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IPCC, SABIC on
the Same Team

In an age of mergers and acquisitions, companies with a small size or a small market share will either be swallowed by big ones or will go out of business. But terms such as “partnership” and “alliance” may come as a remedy to tough competition of major players. That is clearly what Iran’s Petrochemical Commercial Company (IPCC) may have thought.

Early Awareness: “IPCC has realized that it must launch partnership with global players in petrochemical business to enhance its position in the market,” told us the company’s chairman and managing director Mohammad Ehtiyati a few months ago. This indicated that Ehtiyati, a former London-based petrochemical executive, already had an awareness on the necessity of replacing a destructive competition with an essential partnership.

An Issue, A Solution: Although IPCC enjoys necessary potentials to develop internationally, but are all regional conditions suitable for such growth? This is where one has to note regional petrochemical companies – especially those based around the Persian Gulf – as very similar players with very similar markets. Even the Iranian Oil Minister Bijan Zanganeh warned a few times against a poor cooperation between regional countries that would finally result in market saturation. The solution masterminded by IPCC brings petrochemical companies from the neighboring countries around the negotiation table. Obviously, top on the joint venture list is Saudi Basic Industries Corporation (SABIC).

The Initiative: IPCC’s proposed alliance is in fact an inclusive regional cooperation package to enhance competitiveness. IPCC hopes to found a regional cooperation committee to implement this alliance. Even end-users could be members of this committee which is soon to be formed.
Likely to be positive, negotiations are underway with SABIC after fruitful talks with Emirates National Oil. The alliance is predicted to have production, marketing and technology on the menu. In addition, IPCC chairman recently provided greater details: “The aim is to increase cooperation since we have common markets in China, India and North East Asia. The alliance will enable the Persian Gulf suppliers to share resources especially in hydrocarbons and gas. The committee will promote cooperation in manufacturing, marketing, e-commerce, technology, shipping, safety and environment.”
Ehtiyati continued, “Depending on how the discussions progress, there may also be a joint research program for developing new technologies. Nevertheless, we need to first reach a common understanding before we establish a regional cooperation committee. IPCC hopes to forge a consensus among regional players on the products that each should focus on depending on the type of feedstock or technology available in the country. When a regional producer is better at manufacturing a certain type of product, then it should focus on that.”
In addition to their own countries, regional companies may also be encouraged to invest in other countries around the Persian Gulf in case there are advantages in production. Coordination of shipping efforts to reduce shipping and freight costs is also a logical measure to be taken by suppliers who have common markets. As a result, IPCC is studying establishment of a joint-venture shipping company that would operate in the Middle East-Asia route.