Italian Company Signs $40m Deal with Iran's Ardabil Petrochemical Co

Italy's Techint Engineering and Construction signed an agreement with Ardabil Petrochemical Company to provide the technical know-how for the construction of a 500,000-ton petrochemical unit in northwest Iran, the company's head of the board of directors said.

The contract, worth €34 million ($40 million), was signed between Giorgio Veronesi, Techint's commercial manager, and Bahram Shahsavari, Ardabil Petrochemical Company's head of the board of directors, in Tehran on Tuesday, NIPNA, the official portal of the National Petrochemical Company, reported on Tuesday.

"The unit, to be completed in 18 months, will convert natural gas to value-added products, namely polypropylene and olefin. The unit will produce 500,000 tons of petrochemical products per annum," Shahsavari said, adding that the mega project will create 10,000 jobs in the region.

Pointing to lengthy talks with the Italian firm since mid-2016, the official said negotiations were mainly centered on completing the value chain and manufacturing polypropylene from low value-added commodities like methanol.

"Technology transfer is an indispensable part of the agreement," he said, adding that as per the terms of the deal, Iranian experts will be trained by Techint specialists for installing utilities and running the unit upon its completion.

According to Shahsavari, Ardabil complex's core products include base goods such as ethylene and propylene as well as polymer items like high density polyethylene, low linear density, polyethylene, polypropylene and polybutadiene rubber.

  Long-Term Plan

"Techint has a long-term plan to play an active role in Iran's petrochemical ventures," Veronesi said, adding that the Italian enterprise's strategy is to take advantage of domestic and local workforce to cut costs and the same approach will be adopted in Iran.

Highlighting Techint's willingness to provide Iran with cutting-edge technical expertise, Veronesi said working conditions in Iran have undergone drastic changes compared to pre-sanctions period and Techint will adapt itself to the new situation to transfer services to the country.

According to the Italian manager, Iran's petrochemical industry has a huge potential to expand from its current output capacity of around 60 million tons a year.

The country aims to double that capacity in five years through billions of dollars in mostly foreign finance.

"The availability of relatively cheap feedstock, combined with proximity to international  markets, especially Turkey, as the second largest polypropylene consumer in the world , are the greatest advantages of the venture," he added.

Referring to Techint's history in Iran's oil and gas projects between 1966 and 2004, Veronesi said the Italian enterprise played a key role in oil and gas field development ventures as well as pipe laying, refinery and petrochemical development projects in the oil-rich state.

"Supporting foreign investors is of paramount importance in cooperating with international companies," he added, noting that Techint will not only help the plant to choose the best licenser but also provide it with project management, engineering, procurement and construction services in the first phase.

Techint holds a leading position in the construction and management of complex oil and gas projects, including central processing facilities, gas treatment plants, offshore platforms, marine facilities and installations, onshore oil and gas and multi-products pipelines and LNG regasification terminals.