Ahmad Zera’atkar, deputy oil minister for planning, said nearly 370 trillion rials of roughly 1,000 trillion rials allocated to Iran’s targeted subsidy program comes from natural gas sales, including about 170 trillion rials from gas supplied to petrochemical plants. The figures show that a significant share of subsidy resources is funded by gas sales to industry, especially petrochemicals, he said.

Speaking Monday on the state television program Economic Roundtable, Zera’atkar outlined the latest developments in pricing petrochemical feedstock gas. Under Iran’s subsidy reform law, he said, energy carrier prices are required to gradually rise over a five-year period to reach 75% of export prices, with the price gap earmarked for support measures such as cash subsidies and energy efficiency programs.

He said that since 2016, gas pricing for petrochemical feedstock and fuel has been determined under annual budget provisions and established formulas. Currently, petrochemical plants pay about 30% of export gas prices, well below the 75% level stipulated by law.

Average Petrochemical Gas Price About 10 Cents

Zera’atkar said Iran exports natural gas at prices ranging from 29 to 31 cents per cubic meter, while the average price paid by petrochemical plants for feedstock and fuel gas is about 10 cents.

From 2016 to 2024, he said, industrial gas prices have averaged roughly one-third of export prices. He noted that producers in other countries also purchase gas at market-linked rates and convert it into higher value-added products.

Describing Iran’s petrochemical production structure, Zera’atkar said the sector produces a wide range of polymer products, fertilizers and base chemicals. Methanol, he said, is the most basic output and not a final product, offering relatively low profit margins.

Profit Pressures Concentrated in Methanol Sector

Zera’atkar said most petrochemical plants—apart from methanol producers—do not face serious profit margin problems. He acknowledged that Iran’s petrochemical industry remains heavily focused on base and intermediate products, with incomplete value chains limiting profitability.

He said objections to feedstock pricing are partly driven by declining global methanol prices. In earlier years, when methanol sold for $300 to $350 per ton, producers enjoyed strong profits. The recent price slump, he said, has mainly affected methanol, not other petrochemical products.

According to Zera’atkar, urea and polymer producers earn profit margins of 24% to 50%, and even older methanol plants that have fully depreciated their investments remain profitable. He warned that altering gas pricing formulas to offset methanol losses would unfairly burden the public, the ultimate owner of natural gas resources.

Oil Ministry ‘Does Not Benefit’ From Gas Revenues

Zera’atkar said the petrochemical industry has benefited from cheap fuel and feedstock for more than six decades, but that era has ended. Revenues from gas sales to petrochemical firms, other industries and residential and commercial users are deposited into the targeted subsidy account and used to fund direct and indirect subsidies and household support programs.

“The Oil Ministry does not benefit from these revenues,” he said, stressing the need for transparency so the public understands the policy rationale.

Under Iran’s 1404 budget law, Zera’atkar said about 370 trillion rials of subsidy funding will come from natural gas sales, including roughly 170 trillion rials from petrochemical consumers.

Pricing Debate and Fiscal Risks

Zera’atkar said a clear pricing mechanism for petrochemical feedstock has been in place for about a decade. Calls for additional support to petrochemical producers, he said, raise a fundamental question: who would bear the cost.

He warned that even a 20% reduction in government revenue from changing the pricing formula could cut targeted subsidy resources by 50% to 55%, jeopardizing timely subsidy payments and funding for vulnerable groups supported by charities and welfare organizations.

Rejecting claims that petrochemical plants pay up to 22 cents for gas, Zera’atkar said the combined average price of feedstock and fuel gas—fuel accounts for about 60% of consumption—was around 10 cents per cubic meter over the past seven months.

Petrochemicals Owe 120 Trillion Rials in Feedstock Payments

Zera’atkar noted that in some gas-rich countries, governments supply gas at base prices while also taking equity stakes in petrochemical projects—a model Iran does not follow. He said such differences are often ignored in regional price comparisons.

While praising the petrochemical sector’s role in export earnings and currency repatriation, Zera’atkar said companies currently owe about 120 trillion rials in unpaid feedstock bills, with collections typically running a year behind schedule.