Farhad Shahraki said assigning arbitration over utilities pricing to the National Petrochemical Industries Company should be seen as an important step in resolving one of the sector’s long-standing disputes.

He said the dispute, which for years persisted due to the absence of a neutral authority, had increased transaction costs and created uncertainty for investment but was resolved through the foresight of the oil minister. Auxiliary services — including steam, industrial water, electricity, nitrogen and off-site services — are characterized by natural monopoly conditions, he said, making the formation of a fully competitive market impractical.

“In such circumstances, neither full market liberalization nor command-style price setting is efficient,” Shahraki said. “The scientific and effective solution is the establishment of rule-based regulation.”

He said that if arbitration is implemented based on pricing tied to actual costs, a reasonable return on investment and productivity indicators, along with periodic adjustment mechanisms, it could deliver three key outcomes: reduced regulatory risk and greater predictability for investors; fewer conflicts of interest and contractual disputes between utility suppliers and consumers; and improved bankability of projects, easing financing, particularly for downstream developments.

Shahraki said the success of the decision depends on meeting several key conditions, including transparency in pricing formulas and cost data, guarantees of operational independence in the regulatory role, and clear mechanisms for challenge and review. Without these requirements, he warned, there is a risk of drifting toward opaque regulation or indirect intervention.

He said that in the medium term, proper implementation of the arbitration framework could help complete value chains and boost the effective utilization of complexes. Over the longer term, the experience could support the creation of an independent petrochemical regulator and closer alignment with international energy governance standards.

“Utilities pricing arbitration, if carried out in a scientific, transparent and accountable manner, is a necessary institutional reform,” Shahraki said. “It reduces disputes, attracts investment and clarifies the development outlook for Iran’s petrochemical industry.”