Gas Feedstock Price Set

Gas Feedstock Price SetGas Feedstock Price Set

Gas as feedstock to petrochemical complexes has been priced at 13 cents for August-September (first half of the Iranian year), while gas for burning as fuel will cost 3-4 cents, Deputy Oil Minister Abbas Sheri-Moqaddam said on Sunday.

Sheri-Moqaddam said the new tariffs were presented to the oil, economy and industries ministries in a bylaw signed by Vice President Es’haq Jahangiri, ILNA reported.

The new prices are determined based on the average selling prices of feedstock to domestic and foreign customers. The official said feedstock prices are deduced from a single formula, though final prices may vary depending on the type of gas consumption in power plants.  

"For instance, Mobin and Fajr petrochemical complexes burn all their gas as fuel … while 90% of gas supplies to some power plants are used as feedstock and the rest is burned as fuel," he said.

Sheri-Moqaddam noted that there will be a price cut for feedstock to petrochemical complexes in deprived or less-developed areas. Setting feedstock prices will allow investors to assess the profitability of their venture in the Iranian market.

However, Managing Director of Bandar Imam Petrochemical Complex Reza Amiri says, "We have to wait and see the investors' reaction" to the new tariffs and also see the prices in Persian Gulf neighbors.

"In case it does not receive a positive reaction, we should give a second thought" to feedstock prices, he said. The newly announced prices would be reasonable "only if domestic products are competitive with similar products in the region in terms of final prices", he added.

Amiri stressed that volatility in feedstock prices would lower investment opportunities in the petrochemical sector.

"Uncertainty in feedstock prices does not affect output, but can hurt revenues," because of a lack of reliable prospect for making future investments. Amiri noted that feedstock prices vary from 6 to 8 cents in the Middle East.

  Gas Supply to Power Plants

Close to 30 billion cubic meters of natural gas were delivered to power plants nationwide in March-August, averaging 193 million cubic meters per day, the National Iranian Gas Company said. The volume sees a 3.5-bcm increase compared to the same period of last year.

"Gas supply to power plants helps make economic savings and curb pollution," Mojtaba Sheikh-Bahai, deputy for engineering and extraction at the NIGC, said.

According to plans, gas supply to power plants is expected to go up by 7 bcm in the current Iranian year (ending March 19, 2016).

Following the launch of several phases of South Pars Gas Field in the Persian Gulf last year and increase in natural gas output, gas has replaced mazut and diesel as feedstock in some refineries and power plants.

In addition, the government has instructed power plants and refineries to use gas instead of more polluting feedstock due to abundance of gas resources in Iran and the rise in SP gas extraction. Approximately 14 bcm of gas, or 93 mcm per day, were delivered to major industries over the past five months. Households and light industries also burned more than 24 bcm of natural gas in this period.