Iran Feedstock Prices for Q1 Competitive

Iran Feedstock Prices for Q1 Competitive Iran Feedstock Prices for Q1 Competitive

Iran listed the prices of natural gas delivered to petrochemical complexes as feedstock for the first three months of the present Iranian year (March 20- June 20).

The new price points per cubic meter are more competitive with feedstock tariffs in the region, standing at around 6.5 cents (2,313 rials) for the first month and 7 cents and 7.7 cents for the second and third months respectively, ISNA reported.

Feedstock price is a key factor when it comes to investment in petrochemical projects.

The tariffs are deduced from a pricing formula that was approved last year and will be in effect until 2025.

As per the new formula, the price of feedstock will be contingent upon prices at major global gas trading hubs, including the US Henry Hub, Alberta Hub in Canada and the UK NBP Hub, the Oil Ministry said in a report.

According to the report, deduced prices will take a 10% cut in the first half of the year and will increase by 10% over the second half.

  Past Developments

Feedstock was previously sold to domestic petrochemical complexes at 13 cents per cubic meter and had become a subject of contention among petrochemical producers.

Ahmad Mahdavi, director general of Petrochemical Employers Association, said last year that the 13-cent price point was unreasonable.

According to reports, Persian Gulf Arab states offer feedstock at prices varying from 6 to 8 cents, but prices are slightly cheaper in Russia and Canada, with the average price in Persian Gulf, North America, and Africa at 5.5 cents.

Opponents of costly feedstock have called for more reasonable prices for extended to attract foreign investment.

In April it was reported that a pricing formula was approved by the ministry, based on which every cubic meter of gas as feedstock was priced between 8.5 to 9 cents for the first half the present Iranian year that started in March.

However, some top industry players claim the pricing was still unattractive and puts Iran’s sanctions-hit petrochemical sector at a disadvantage vis–à–vis foreign rivals, especially in the Persian Gulf region.

Many officials, including First Vice President Es’haq Jahangiri, said the price cut from 13 to 8 cents can and should help the petrochemical companies to have  bigger profit margins.

Endorsing the new formula, Economy Minister Ali Tayyebnia and head of Management and Planning Organization of Iran Mohammad Baqer Nobakht, asserted that new prices are an improvement over the previous 13 cents per cubic meter.

On the other hand, Mohammad Ali Rejali, vice president of Iran’s Association of Petrochemical Industry Corporation, said the new formula may cut losses for petrochemical units, but is still lackluster for foreign investors.