The petrochemical industry internationally plays a key role in production, economic growth, hard currency generation, and job creation. In Iran too, given the valuable stance of the petrochemical industry in the economic sector, this sector has become important and considerable. Furthermore, as the bulk of petrochemicals is exported, this industry is instrumental in currency generation and banking system improvement. The petrochemical industry has so far yielded valuable achievements and significant capabilities for growth and development.

Background

Previous reports put Iran’s petrochemical production at 75 million tonnes (mt) during the last calendar year (ended on 21 March 2024), up 7% year-on-year. Recently, new petrochemical projects have come online. One case in point is the first phase of the Persian Gulf Hoveyzeh Gas Refinery (NGL 3200) that became operational in May 2023 with a processing capacity of 250 mcf/d of associated petroleum gas released during crude oil recovery from West Karoun fields. Cost $1.338 billion, plus IRR 2.210 trillion, it was aimed at gathering flare gas from the Yadavaran, North Azadegan, South Azadegan, North Yaran, South Yaran, Darquain, Sohrab, Sepehr, Jofair, Susangerd, and Band Karkheh fields. The NGL 1000 precompression facility, one of 27 projects for flare gas gathering in East Karoun, came on-stream. The inauguration of this project added 100-150 mcf/d to the Persian Gulf Bidboland gas refinery’s feedstock intake. The NGL 900 pre- compression facility came online last calendar year.

Other instances of significant progress in the petrochemical industry include the olefin unit of the Gachsaran Petrochemical Plant in Kohguiluyeh and Boyer Ahmad Province. Established with a €1.3 billion investment, it has a production capacity of 1 mt/y of ethylene and 84,000 tonnes a year of C3+. With more than 83% of its equipment sourced domestically, this project has saved Iran €269 million in hard currency, thanks to €33 million in key equipment having been manufactured domestically for the first time. To reduce industrial pollution and improve environmental conditions, the ammonia recovery unit of the Khorasan Petrochemical Plant was launched. Construction and installation of a stripper to separate ammonia from the waste and its recycling to the production line came online in one year with IRR 150 billion credit, resulting in cleaner air and a better environment.

Among other petrochemical projects was the fourth industrial gas production unit of Damavand Energy Co. with the capacity to produce 73,500 normal cubic meters of varieties of industrial gas. Jetty No. 17 of Phase 2 of Assaluyeh Port came online last winter as the first Iranian-made cryogenic loading arm. Meantime, Jetty No. 3 of Parsian Port was launched.

Projects Underway

Among projects that have got under way is construction of the Ibn Sina petrochemical plant (for the production of up to 300,000 tonnes a year of ethylene with €291 million investment, first construction phase of the petro-olefin unit of the Fanavaran Petrochemical Plant (for building methanol storage tanks), the urea/ammonia unit of the Golestan Petrochemical Plant, construction of the Sigloo Petrochemical Plant in the Lamerd Special Economic zone (for producing methylamine and its derivates for the first time in the country with €227 million investment), construction of the “Be’ssat Petrochemical Plant” in Bijar (with €750 million investment and production capacity of 500,000 tonnes of terephthalic a year and 500,000 tonnes a year of expanded PET), construction of the Torbat-e Heydarieh polystyrene project (with a view to value chain completion to supply domestic needs and export the surplus to neighboring countries), the first phase of construction of the olefin site of the Almas megaproject in Mahshahr.

Regarding petrochemical diplomacy, a key development was the agreement signed for the first time in June to renovate overseas petrochemical plants. Iran and Russia also signed 19 documents for cooperation at the end of their 17 th Business Council forum. Two MOUs were signed for building petrochemical units, valued at IRR 40,000 billion, in the Special Economic Petrochemical Zone. An MOU was signed between a Chinse firm and the Special Economic Petrochemical Zone Organization for a sodium formate production plant. MOUs were also signed for the development of oil and gas fields.

That along with other achievements based on domestic manufacturing is indicative of the promoted standing of Iran’s petrochemical industry, technical savvy, and capabilities. It can also serve as a key factor for attracting domestic and foreign investment. As long as this industry is growing nonstop there would be nothing to worry about with regard to the return of investment. The 14 th administration is now focused on the removal of sanctions and overcoming challenges in banking and financial interactions with other nations.

131mt Capacity Possible

Behzad Mohammadi, a former CEO of National Petrochemical Company (NPC), told “Iran Petroleum”: “The production capacity in the petrochemical industry currently stands at 97 mt a year. But through planning at the level of the Ministry of Petroleum in the 14 th administration, the 131-mt capacity projected in the development vision for this industry is achievable as new petrochemical projects are coming online.”
It was earlier announced that the strategic priority of the petrochemical industry would be to supply domestic needs before the issue of exports is brought about, thereby necessitating feedstock supply to the petrochemical industry first. That would require cooperation and convergence for sustainable feedstock supply to petrochemical plants at affordable prices.
On the importance of feedstock supply, Mohammadi said: “Naturally when a local investor is assured about the sustainability of feedstock, he/she would show more inclination for investment. Among the main four factors of investment (feedstock, investment, technical know-how, and market), the most important factor for the genuine private investment would be assurance about sustainable feedstock.”

