Golden Chance for Shell in Iran Petchem
More than 60 years have passed since Shell started its work in Iran. Over these years, Shell has been present in Iran on and off. Now after nearly two decades of absence, it plans to step into Iran's oil, gas and petrochemical industry.
Throughout decades of its presence in Iran, Shell has made great contribution to Iran's oil production and sales. Now, it is taking advantage of post-sanctions opportunities to renew its presence in Iran and get involved not only in the oil but also in the petrochemical sector directly.
Ever since it started its Iran projects by joining a consortium of Iran's oil sales in the 1950, Shell has been seeking a toehold in Iran. After Shell pulled out of Iran due to international sanctions, such projects as the development of Soroush and Norouz, and Sourena very large crude carrier (VLCC) faced serious problems for some time and Iranian petroleum industry experts were facing a Herculean task for making the oil industry self-sufficient. Of course it should be kept in mind that Shell's training courses proved to be effective and Iranian manpower trained by Shell are faring well in Soroush/Norouz platforms and the Persian Gulf VLCC. Since the very start of its presence in Iran's oil sector, Shell was interested in heavy and ultra-heavy crude oil and that is why Shell was mainly active in Iranian offshore fields.
Presence in Iran's projects and sales of Iran's heavy and ultra-heavy, over decades had strengthened its exchanges with Iran such that immediately after the imposition of international sanctions this channel of Iran's oil sales was cut off. Shell owed Iran around $2 billion. Over these years, both sides made many efforts for the return of this money to Iran.
The money was paid back to Iran in May, thanks to efforts by Iran's Minister of Petroleum Bijan Zangeneh and Iran's overture to abroad following the implementation of its nuclear deal with world powers and the ensuing removal of international sanctions. Having done so, Shell proved its good intention for presence in Iran and it can now submit its proposal for presence in Iran's projects in a tight competition with other foreign companies.
Even before the Joint Comprehensive Plan of Action (JCPOA) had taken effect, Shell's managers had voiced their interest in broadening trade ties with Iran and made it clear that Shell was "very serious" in benefitting from opportunities presented by Iran. They said they would work with any partner based on the principle of long-term participation and generation of value-added.
The head of Iran affairs in Shell went straight to National Petrochemical Company of Iran and held face-to-face talks with Marzieh Shahdaei, managing director of NPC, and Amir-Hossein Zamani-Nia, deputy minister of petroleum for international affairs and trading. During their talks, they signed an agreement for NPC to consider Shell's presence in Iran's petrochemical market. This agreement interpreted as a new chance for Shell.
Hans Nijkamp, the head of the department for Iran affairs at Royal Dutch Shell, said the signing of the Memorandum of Understanding (MOU) came after months of negotiations between the two companies.
"We believe that we can have joint projects in the petrochemical field with the National Petrochemical Company," he said.
Referring to future plans by Shell for presence in Iran, Nijkamp said that the company is looking for investment opportunities.
He said Shell and NPC are set to launch negotiations at technical, engineering and economic levels in order to explore opportunities for investment in Iran. He said it was the main point in the Shell-NPC MOU.
Nijkamp said Shell would be pursuing a variety of projects in Iran, including the construction of ethylene cracking plant. He added that Iran has called on Shell to build a GTL plan by applying state-of-the-art technology and to market its products. There are lots of opportunities for investment in Iran, he said, adding that the important point was to find the correct path and analyze all details.
He said after Shell-NPC expert team defines a framework for cooperation, Shell would be able to announce when it would start investing in Iran.
Nijkamp said that Shell would then examine opportunities and ways of activity before signing any agreement. That could last six months or one year because any negotiations about details would need time and a final agreement would depend on the negotiations between the two sides.
The important thing for the moment, he said, is that Shell has expressed its willingness to be present in Iran's petrochemical industry. However, negotiations have to reach a conclusion.
According to him, the important thing is that Shell's investment in Iran would create jobs in the country.
Nijkamp also briefed the meeting about the history of Shell's presence in Iran, saying Iran and Shell have already cooperated on different projects and supplied products of high quality on the market.
He said international sanctions brought a halt to cooperation between Shell and Iran, but with the signature of this HOA, cooperation between Shell and NPC would be revived.
Nijkamp said old projects must be looked at as an instance of experience, but time and technology are going ahead and managers have changed. Therefore, he added, old projects could not be followed up; therefore, Shell would have to focus on new projects.
There is time for upgrading old projects, he said, adding however that Shell would prioritize new projects.
Shahdaei noted in the meeting that NPC had cohesive plans for increasing petrochemical production. She said NPC hopes to bring Iran's petrochemical output from the current 60 million tons a year to 160 million tons by 2025.
Zamani-Nia also described Shell-NOC memorandum as a very important step for Shell to start its work in Iran's petrochemical industry. He expressed hope that Shell would become active in Iran very soon.
"Thanks to the foresight of petrochemical industrialists in Iran, this company’s projects will come online sooner than other oil and gas projects. Iran is looking for contracts worth $10 billion in the oil and gas sector in the current [calendar] year," he said.
Iran-Japan MTP Cooperation
In a separate development, NPC signed an MOU on methanol-to-propylene (MTP) with Japan's Jositz.
Hossein Alimorad, director of investment at NPC, and the representative of the Japanese firm signed the agreement in the presence of Shahdaei.
"Given abundant gas reserves in the country, implementing methanol-to-propylene project is a main policy of Iranian Ministry of Petroleum," said Shahdaei.
Propylene is used in different industries including car manufacturing and textile. As far as car manufacturing is concerned, it is used in producing injection equipment. In the textile, propylene is used for making tissues and thread for packaging, machine-woven carpet and rug.
Propylene is a low-density olefin and a major basic substance in the petrochemical industry. Global demand for propylene was around 110 million tons in 2020. The demand for this material has been growing more rapidly than demand for other polymers.