Germans Propose €12b in Petrochem Investment

Germans Propose €12b in Petrochem InvestmentGermans Propose €12b in Petrochem Investment

Two major German companies are ready to invest €12 billion in Iran's petrochemical projects after the lifting of sanctions, managing director of the National Petrochemical Company said on Monday.

"One [German] company has lined up an €8 billion investment plan and the other a €4 billion project," Abbas Sheri-Moqaddam also said on the sidelines of a ceremony marking the National Petrochemical Day and the 51st anniversary of NPC, IRNA reported.

In a major conference earlier this month, Iran signaled it is ready to open doors to international companies after the lifting of sanctions, planning to attract $70 billion in petrochemical investments in a 10-year timeframe.

"Foreign firms were afraid of working in Iran, but they have presented several offers for cooperation in the petrochemical sector over the past few months," he said.

Nominal production capacity currently stands at 60 million tons a year, but plans call for doubling the volume by 2021 and raising the output to an ambitious 180 million tons a year by 2025.

According to reports, petrochemical exports reached 16 million tons worth $10 billion last year.

Sheri-Moqaddam added that the private sector should be encouraged to invest in Iran's petrochemical infrastructure as part of measures to attract foreign direct investment in a key sector that has the potential to earn more than the plummeting oil revenues.

"The government so far has been providing the infrastructure [in the petrochemical industry], but the private sector should be prompted to do so," he said in his speech on Monday. "Private investors should establish the infrastructure in underdeveloped areas."

Sheri-Moqaddam stressed that after initiating the privatization of NPC subsidiaries in 2006, the company started to rethink its strategy and has been involved in planning and policymaking for the petrochemical sector over the past decade rather than engaging directly in production and trade.

Reflecting on challenges against the development of petrochemical industry, Sheri-Moqaddam said some "bureaucratic rules" deter investment. However, the official called for devising a way to fast-track investment in petrochemical projects.

Mohammad Hassan Peyvandi, NPC's vice president, also addressed the event on Monday.

In a somewhat different view from Sheri-Moqaddam, Peyvandi said the government is "compelled to create the infrastructure" to lure foreign investment in petrochemical projects.

He singled out petrochemical infrastructure, i.e. refining and production facilities, as the most important factor to attract FDI and said the abundance of feedstock and incentives such as tax exemptions are secondary issues.

"We cannot expect internationals to make multibillion-dollar investments without providing an adequate [production] site by the sea," he said.

Peyvandi also said shrinking oil revenues "cannot even provide the cash subsidies", adding that it is an opportunity to reduce dependence on petrodollars. Oil prices reached $32-a-barrel range last week, a level last seen in 2004.