1400, Record Year for Petchem Output Capacity
Iran’s petrochemical production capacity is forecast to reach 100 million tonnes in the current calendar year (1400).
Iran’s petroleum minister, Bijan Zangeneh said the country had tough time last calendar year, but it could increase its production capacity from 66 million tonnes to 80 million tonnes a year. And Behzad Mohammadi, CEO of National Petrochemical Company (NPC), has said that completion of more projects would bring Iran’s petrochemical production capacity to 100 million tonnes in the current calendar year.
The increase in Iran’s petrochemical production capacity comes against the backdrop of restrictions imposed on Iran’s petroleum industry.
The covid-19 pandemic affected the entire petrochemical sector last calendar year, but petrochemical projects were never stopped.
In Iran, sanctions along with the coronavirus toughened conditions for Iran’s oil sector. For instance, before the coronavirus outbreak, Iran was exporting 70% of its petrochemical output. But the figure declined as buyers of Iran’s petrochemicals experienced economic stagnation. However, after signs emerged of prosperity in China’s market, Iranian products were sold at better prices because China is the main destination for Iranian exports. It has to be also noted that over the past 20 years, Iran’s petrochemical industry has experienced significant growth. In parallel with the increased production capacity at the South Pars gas field, the petrochemical production capacity has increased. Another key point is that some 95 types of petrochemical products were being supplied by March 2020. Ten new products are expected to come online by next March, while three others would be supplied within four years.
In recent years, the petrochemical industry has sought to diversify the mix of products, particularly imported products. Therefore, some projects would become operational in coming years so as to add 20 new products to the petrochemical mix. In this way, 60% of imported products would be sourced domestically.
Global Look
The Persian Gulf Petrochemical Industries Company (PGPIC) has had a decisive share in Iran’s petrochemical exports.
Jafar Rabiei, CEO of PGPIC, said despite sanctions imposed on Iran’s petrochemical industry, “this industry is an export-oriented sector and our presence in international markets will be permanent. Therefore, we always look seriously at our presence in global markets.”
Noting that Iran’s petrochemical industry is a hard currency generator, he said: “Rarely do I know a petrochemical plant in Iran to have not been built for exporting products. Truly supplying our domestic needs is our priority, but we have been always looking at export markets.”
Iran’s petrochemical industry was a major supplier of hard currency at a time the petroleum industry was under tough sanctions and the Iranian economy was faced with restrictions due to sanctions and covid-19.
President Hassan Rouhani has highlighted this issue time and again, and heaped praise on petrochemical industry actors. Last calendar year, 17 petrochemical projects were inaugurated. Some of them were initially forecast to not come online; however, they all became operational, increasing production and exports.
Mohammadi said last February that 35 million tonnes of final products were being produced in the country, 72% of which was exported. A total of 77 chemicals and 18 polymers, in 334 grades, are produced in Iran for consumption in the downstream petrochemical sector.
Oil Sanctions Verification
The US is yet to lift sanctions on Iran’s petroleum industry. The European Union (EU) and the US are apparently seeking a way to resume their talks with Iran. Kazem Gharibabadi, member of Iran’s nuclear negotiating team in Vienna, has said that the US’s return to the 2015 nuclear deal would be verified when Iran would be able to sign oil agreements, export oil, receive oil revenue through banking channels and carry out financial transactions.
Some managers of petrochemical plants have been exporting products with the same sanctions in effect. They hope that US oil sanctions would be lifted, but they say Iran’s petroleum industry has been under sanctions since the 1979 Islamic Revolution. For them, the sanctions have changed in toughness in recent years, but the petrochemical industry has continued its path. Some of them even say they have customers beyond neighboring countries, noting that they would be able to attract investment if sanctions are lifted.
Hassan Abbaszadeh, director of planning and development at NPC, had earlier said that under good economic conditions of 2003-2004, $4-4.5 billion of investment was attracted into the petrochemical sector. In 2019, when tough sanctions were in effect, $3.8 billion was invested in this industry. Chinese finance and national facilities had a small share in this investment as most projects have been financed by holdings.
Joint Ventures
Rabiei said: “It’s true that during sanctions our communications with petrochemical majors for receiving cutting edge technology an investment became very limited, but we were not brought to our knees and we managed to produce some materials like catalysts.”
He expressed hope for joint investment by Iranian and foreign companies in Iran’s petrochemical sector once sanctions have been lifted.
“Furthermore, we expect to diversify and increase our exports,” he said.
Asked to explain if the petrochemical industry remains attractive to investors, he said: “Iran’s petrochemical market is undoubtedly very attractive to foreign investors and particularly big petrochemical companies in the world.”
“Due to feedstock diversity in Iran, big petrochemical companies have always been willing to invest in Iran’s market. Meantime, we are not short of specialized manpower. Therefore, if we did not have the restrictions caused by sanctions, we would see the presence of foreign investors in this sector. Of course, this presence does not mean that there would be less room for Iranian industrialists; rather it means that more orders will be flowing towards us and they can have more cooperation with foreign partners,” Rabiei said.
Iran’s petrochemical industry has been racing ahead normally despite sanctions. But removal of sanctions would help Iran export more, while clearing the way for fresh investment and modern technologies.
According to plans, 28 petrochemical projects would have become operational by March 2026. That would bring Iran’s petrochemical production capacity to 133 million tonnes annually with a revenue of $35 billion. That would push Iran to the top Middle East spot in supplying basic products.
Mohammadi has said petrochemical projects have been planned based on feedstock available up to 2027. Based on the feedstock that may be available in coming years, 30 strategic products are considered for sustainable development. With an investment of $16 billion, these projects would add 20 million tonnes to the annual petrochemical production capacity.