Petrochem Sector Expansion With Foreign Investment

Iran plans to produce 180 million tons of petrochemicals per year by 2025.Iran plans to produce 180 million tons of petrochemicals per year by 2025.
Iran is expanding export markets in South America and Europe, with its first petrochemical cargo planned to be shipped to Italy in the near future

Iran has attracted billions of dollars in foreign investment in petrochemical projects after the agreement over the disputed nuclear program last year, with the Chinese making the biggest financial contribution to the key energy sector, head of the Persian Gulf Petrochemical Industries Company (PGPIC) said on Tuesday.

"Eleven petrochemical projects worth €6 billion ($6.68 billion) are being developed with Chinese finance," Adel Salimnejad said while on a tour of  petrochemical projects in the central province of Kohgilouyeh-Boyerahmad.

Construction work on the projects on average has made 40% progress, Salimnejad said, stressing that expanding petrochemical projects is essential for diversifying the ailing economy that has been based largely on crude export revenues over the past four decades.

Some international trade and banking restrictions that had undermined the economy over the past few years were lifted in mid-January, giving the country leeway to renew trade ties with multinationals.

PGPIC is developing a raft of petroleum and petrochemical projects in Asalouyeh and Mahshahr—home to Iran's largest petrochemical complexes—as well as Pars Special Economic Energy Zone in the southern Bushehr Province and Ilam Province that borders Iraq to the west.

The PGPIC chief said Iran is a hotspot for investment in petrochemical projects due to access to international waters, abundance of cheap natural gas as feedstock and incentives such as tax exemption for investments in energy zones and discounts on feedstock.

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

With over 60 subsidiaries, PGPIC is Iran's largest of the petrochemical companies, owning more than 11% of Iran's capital market. Its exports are estimated at $8-9 billion per year. According to published reports, PGPIC has been the second biggest petrochemical exporter in the Middle East.

  Expanding Exports

Iran's Karoun Petrochemical Company (KRNPC) is expanding export markets in South America and Europe, with its first petrochemical cargo planned to be shipped to Italy in the near future, the company's commercial manager said.

“Under the sanctions regime, Iran’s petrochemical exports were limited to Middle East, such as Turkey and the UAE. Nonetheless, Sweden, Albania, Russia and Greece have now joined the customers' list,” Kazem Bastakian was quoted as saying by Mehr News Agency on Wednesday.

Noting that one of KRNPC’s main products is toluene diisocyanate (TDI), a compound widely used in manufacturing glue and packaging industry, Bastakian said that the company started production of the organic compound five years ago and plans are underway to send the first TDI cargo to Italy.

KRNPC, as a midstream industrial company, receives its feedstock from the petrochemical complexes from Bandar Imam, Bu Ali Sina, Fanavaran, Arvand, Razi and Shahid Rasouli.

The lifting of sanctions in January has set the stage for Iranian companies to boost petrochemical exports to Europe, a large market that gradually grew out of reach after tighter restrictions were imposed in 2011 and 2012.

Officials say Iran's petrochemical industry lost its European customers during the sanctions years and needs to work hard to reclaim the lost market. Sanctions also divested the country of access to foreign technology and knowhow.

According to reports, PGPIC is planning to reopen its sales offices in Europe. Iran has opened its gates to foreign investors as it plans to make a strong comeback in the global petrochemical sector.

In a major conference last year, the country introduced investment opportunities in the post-sanctions petrochemical industry and called for $70 billion in foreign direct investment over 10 years.

Nominal petrochemical production capacity is close to 60 million tons a year, with actual output at 40.5 million tons, 44.5 million tons and 45.6 million tons over the past three years. The volume is expected to exceed 50 million tons in this fiscal that ends next March.