then seeking financing via project funds," should produce the desired results.

The biggest challenge oil, gas and petrochemical industries have been grappling with in recent years is related to liquidity, according to Peyvandi. The problem seems more pronounced in the petrochemical sector in which the 67 incomplete projects are a testament. The annual production capacity of these projects is 60 million tons and they need a whopping $40 billion to take off.

Given the pressing financial needs, a sort of national mobilization is long underway to help privatize the petrochemical industry as the relevant officials are neither interested nor authorized to finance the gigantic projects from government resources. An added problem is that the industry's share in the National Development Fund and Chinese finance seems to be meager at best.

Consequently, the projects lag behind, and as the present manager responsible for the development of the National Petrochemical Co., Marzieh Shahedaie, complains, "Three-year plans see the light of day after 10 years."

Given the fact that the industry has a decent profit margin, workable strategies to get the projects off the ground with access to the much-needed liquidity is a must.  To this end, the NPC in cooperation with the stock exchange embarked on setting up the 'Project Fund' in 2012 with the aim of easing the extended financial constraints. In spite of the fact that initial stages were successful and the fund was due to be launched by the end of 2014, nothing has materialized.

Currently, 45 petrochemical units produce 60 million tons of diverse products and account for 36 percent of the total non-oil exports. According to available data, Iran holds 24 percent of Middle East's and 4.2 of the world's petrochemical production capacity.