Petchem industry, successful model for Economy of Resistance

EghtesadOnline: As one of the countries possessing world's massive proven hydrocarbon reserves, Iran has launched a successful model of petrochemical industry to go ahead with Economy of Resistance.

News ID: ۷۷۲۱۷۵

11 December 2016

Facing such oil and gas rich states as its rivals in the Persian Gulf and the Middle East, Iran is the world's second petrochemical power, having 25 percent share in general capacity of petrochemical products.

Despite restrictions over nuclear sanctions and primarily due to the eight-year imposed war (1980-88), the industry is now vanguard of materialization of the Economy of Resistance and is considered as base of the country's self-sufficiency, IRNA reported.

As the 24-point strategic and macro directives of the Economy of Resistance, drawn up by the Supreme Leader, was brought to the notice of the heads of the three branches of government on February 12, 2014, and following the Executive Branch of Power's issuance of an 11-point directive to the executive organs, the roadmap for development of the petrochemical industry was drafted in seven detailed volumes by the Ministry of Petroleum.

The executive document has specified the steps towards addressing the goals of the Economy of Resistance in the industry.

It should be noted that Economy of Resistance does not mean closing the doors or getting drawn in international isolation; rather, it means creating a dynamic atmosphere inside and using the domestic and foreign potential in line with the specified objectives. The prelude to the policies of Economy of Resistance asserts, 'With the goal of guaranteeing dynamic growth and improving indices of economy of resistance and to achieve the goals of the 20-Year Vision Plan, general policies of the Economy of Resistance with Jihadi, flexible, opportunity making, generative and progressive approach, are hereby issued.'

Besides the content and general approach of the document, the articles 14 and 15 of the policies contain a series of phrases which explicitly highlight the role of the oil, gas and petrochemical industry in the Economy of Resistance:

The Article 14 envisions increasing strategic oil and gas reserves of the country to influence the world oil and gas market, while emphasizing preservation and development of the capacity for production of oil and gas, especially in the joint fields.

And the Article 15 foresees increasing the value-added through completion of the chain of value of the oil and gas industry, developing production of the goods with optimal return (based on the index of strength of energy consumption) and raising exports of electricity, petrochemical products and oil derivatives with an emphasis on protective and sustainable extraction from resources.

Consequently, the executive documents underline the need for development of the downstream petrochemical industry to put into operation and exploit new petrochemical units and increase the capacity for production and refining.

Iran's petrochemical production capacity stands at 45 million tons a year and following operation and exploitation of new units, the production is pegged at 130 million tons to 180 million tons a year by 2020 and 2025 respectively.

Deputy Minister of Petroleum for Petrochemical Affairs and Managing Director of the National Petrochemical Company (NPC) Marzieh Shahdaie has put the country's current capacity for production of petrochemical products at 63 million tons a year.

She said that the capacity will reach 130 million tons by 2020 and 180 million tons by 2025 based on the plans made. Shahdaie also said that 19.1 million tons of petrochemicals are also to be exported and the figure will be as much as 65 million tons a year by 2020.

Meanwhile, Member of the Board of Directors of the NPC Farnaz Alavi said that capacity of Iranian petrochemical production will increase by 50 to 60 million tons in the Sixth Five-Year Economic Development Plan (2016-21).

Alavi told Shana that $35 billion has been allocated for new petrochemical projects in the Sixth Plan and the budget has been defined for various phases based on various financial resources dedicated for the purpose. It depends on power of the investor in attracting foreign partners and international financial creditors.

She also said that 50 to 60 million tons of increase in the production capacity is expected in the Sixth Five-Year Development Plan. 'Part of the products will be consumed by the units as basic products and about 40 to 50 percent of the total will be marketed inside and internationally as marketable final product.'

As the above figures show, due to the value-added it creates from changing raw materials into processed substances, the petrochemical sector is of considerable economic importance. Put it simply, the petrochemical chain starts from the current hydrocarbons in crude oil, gas condensates and natural gas and then turns into new chemical products after processing in chemical and petrochemical procedures. At the end, the downstream petrochemical industry turns the final products into goods and consumer products.

Any step of progress in the petrochemical industry will lead to a stepwise decrease in crude sales. Per the policies of the Economy of Resistance, this is considered not only as an infrastructural value but also as final objective. Selling crude is never considered as an advantage and based on the theory of natural resources curse or the paradox of plenty, it will entail adverse economic and social consequences.

Economists maintain that even under the circumstances prepared for selling crude at prices times higher than the price for the processed goods, one should refuse doing it so that the value chain continues and maximum economic capacity is employed. On this basis, the establishment of the Special Economic and Energy Zones to complete the chain of production of oil and gas industries will facilitate circulation of the value chain, reaping windfall income out of exports through increasing the value-added.

