for transit of commodities in Iran. Iran targets 15 million tons a year of good transit. This figure is likely to be achieved as international sanctions have been lifted, trade transactions are on the rise and foreign companies are coming back to Iran.
An advantage which foreign delegates always highlight in their remarks for investment in Iran, is the existence of skilled manpower in different engineering, construction and contracting sectors. That gives Iran a big advantage over its rivals. Every three to four years, around 4,000 students graduate from universities and they are ready to work.
Long-Term Feedstock Pricing Formula
By working out a gas feedstock pricing formula for petrochemical plants for long term, Iran has practically given the green light to domestic and foreign investors willing to finance projects in the country. The prices set for the gas feedstock remain in force for at least 10 years. Up to that time, 21% of Iran’s 1.4 bcm gas output would have been converted to petrochemicals.
Today, in case long-term feedstock prices are set, investors would be able to make a more realistic assessment of projects they would be willing to finance in Iran. Setting gas price for petrochemical units for the long term would let investors, producers and industrialists of petrochemical sector to have a clear price range for coming years and therefore they would not be worried about price fluctuations in the market.
In order to meet the expectations of potential investors in Iran, three principles must be taken into consideration; First, setting long-term price to be more attractive than in rival countries; Second, establishment of infrastructure by the government; and Third, sustainable rules and regulations.
Iran Petchem Thirsty for Investment
Iran currently needs $33 billion in investment to finance petrochemical projects for a total output of 55 million tons. That would earn the country $26 billion in revenues a year. There are also 15 petrochemical projects under construction, which are all prioritized. These projects would become operational in four years and are expected to add 10 million tons to the country’s petrochemical production capacity.
With the finalization of financing for 7 methanol projects in Assaluyeh, some 10 million tons of methanol would hit global markets. Before this, the country’s petrochemical development has been mainly in the ethylene sector because due to the abundance of ethane, most products became ethylene-based and downstream industries had the chance to grow. But in order to accelerate the growth of these industries, propylene production must be facilitated. Propylene generates and feeds an extended chain of downstream industries. Therefore, Iran eyes propylene-to-methanol projects so that it would not slash the methanol price while propylene production would help improve downstream industries in the country.
According to National Petrochemical Company (NPC)’s projections, Iran plans to bring the capacity of petrochemical production to 180 million tons a year in ten years’ time from now. That would promote Iran to the first rank of petrochemical industry in the region.
Completion of 60 incomplete projects with 10-90% progress could raise the current production capacity of petrochemicals to 120 million tons a year. Furthermore, by implementing 36 new projects which need $41 billion in investment, the annual production capacity will go beyond 180 million tons.
Financing so many petrochemical projects is not possible merely by domestic resources; therefore, foreign investment must be involved.
Senior NPC officials have stressed the point that banks in Iran would not be able to provide so much investment for the petrochemical industry. They have welcomed the entry of banks and financial institutes into this value-generating industry. In the wake of the lifting of international sanctions on Iran, the country has held talks with foreign companies and voiced its readiness to cooperate with leading countries. Several European countries with a record of working in Iran have expressed readiness to return to Iran’s petrochemical sector.
Maximum use of the existing petrochemical production capacity is one of strategies envisaged in the 6th Five-Year Economic Development Plan (2015-2020). The industry can complete the value chain, but the presence of private sectors and particularly foreign investors must be increased by facilitating conditions for their presence.
No new investment has been made in Iran’s petrochemical sector over the past one decade. Therefore, this industry is now thirsty for foreign investment and technology. Foreign parties are well aware of potentialities and big profits of this industry for them. Germany’s BASF ad Linde, France’s Axens, South Korea’s Hyundai, Britain’s Shell and South Africa’s Sasol are set to benefit from post-sanctions period in Iran to resume work in Iran’s petrochemical projects in the near future. They know quite well that the rate of return for depositing money in banks is around 1% in their countries, while their investment in Iran’s petrochemical projects would produce at least a 20% rate of return.
Some 62 incomplete and new projects in Iran are like 62 sources of investment attraction. Implementation of these projects would let