9 January 2024 - 11:08
  • News ID: 635952
Iran petchem output capacity set to hit 110 mt/y

Iran’s petrochemical industry is a key non-oil revenue generator. Despite oil sanctions, Iranian petrochemical manufacturers have managed to find new markets and have invested in the downstream sector to earn Iran hard currency revenue. Iran’s petrochemical industry production capacity stands at 92 million tonnes a year (mt/y). So far, $85 billion have been invested in this industry. The National Petrochemical Company (NPC) plans to invest another $15 billion within two years to bring the production capacity to 110 mt/y. Hassan Abbaszadeh, NPC’s director of planning and development, told Iran Petroleum the country's petrochemical production capacity would reach 200 mt/y by the end of the 8th National Economic Development Plan.

The full text of the interview is as follows:

Iran’s petrochemical production capacity is set to reach 200 mt/y by the end of the 8th National Development Plan. How many development projects are set to come online under the 13th administration?

Currently, 66 petrochemical projects are underway with an annual capacity of 51 million tonnes. They require $35 billion in investment, $10 billion of which have already been provided. Petronad Asia, Pad Jam, Urea and Phase 2 of Ammonia of Kermanshah, and Arghavan Gostar PP in Ilam are among development projects to come online by the end of the current administration, which would bring the petrochemical production capacity from the current 92 mt/y to 110 mt/y. 

How much investment will have been made in the petrochemical industry by the end of the 13th administration?

Currently, $85 billion have been invested in the petrochemical industry, which would increase by $15 billion to reach  $100 billion.

The petrochemical industry needs $7-10 billion in annual investment. How much investment has been made over the past two years?

Over the past years, on average $3.5 billion have been invested annually, mainly by holdings.  

What measures are to be taken based on talks between the Ministry of Petroleum and foreign countries?

As far as foreign relations are concerned, several issues are pursued in the petrochemical industry. Providing capital, technical know-how, and more importantly marketing and market development are among them. NPC is focused on these three points. We need to find our markets in some countries. Brazil has a big market and we have focused on Brazil over the past one and a half years. We have entered into talks with some countries like India and China for technical savvy cooperation. Talks have been also held with Russia to attract investment. A Russian company has offered to invest $500 million for value chain completion, for which are reviewing feedstocks supply options. As Iran’s petrochemical industry capacity is set to reach 200 mt in the coming years, we would have to export the bulk of this volume. Therefore, we need to find our place in the market.  

What domains is Iran presenting its capabilities?

Russia, which is grappling with war and sanctions, is firmly willing to cooperate with Iran in various sectors. Venezuela is willing to use Iranian technical know-how to renovate its petrochemical units. Venezuela’s petrochemical industry capacity is 12 mt, with only 2 mt being active. Challenges could be easily surmounted by activating the inactive capacities. Talks have been held with the Venezuelan side and they have become familiar with Iranian companies’ capabilities. They are supposed to provide us with details of the problems of their units and we would then focus on their units using our equipment and services. In the second step, we proposed to give them a 10-year development plan with available feedstock, which they welcomed.

Statistically speaking, what trend has Iran’s petrochemical industry been through over the past two years?

I should say that Iran’s petrochemical industry production capacity was about 90.2 mt by March 2022, which reached 91.5 mt a year later. Now, with new projects having become operational, it has reached 92 mt. Petrochemical production capacity has varied in different years. Petrochemical production was 65.3 mt in the calendar year to March 2022, while a year later it reached 69.7 mt. The value of petrochemical exports has increased from $14.8 billion in the calendar year to March 2022 to $16 billion a year later. In terms of volume, it increased from 25.5 mt/y to 27.6 mt/y over the same period. Domestic sales rose from 10.2 mt to 12 mt during the same one-year span, which saw income rise from $8.2 billion to $10.8 billion.

What was the reason for the decline in the value of petrochemical exports during the first quarter of the current calendar year?

We are witnessing the decline in the value of petrochemical exports for several reasons with the most important one being the decline in the global price of petrochemicals. The global prices of some petrochemicals have declined year-on-year. For instance, we see an 80% decline in global prices for ammonia. The average price of ammonia was $790 per tonne during the first quarter of last calendar year, which currently stands at $165 per tonne. Urea, propane and butane, methanol, and polyethylene have also seen their average global prices fall 50%, 45%, 30%, and 21% respectively.

Why have global prices declined?

Numerous reasons explain this price fall. As oil prices fall, so do some petrochemicals’. For instance, the global fall in oil prices would affect China’s economy and as Iran is exporting the bulk of its methanol to China, Iran’s methanol is affected. The Russia-Ukraine war initially affected the global prices of urea fertilizers, but finally, alternatives to Russia intervened in the market and the prices went down anew.

