Plan to Incentivize Petrochem Investment

The purchase of foreign shares is not a priority for Iran, as it aims to develop the country’s petrochemical sector.The purchase of foreign shares is not a priority for Iran, as it aims to develop the country’s petrochemical sector.

New petrochemical projects in Iran will receive cheaper gas feedstock as part of the government’s incentive to spur growth in the key petrochemical sector, the director for production control at the National Petrochemical Company said on Friday.

“Ventures in the country’s petrochemical sector will receive between 10% and 30% cheaper feedstock, according to a law approved two years ago,” Ali Mohammad Bosaqzadeh was also quoted as saying by IRNA.

Iran is also offering tax exemptions in energy zones as incentive for attracting multinationals to invest in lucrative petrochemical projects.

It has set an ambitious petrochemical production target of 180 million tons a year by 2025, nearly three times the current level.

Ahmad Mahdavi, secretary-general of the Association of Petrochemical Industry Corporations, also noted that buying stocks of profitable petrochemical companies and complexes in Asia and Europe can be a suitable economic and commercial strategy for Iran in the post-sanctions era.

However, the country’s private sector currently has no such plan, Mehr News Agency reported.

“In view of Iran’s present potential for developing domestic petrochemical industry, the purchase of foreign shares is not a priority,” he said.

  $60b Market

Pointing to the country’s $60 billion investment capacity in the sector, which has been created after the international sanctions were lifted in January, Mahdavi added that the oil and gas rich country has advantages over other petrochemical producers that justify the foreign countries’ growing interests in petrochemical investment.

“Huge resources of oil and gas, a diverse basket of petrochemical feedstock, accessibility to international waters via the Persian Gulf and the Sea of Oman as well as proximity to large consumer markets such as India and China among other East Asian countries, Turkey and Caucasian states, are some of the factors that can put Iran’s petrochemical sector in a more favorable position in the future,” he said.

During a conference in Tehran in December 2015, Iran announced plans to attract $70 billion in petrochemical investment to develop the industry.

According to international institutions, the rival country Saudi Arabia is currently facing shortage of gas feedstock for its petrochemicals, which cannot be alleviated with the exploitation of Karan Gas Field in the country’s territorial waters.

This is while Iran is now fast expanding the new phases of South Pars Gas Field, as the Iranian part of the world’s largest gas field shared with Qatar.

Officials say the field can increase gas production by up to 700 million cubic meters if certain operational and financial hurdles are removed.   

Iran aims to produce more than 40% of the Middle East’s total petrochemical output by 2021 and become the largest petrochemical producer in the region in 10 years.

The country’s petrochemical output in the last Iranian year (ended March 19, 2016) accounted for nearly 25% of total Mideast production.