The Pars Special Energy and Economic Zone (PSEEZ) is one of the regions put into operation to extract, refine and process independent and joint gas resources. The project for establishment of PSEEZ was approved by the Supreme Council of Free Trade Zones on October 9, 1998.

The region lies on northern coastline of the Persian Gulf, covering 46,000 hectares of land in Bushehr Province. The Pars I region (South Pars), covering 14,000 hectares of land, including Assaluyeh city, Pars II (Kangan) region, covering 16,000 hectares of land from Kangan city and Pars III (North Pars) region, covering 16,000 hectares of land around the cities of Dayyer, Tangestan and Bushehr.

South Pars region consists 16 phases for gas processing, 16 petrochemical facilities and downstream petrochemical industries and various related industries and semi-heavy industries. Pars II region includes eight refinery phases and an LNG project. Pars III is also aimed to protect development project of certain key hydrocarbon fields. North Pars, Golshan, Ferdowsi and Farzad A and B gas fields also fall in the same zone.

On the issue, Director of the Public Relations Department at the Non-Industrial Operations Pars Pasargad Company (Assaluyeh site), affiliated to Persian Gulf Petrochemical Industries Company (PGPIC), Ali Hassanzadeh told a group of IRNA reporters visiting Assaluyeh Site that PSEEZ is the economic capital of Iran. In the area, gas is not only used as fuel for industrial facilities but for production of the downstream chemical products.

Assaluyeh site comprises such facilities as Sadaf Petrochemical Assaluyeh Company (SPAC) commissions a project for production of the environment friendly tire and asphalt polymer with well credited Italian Eni as its licensor. Jam Petrochemical Co. (JPC) produces olefin for the polyethylene market. Sasol Polymer Company having German Basel, French Technip and South African Sasol as its licensors and Bushehr petrochemical company (BUPC) is another such facility. All the facilities serve as complementary to the chain of petrochemical products in the region, addressing needs of the domestic and foreign markets through 15 chemical and container jetties in the vicinity.

In fact, the motto of 'Action and Implementation' suggested by the Supreme Leader of Islamic Revolution Ayatollah Seyed Ali Khamenei, who emphasized implementation of the policy of Economy of Resistance, designating the year 1395 as the year of the Economy of Resistance, is well reflected in the chain of petrochemical production. This means that raw materials are turned into products and goods and sold in domestic and foreign markets, thus checking waste of domestic capital.

Director of the Public Relations Department at Arya Sasol Polymer Company, Faramarz Parizi, told IRNA reporter on the sidelines of the tour of the reporters to Assaluyeh that the motto of 'Economy of Resistance: Action and Implementation' that was referred to in the new year message of the Supreme Leader, is fully reflected in his company.

Parizi said Arya Sasol has not only been successful to draw in domestic and foreign capital into the downstream and upstream industries, but also followed the outlook of skilled manpower training, thus no longer being in need of foreign consultants.

Undoubtedly, the huge and remarkable achievements in the industry today are due to the round-the-clock services and hard-working of directors, engineers and workers who managed to repel challenges and solve them gradually despite such problems as lack of insurance coverage, no money and equipment transfer, falling exports and disinterest of Iranian and foreign licensors to transfer technology to Iran.

One year into signing of the Joint Comprehensive Plan of Action (JCPOA) and with President Hassan Rouhanis in office in the last three years, brighter prospects are before the oil and gas industry while the requisite to achieve the targets is stronger support for the industry. Attraction of new domestic and foreign capital, using new technologies, renovation of equipment, training and recruiting specialized workforce, employing the locals, and enhancing the capacity along with production of new products will be possible through financial assistance and regulations, that part of which are accessible by new model of oil contracts known as Iran Petroleum Contracts (IPC).

If fundamentals of the Economy of Resistance are theorized in such inter-disciplinary fields of political-economy and then applied to industrial fields, one can suggest petrochemicals as a key to attain self-sufficiency and economic vitality of the country. The petrochemical industry has the potential to help the country get rid of the deflationary inflationary conditions, provide creative and non-inflationary jobs, and even meet the targets of the strategic non-oil export development.

All the southern coastlines of our country provide God-given opportunity for economic and industrial development, but just a fracion of the potential has been tapped. Of course, the western half of the stretch in northern part of the Persian Gulf has attained considerable growth in the past couple of years. However, the eastern side in northern part of Oman Sea has not attained the progress it deserves. Development of Chabahar Port in far eastern bank of the band and launching of petrochemical facilities in the port, which is located in the Oman Sea, will guarantee further flourishment of the knowledge-based and entrepreneurship industry in the future.

To guarantee success of the policies of the Economy of Resistance, the successful strategy of petrochemical industry development, especially the experience with the PSEEZ, can be extended to other economic, commercial and industrial fields of our country.