Cooperation with Neighbors

Mohammadi touched on the necessity of negotiations for the removal of obstacles in the way of interaction, saying: “As long as the political context is not balanced no foreign investor would show inclination for investment in the petrochemical industry. That would be possible only by providing a calm political atmosphere and becoming assured of the stability of local rules and regulations. Therefore against the backdrop of sanctions-related restrictions, investment in Iran would be risky for foreign companies, thereby impossible. Market development in neighboring countries is directly tied to our political circumstances. Recently even neighboring countries intend to downgrade their trade ties with us. Under the current political conditions with sanctions and banking restrictions, enhancing cooperation with neighbors would require a well-thought-out plan."

Mohammadi had earlier said the petrochemical industry should be viewed with more care as it is generating value and is able to accelerate national development and have a big share in hard currency generation. He had called for the 14 th administration to pay more attention to this sector.

As far as the 14 th administration’s plans are concerned, he had called for action concerning feedstock supply. “Currently 70 petrochemical plants are running with an annual production capacity of 96 mt. While nearly 20% of their capacity is idle, which is due to insufficient feedstock. This challenge needs to be resolved by the Ministry of Petroleum because it would be instrumental in hard currency revenue for the country.”

Future Plans

Minister of Petroleum Mohsen Paknejad has laid emphasis on the petrochemical industry in his vision plan. Among the main points highlighted in the minister’s plan are policymaking for attracting investment from the capital market and using modern financial instruments and project funds for development and 8% annual growth in the petrochemical industry.

The former administrations had also paid attention to spatial planning for the balanced development of Iran’s petrochemical industry. Paknejad is  following in their footsteps, stressing the need for the completion of spatial planning for the petrochemical industry, introducing petrochemical projects at chemical parks (in collaboration with the Ministry of Industry, Mine and Trade) with the focus on border provinces, while taking into consideration feedstock and water requirements, infrastructure for export, and access to international markets and domestic distribution network.

Petrochemical officials and experts say one key issue to be highlighted by researchers and policymakers of the petrochemical industry is to study challenges and obstacles in the way of development of the value chain of the petrochemical industry. Another issue that applies to the petrochemical sector too is attracting investment. Therefore, it is necessary to make necessary arrangements for attracting foreign investors into this sector. Meantime, necessary guarantees should be given for using foreign facilities and offering necessary incentives to attract investors, particularly in downstream industries.

Key Techno-Engineering Player

What should be taken into consideration in introducing the national petrochemical sector is the technical know-how and self-sufficiency Iran has achieved during years of sanctions. The domestic potential and skills Iranian specialists have achieved can rival what is underway in the world and may serve as an example for them.

Iran has become fully self-sufficient in developing technical know-how for ammonia, urea, olefin, and gas conversion to methanol, ethane, ethylene, and other products. Meanwhile, Iran’s petrochemical industry is a key player in terms of technical and engineering services. It is now ready to cooperate in the manufacturing of commodities and equipment. The key point would be to focus on fruitful actions in line with interaction with the world.

Paknejad has highlighted this point in his vision, saying active diplomacy in the petrochemical sector would be prioritized for market development in neighboring countries and target markets. He has noted that it could be fulfilled under the aegis of cooperation on the part of big petrochemical holdings, the Ministry of Foreign Affairs, specialized associations, and the Iran Chamber of Commerce.

On the other hand, in line with introducing petrochemical attractive features to domestic and foreign investors, the potential of this industry should be highlighted. One case in point is the possibility of enhancing the petrochemical production capacity to 131 mt. According to the 7 th National Economic Development Plan, where special attention is paid to developing the chains of propylene, methanol, ethylene, and aromatics, expanding the 2 nd and 3 rd petrochemical hubs in the Makran Special Zone (Chabahar) and Parsian Energy-Intensive Industrial Special Economic Zone (PEISEZ) and the focus on sanctions waiver in Chabahar Port, the petrochemical industry in the 14 th administration is tasked with reconsidering current procedures of issuance of permits and determining priorities for financial facilities receipt, which would result in the fair and smart distribution of opportunities for investment in the petrochemical sector. Implementation of these plans would ease, even remove legal and financial restrictions in the way of investors, and would allay foreign investors’ concerns about investing in Iran’s petrochemical industry.

Another issue incorporated in Paknejad’s plans, which could be considered as the strength of Iran’s petrochemical industry, is the development of necessary technologies by identifying and working up strategies for acquiring technical know-how needed by the petrochemical industry within a 10-year horizon. Implementing this plan, along with Iran’s geographical position, abundant feedstock, effective manpower, competitiveness, technical savvy, and domestic specialized potential are among the advantages of the petrochemical industry for would-be investors.