Europe Offers €12 bn Credit to Iran Petchem
Iran is estimated to need $50 billion in investment for developing its petrochemical industry as the country is benefiting from post-sanctions opportunities. Efforts for achieving this objective started as the administration of President Hassan Rouhani took office in 2013. However, they were accelerated after sanctions were lifted on Iran.
Negotiations in rapid succession as well as change in the direction of development of petrochemical products of higher value-added have come to fruition. Recently, National Petrochemical Company of Iran (NPC) signed an agreement with Linde.
Hossein Ali-Morad, director of investment at NPC, has said that Japan plans to release a €10 billion credit line for financing economic projects including petrochemical projects, in Iran. Furthermore, talks are under way for the opening of a €3 billion by Germany.
Iran's installed petrochemical production capacity stands at 63 million tones, which would rise to 130 million tones with the attraction of new domestic and foreign investment.
Regarding a €10 billion credit line by Japan, he said that this credit line was considered to be used for financing different economic projects including petrochemical projects.
Japan had earlier opened a €320 million credit line for Persian Gulf Petrochemical Industries Company. At present, talks are under way for a €640 million credit line by Japan.
But Iran's efforts made for attracting investment did not end here. In parallel, negotiations were under way with European countries, China and South Korea for opening other credit lines.
The Europeans' interest in Iran's petrochemical industry is not limited to a single country. A German company plans to invest €6 billion in Iran's petrochemical sector. Another European company also plans to invest €6 billion in Iran's petrochemical projects. Therefore, Europeans plan to invest a total of €12 billion in Iran's petrochemical industry.
"Two senior officials from one of the largest German petrochemical companies will soon travel to Tehran to finalize the previous talks and conduct economic feasibility studies on Iran's proposed petrochemical projects," said Ali-Morad.
All these efforts are aimed at bringing new technologies to Iran which has been denied cutting edge technology during years of sanctions.
Europe Banks to Finance Projects
The NPC insists on using different methods for the financing of projects. Therefore, in a bid to accelerate financing by European banks, a meeting was recently held with the German insurance company Hermes.
Ali-Morad said the European banks presented proposals for financing one or two projects. In the next phase, the banks will finance private petrochemical projects.
Another method of financing of petrochemical projects is credit line by European banks. In this regard, he said: "Even if we manage to activate a €100 million credit line from Germany's Hermes for Iran we will be able to change the international atmosphere and prepare the ground for bigger credit lines with other countries."
Regarding prioritized projects for this purpose, Ali-Morad told Iran Petroleum: "At present we are studying different projects so that we would introduce our projects as soon as the share of petrochemical sector is decided upon. In any case, we are trying to attract foreign investors that offer products of higher value-added and better price. The proposed projects get permit for investment after assessment and approval by the NPC."
He said that the implementation of government guarantee mechanism for attracting German investors would require the endorsement of NPC balance sheets by top European auditing companies.
"Furthermore, among investors and stakeholders of holdings and the NPC there must be transparency," he added.
Investment without State Guarantee
The process of attraction of investment and financing of petrochemical projects requires time. According to Ali-Morad, the NPC must take maximum benefit from the opportunities created following the implementation of Iran's nuclear deal with world powers with a view to attracting foreign investment and facilitating the transfer of technology. The nuclear agreement is officially referred to as the Joint Comprehensive Plan of Action (JCPOA).
"Lots of activities have been carried out after the implementation of the JCPOA and they are coming to fruition gradually," he said.
Following an instruction by Minister of Petroleum Bijan Zangeneh, all domestic and foreign investments in petrochemical projects must be done through the NPC.
"We cannot disregard the impacts of political and international developments on the trend of investment in Iran," Ali-Morad said.
He also referred to another important point with regard to the attraction of investment for the petrochemical industry. He said that "throughout talks we try not to create financial burden for the government; therefore, we attract investments without state guarantee."
Ali-Morad recalled that a recent visit to Germany by an Iranian petrochemical delegation was aimed at attracting investment and financing projects. Top managers of companies and holdings involved in Iran's petrochemical industry as well as representatives of German banks, companies and insurance agencies were in attendance.