Petrochem Powerhouse Revisited by Int'l Firms

Energy Desk
Petrochem Powerhouse  Revisited by Int'l Firms
Petrochem Powerhouse  Revisited by Int'l Firms

The port city of Asalouyeh in the southern Bushehr Province houses the world’s biggest olefin and aromatic production plants, and is also the largest petrochemical export hub in the Middle East.

Marzieh Shahdaei, project director of the state-owned National Petrochemical Company, made the statement during a daylong visit by a high-ranking delegation of international petrochemical, engineering and shipping companies to Asalouyeh's petrochemical infrastructure earlier this week.

"This is an opportunity to show the capacity of Iran's petrochemical facilities and contractors in all operational phases, from construction to production and maintenance," she said.

Asalouyeh–part of the massive Pars Special Economic Energy Zone in the south covering roughly 46,000 hectares of land—is the site of numerous petrochemical plants that receive natural gas through a 100-kilometer-long pipeline from the South Pars Gas Field to produce a wide range of petrochemicals such as ethane, methane, methanol, propane, propylene and butane.

Petrochemical projects in Asalouyeh are being developed in two phases. The nominal production capacity of Phase 1 currently stands at 25 million tons of petrochemicals a year, with the volume expected to reach 60 million tons per year upon the completion of the second-phase projects.

Singapore, Malaysia, China, Japan, South Korea, India and Middle East countries are the main importers of Asalouyeh's petrochemical products, but plans call for reaching out to European markets in the post-sanctions era.

Foreign companies previously active in Iran have a greater chance of undertaking petrochemical projects after the sanctions removal, according to an official at Bushehr Petrochemical Company who did not wish to be named.

Besides Venezuelan, Malaysian and Japanese firms, French oil and gas major Total, South Korea's Hyundai and Italy's Eni are among the likely candidates to resume operations in Iran, the official added.

Iran holds an estimated 34 trillion cubic meters of natural gas reserves, the world's largest, which makes it a place of choice for investment in gas and petrochemical sectors.

Shahdaei noted that a power plant with an output of 1,000 megawatt has come on stream in the first development phase of Asalouyeh and a second power plant with double the capacity is under development for Phase 2.

NPC's Managing Director Abbas Sheri-Moqaddam raised the bar last week for the petrochemical production capacity, saying the annual output will reach 70 million tons by March 2016.

Iran is counting big on foreign direct investment to boost petrochemical production capacity to 180 million tons a year by 2025. Officials hope the nation's petrochemical projects can attract $70 billion in investment after trade and financial restrictions against Tehran are removed.

  Feedstock Price

On the price of feedstock, a deal breaker for international companies seeking long-term investment in Iranian petrochemical projects, Shahdaei told Financial Tribune that the government has proposed a pricing formula that will be decided upon in two weeks.

"The pricing scheme depends on many factors, such as oil, gas and methane prices," she said, adding that the formula will likely be effective for a 10-year period if approved.

The government had previously set the price at 13 cents per cubic meter for August-September, which has met with opposition from domestic petrochemical complexes.

According to reports, the average price of feedstock in Persian Gulf Arab countries stands at 6-8 cents. Earlier this week, an official from Tehran Chamber of Commerce, Industries, Mines and Agriculture made a case for raising feedstock tariffs from 13 cents to 35 cents per cubic meter, in a statement that further agitated petrochemical stakeholders.

"Feedstock prices for petrochemicals are set in the region. Iran imports natural gas from Turkmenistan at 33 cents per cubic meter and sells it to Turkey at 44 cents," Mehdi Pourghazi added.

Pourghazi questioned what he termed the unlawful advantage of semi-government industries from using inexpensive feedstock, stressing that current prices are counterproductive to privatization.