New Investment Framework for Petrochemical Projects

New Investment Framework for Petrochemical ProjectsNew Investment Framework for Petrochemical Projects

Iran is working on a financial framework to facilitate foreign direct investment in its petrochemical industry, a member of the board of National Petrochemical Company said.

"NPC and the Oil Ministry are working on the new framework to encourage foreign and domestic investments in petrochemical projects," Farnaz Alavi was also quoted as saying by Shana on Friday. The framework is expected to clear many hurdles and obscurities for investment in Iran's sanctions-hit energy industry and ease the return of international companies still wary of doing business with Iran more than five months after sanctions removal.

The US and EU intensified trade restrictions against Iran in 2011 and 2012 targeting its nuclear program. Many internationals, particularly European companies, flocked out of Iran's economy in fear of violating sanctions.

But the lifting of nuclear-related sanctions in January has allowed Iran to open up a plethora of investment opportunities to foreign firms, including multimillion-dollar projects in petrochemical sector, its second-most valuable industry after oil and gas. The new framework appears to be an effort to not only clear the air of uncertainty over sanctions, but also to ease red tape and investment regulations that existed before the sanctions and hinder foreign investment to date.

Alavi said once the framework gets the final approval, it will streamline some investment processes, such as receiving feedstock for petrochemical plants.

NPC is the chief regulatory body for Iran's petrochemical sector. The state-owned company has converted many of its public subsidiaries into privately-run companies to boost private sector cooperation with international firms in the petrochemical sector. Iran hopes to attract $55 billion in a petrochemical industry that, according to some analysts, can be more lucrative than Iran's oil and gas business in the long run.

The government is also taking measures to accelerate its reintegration with global markets. An official said last week that the main issues on insurance coverage for the petrochemical sector, which includes the transport of products, have been resolved. But like other nations, Iran's petrochemical industry is grappling with significantly lower income from crude oil, which has adversely affected its petrochemical sector.

The volume of petrochemical exports in the past five months has soared by more than 30% compared to its pre-sanctions levels, although persistently low price of crude oil has curtailed any significant boost in the value of exports.