Iran’s petrochemical industry is facing a major financing challenge as it moves to meet the targets set under the country’s Seventh Development Plan.
According to the head of the National Petrochemical Company (NPC), achieving the planned expansion to 131 million tons of production capacity will require $26 billion in new investment, underscoring the growing gap between ambition and available capital, Donya-e-Eqtesad reported.
Speaking at the First Petrochemical Investors Conference held in Tehran on Tuesday, NPC’s CEO and Deputy Oil Minister Hassan Abbaszadeh said the industry can no longer rely on traditional financing methods. “Meeting the objectives of the Seventh Development Plan will not be possible without simplifying investment procedures and diversifying financial instruments,” he said, adding that private-sector investors expect a faster, more transparent licensing and project execution process.
The petrochemical sector holds a strategic position in Iran’s economy, yet structural bottlenecks remain significant. Abbaszadeh noted that around 22 percent of installed petrochemical capacity is currently idle, primarily due to shortages of feedstock from the upstream sector.
To address this gap, he outlined four key strategies: large-scale collection of flared gas with a target of 1.5 billion cubic feet per day, development of upstream fields assigned to petrochemical companies, expansion of renewable energy, and improved energy efficiency in the household sector to ensure more stable feedstock supply for industry.
Abbaszadeh said roughly half of the $26 billion required for projects under the Seventh Plan has already been secured. Looking further ahead, he estimated that the Eighth Development Plan would require an additional $44 billion in fresh financial resources.
He also criticized the limited role of what he described as the “real private sector,” which currently accounts for only 15 percent of investment in petrochemical projects.
Financing Gap
To bridge the financing gap, NPC is promoting new financial instruments. Abbaszadeh highlighted foreign-currency project funds as a key mechanism explicitly stipulated in the Seventh Plan, noting that the Ministry of Economic Affairs and Finance has been tasked with playing a more active role in this area.
He said the petrochemical industry is well positioned to use such tools, given that around 70 percent of its output is exported, making it a net foreign-currency earner rather than a drain on reserves.
Another instrument gaining attention is foreign-currency murabaha bonds (a Sharia-compliant debt financing instrument used primarily in Islamic finance, including in Iran). Abbaszadeh said that, in cooperation with the Central Bank, the National Development Fund, and Tejarat Bank, steps were taken about ten days ago to facilitate their issuance.
These bonds are expected to become an important source of funding for petrochemical projects. He stressed that only projects with guaranteed feedstock supply and full regulatory approvals—including land-use planning, water access, and environmental permits—will be offered for financing through project funds or bond issuance.
Public participation in investment is another priority. Abbaszadeh said projects financed through public savings would be selected with particular care to minimize risk and preserve investor confidence.
He also referred to the introduction of settlement bonds, which will replace previous stepped discount mechanisms and can be transferred or used once projects reach 40 percent physical progress.
Abbaszadeh pointed to Article 45 of the Seventh Development Plan, which obliges large petrochemical holdings benefiting from upstream resources or discounted feedstock to reinvest 40 percent of their annual profits back into the sector. He expressed hope that by the end of the Iranian year 1404 (March 2026), new projects would add around 7 million tons to national production capacity.
Addressing a question from Donya-e-Eqtesad on credit-based sales, Abbaszadeh said petrochemical companies had provided more than 700 trillion rials ($515 million) in credit to downstream industries during the first six months of the current year. He expressed optimism that this figure would exceed last year’s total of 1,220 trillion rials ($897 million).
Finally, he said Iran’s petrochemical export revenues are expected to reach around $13 billion by the end of 1404, noting that over 98 percent of export proceeds have been returned to the domestic economic cycle—a point policymakers increasingly cite as evidence of the sector’s importance to Iran’s external balance and overall economic stability.
