European Firm Close to €7 Billion Petrochem Deal

European Firm Close to €7 Billion Petrochem DealEuropean Firm Close to €7 Billion Petrochem Deal

A European company is planning to invest €7 billion in a major petrochemical project in southern Iran, managing director of the Persian Gulf Petrochemical Industries Company said on Monday.

“The (unnamed) company wants to establish a joint venture in Asalouyeh,” Adel Salim-Nejad said. “The project will lead to producing new petrochemicals in Iran for the first time.”

He added that PGPIC and the European firm are close to signing a deal after months of negotiations, IRNA reported.

Iran aims to sell 93 million tons of petrochemicals worth $61 billion under the sixth five-year development plan (2016-21).

In line with the plan, petrochemical projects, worth $37 billion, have been offered to foreign and domestic investors.

Petrochemical products are Iran’s second biggest source of income after crude oil, but officials are confident that Iran can earn more money from petrochemicals than it makes from oil.

More than 46 million tons of petrochemical commodities were produced during the last Iranian year (ended March 19, 2016), of which 19 million tons worth $9.5 billion were exported.  

“Due to effective measures to provide petrochemical complexes with much-needed natural gas as feedstock, NPC’s production in 2015 witnessed a 2.5-million-ton rise compared with the corresponding period of 2014,”Ali Mohammad Bosaqzadeh, National Petrochemical Company’s coordination and supervision director, told ISNA on Monday.

Pointing to the fact that the nominal capacity of petrochemical units in 2014 stood at 76%, resulting in the production of 43.5 million tons of petrochemical goods, the official noted that the capacity reached 80% in 2015.   

  NPC Revenues

Giving a breakdown on NPC’s revenues, Bosaqzadeh said the value of last year’s exports plus domestic sales stood at $23 billion, of which $13.5 billion were earned from domestic sale and 19 million tons worth $9.5 billion were exported.

On petrochemical complexes’ natural gas consumption as feedstock, the official said, “The units used 43.7 million cubic meters of gas in 2014, which experienced a 2.1% rise and reached 45.8 mcm in 2015.  

He stressed that 1.474 million tons of ethane, provided by the upstream sources, were consumed in petrochemical units in 2014, whereas it reached 1.525 million tons in 2015. According to reports, the complexes used 239,000 tons of gas condensates in 2014, yet their consumption amounted to 5.382 million tons in 2015.

Underscoring the lack of liquidity in petrochemical industry, which has led to a deep economic recession, the official added that 45% of petrochemical products are used domestically. He noted that as per NPC rules and regulations, petrochemical producers must first supply domestic industries and then plan for export. “Export should be producers’ second priority because as long as the downstream sector’s needs are not met, export licenses will not be issued,” he said.

According to the official, negotiations are underway between NPC and the Ministry of Industries, Mines and Trade so that domestic needs are satisfied effectively.

“The administration is required to adopt efficient policies to inject more liquidity into the industry,” he said.

Asked about NPC’s plans to raise production in 2016, Bosaqzadeh noted that after the enforcement of the Joint Comprehensive Plan of Action, the import of petrochemical goods and equipment has become easier, therefore a noticeable rise in production is expected.

Stressing that petrochemical goods were sold indirectly through various institutions in the past, Bosaqzadeh said foreign exchange transfer fees will decrease in the post-sanctions era.

“The generated revenue can be spent on purchasing cutting-edge production technology at more reasonable prices and domestic enterprises will be more enthusiastic to raise output, a part of which can be exported to target destinations,” he said.