NDFI Allocates $6b for Petrochem Projects

NDFI Allocates $6b for Petrochem ProjectsNDFI Allocates $6b for Petrochem Projects

The National Development Fund of Iran has allocated $6 billion for the development of petrochemical and refining sectors in the current Iranian year (ending March 19, 2016), deputy for finance and investment development at the National Petrochemical Company said on Monday.

"The letters of credit for some petrochemical projects have been opened and as soon as SWIFT starts operating, allocation of funds will be accelerated," Amir-Hassan Fallah was quoted as saying by Shana.

SWIFT, or the Society for Worldwide Interbank Financial Telecommunications, provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

According to Fallah, foreign investors have shown interests in cooperating with Iran on petrochemical plans on a whole range of areas.

"The Japanese are interested in investing in utility units, olefin [including ethylene and propylene] and ammonium. Besides, Indians and Koreans are eager to finance urea and aromatics [including benzene, toluene and xylene isomers] projects," he said.

Stressing that small-scale petrochemical projects are not economically viable, the official noted that this does not necessarily mean small investors cannot play a role in this industry as they can either put money into petrochemical complexes' development projects or buy stakes in the downstream sector, such as refining of crude oil and the processing of raw natural gas, as well as marketing and distributing petroleum products.

The official noted that of the 36 proposed projects, 15 top NPC's operational agenda, most of which are located in the South Pars region in southern Iran.

"Undertaking these plans requires at least $500 million in investment," he said.

Fallah believes that the termination of banking and transportation sanctions will revolutionize the petrochemical industry, as it encompasses a broad range of products whose exports can help develop Iran's economy.

"The industry is in dire need of a whopping $10 billion in annual investment," he said, noting that domestic banks will not be able to shoulder such a heavy financial burden, which explains why this important industry cannot prosper without foreign investment.

NPC's Role

According to the NPC head and deputy oil minister, Abbas Sheri-Moqaddam, NPC should be in charge of adopting coherent policies and analyzing market developments.

NPC is primarily responsible for identifying the most suitable spots in Iran to build upstream and downstream complexes. Needless to say, cutting red tape for domestic and foreign investors and providing them with updated data can help attract more money to this industry.

Iran, one of the world’s top oil producers, exported around $14 billion worth of petrochemicals in 2014, down from more than $18 billion in 2011.

On Iran’s petrochemical production capacity, Mohammad Hassan Peyvandi, the deputy head of National Petrochemical Company, said more than 50 million tons of petrochemicals are expected to be produced by March 2016, which would account for 81% of nominal production capacity and register a record.

Iran's petrochemical production reached nearly 20 million tons in March-August, with 4.3 million tons produced last month, Shana said in a report.

Annual petrochemical output in the previous two Iranian years accounted for 40.5 million tons and 44.5 million tons respectively.

The volume is expected to surpass the 50-million-ton milestone in the current year (ending March 19, 2016), upon the completion of several phases of the South Pars Gas Field in the Persian Gulf and a hike in ethane production.

NPC has estimated that Iran's nominal petrochemical production capacity will reach 62.6 million tons this year.

It expects total petrochemical exports to hit $11 billion while domestic sales are estimated to reach $11.1 billion, bringing the overall value of petrochemical sales to exceed $22 billion by March.