Foreign Investment to Help Diversify Iran's Petrochem Products

"Domestic producers are already producing a broad range of petrochemicals and polymers, but the country lacks cutting edge know-how and new equipment to diversify its petrochemical products," Reza Padidar also told NIPNA, the National Petrochemical Company's official news agency, on Monday.

Padidar noted that the manufacture of new petrochemical goods in Iran appeals to international giants and they are keen to invest in such ventures," he said, referring to ongoing negotiations with western companies that seek a place in Iran's emerging petrochemical market.

According to the official, attracting foreign and domestic investments can help the country further diversify its petrochemical projects and commodities, Financial Tribune reported.

"The industry can undergo a revolution, if state-of-the-art technology is transferred to the country," Padidar said, adding that in addition to the government's support, the private sector can also contribute to the development of the money-making industry.

The official stressed that the final cost of petrochemical production in Iran is lower than in other states.

Moreover, abundance of cheap natural gas as feedstock and incentives such as tax exemption for investments in energy zones and discounts on feedstock, Iran's strategic location in the region, skilled human resources and access to raw material as well as proximity to international waterways are among key factors attracting foreign firms to the sector.

Highlighting the high rate of return on investment in Iran's petrochemical plans, Padidar further said that the average ROI of petrochemical ventures in Iran stands at 20% that can generate more enthusiasm in foreign financers.

"Collaboration with more domestic banks and attraction of foreign investment will help speed up the construction of petrochemical projects," he said.

According to the official, Iran has signed important deals with international firms from France, Germany, Norway and Japan not only for importing petrochemical know-how, but also for building new plants, some of which are under construction.

"Sojitz Corporation, a major Japanese industrial and engineering conglomerate, Germany's BASF, Royal Dutch Shell and France's Air Liquide Engineering and Construction Company have either finalized their contracts or are still in talks with the National Petrochemical Company," he said.

Padidar noted that collaboration between domestic and international petrochemical holdings can help raise efficiency because of attracting investment and transferring know-how.

"Introducing Iran’s petrochemical industry potential for growth, exploring the means of expanding the industry’s mid- and down-stream sectors via joint ventures and attraction of international finance should top NPC's agenda to help reach the annual output capacity of 120 million tons by 2020," he added.

  Nominal Capacity

According to Mohammad Ali Bosaqzadeh, deputy for production control at NPC, the nominal production capacity of 57 major petrochemical complexes, mostly concentrated in the cities of Mahshahr (Khuzestan Province) and Asalouyeh (Bushehr Province), is forecast to reach 72 million tons by March 2018, with actual output forecast to reach 60 million tons in six months. Iran holds some of the world's largest crude oil and natural gas reserves, but its petrochemical industry is underdeveloped in comparison.

Tehran says its new petrochemical ventures require over $70 billion in investments that should mostly come from foreign sources, such as France's Total and Royal Dutch Shel, that are reportedly close to sealing billions of dollars worth of licensing and construction deals in the Iranian petrochemical market.