How do you break down the petrochemical industry production capacity in terms of upstream, downstream, and midstream?

By the end of the 7th National Development Plan, 58 mt (45%) would go to basic products, 26 mt (20%) to hydrocarbon materials, 14 mt (11%) to midstream products, and 31 mt (24%) to final products.

The 13th administration has mainly concentrated on completing the value chain of the petrochemical industry. What has been done over these two years?

We have reached significant success over the past year. In line with identifying investment opportunities and introducing them, as well as facilitating their implementation in the future, NPC has moved to comprehensively study the value chain of the petrochemical industry and presented chances for investors to get involved in the five propylene, methanol, ethylene, aromatics, and butylene chain with an annual rated capacity of 3.8 mt with $4.2 billion investment for an output capacity of $4.4 billion of downstream products. This project was introduced to holdings with the framework of national self-sufficiency plans and some holdings have volunteered to invest in this field, for which we are issuing licenses. Furthermore, value chain projects were introduced to the private sector so that investors would have the necessary information on the value chain projects.

How much value-added would be generated by the value chain projects?

The difference in the prices of product and feedstock in these projects is estimated at $2.4 billion. Assuming 20% costs, we can calculate the value-added at 46% for the value chain projects. About 23,000 jobs would be created in these projects.

How many investors have so far been found for these projects?

So far, 36 heads of agreement have been issued for an annual capacity of 5 mt for value chain projects. Seven more projects are waiting for new investment. Most petrochemical projects pertain to the propylene chain. Licenses are being issued for two methionine projects for which investors have already been determined. They would be implemented by the Abadan Petrochemical Company and Maroun Petrochemical Company, next to the Abadan refinery which would supply the required feedstock. Negotiations have been also held with investors for an acrylonitrile project. In the methanol chain, except for a silicone project, all projects have already found investors. Most value chain projects have already found investors and basic agreements have been made. Some of them have made good progress, like SAP, methylamine, and acetic acid projects. We hope that most of these projects will start construction before this administration's term in office ends.

How are these projects financed?

NPC’s priority in financing is the National Development Fund of Iran (NDFI) and the Bank of China for value chain completion projects. Following talks between the CEO of NPC and NDFI, the latter agreed to finance all value chain projects that do not require high investment.

What is the share of holdings in the value chain completion?

These projects are in parallel with the projects that the private sector is implementing to complete the value chain. The idea is to have an alternative plan in case the private sector fails to implement a project. Some projects overlap. For instance, PVC projects do not lie in our value chain projects, but given the tumultuous market for PVC, PET, or PTE, the NPC has required the Persian Gulf Petrochemical Industries Company (PGPIC) to operate them.   

What are the value and volume of projects operated by petrochemical holdings?

About 1 mt for an approximate value of $1.5 billion.

Isn’t there any challenge concerning technical know-how for value chain completion projects?

Technical know-how was maybe the Achilles’ heel, but now we can receive the required technical savvy from a foreign country. Furthermore, NPC is in talks with an R&D company in that country to become a partner for the Petrochemical Research and Technology Company (PRTC) and supply technical savvy which may not be accessible in Iran. One or two of such projects would be enough for Iran. Therefore, mastering their technical savvy would not be cost-effective and would be time-consuming. Therefore, we have to either purchase their know-how directly or get second-hand units.

How many value chain completion projects are defined under the 7th and 8th national development plans?

More than 30 projects have been defined for value chain completion, construction of which would begin under the 7th Plan to be completed under the 8th Plan.

Could you explain the main strategy of NPC under the 13th administration?

The 13th administration is pursuing its strategies in several domains in the petrochemical sector, the most important of which would be completing the value chain development and supporting knowledge-based companies, and domestic manufacturing of catalysts. Another strategy we are pursuing is to activate inactive projects to finalize the case of projects that have long been abandoned or find alternatives to those that are no longer possible to implement.

Will petrochemical development projects be reconsidered under the 7th and 8th plans to match global market developments?

Yes, the projects would be revised from two aspects; the basic revision would be based on gas imbalance. All holdings have been told to revise natural gas-based projects, like methanol, urea, ammonia, or MEG projects, and we are ready to introduce alternative projects to them. Therefore, petrochemical development projects, particularly those envisaged under the 8th Plan, would be subject to fundamental changes.

What about the 7th Plan projects?

Since the 7th Plan projects have had about 40% progress, it would be irrational to modify them. The only change that we would be following up on is to accelerate the implementation of some value chain projects through engaging the private sector to come online by the end of the 7th Plan, in which case the quality of products would improve, not to mention the diversity in the petrochemical mix.

News ID 635952


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