Asghar Ebrahimi Asl, Managing Director of the National Petrochemical Co.

Asghar Ebrahimi Asl, the new managing director of the National Petrochemical Company took part in his first press conference on the sidelines of the 11th International Oil, Gas, and Petrochemicals Exhibition and elaborated on various aspects of the 11th olefin plant’s contract. He told reporters that a consortium comprising Linde, Sazeh, and Hyundai companies, which had been announced as winner of the 11th olefin contract, has charged Iran more than 260 million euros in excess and the contract has, therefore, been halted.

Ebrahimi Asl said, "Decision to give the project to Germany’s Linde Company was a managerial decision made by former officials, but we will not allow the company to increase the cost of upgrading its technology on the pretext of indigenizing it."

He noted that the contract was signed in July 2005, adding, "The contract included production of 2.4 million tons ethylene as feedstock for downstream plants of 11 petrochemical complexes, which are to be built along the West Ethylene Pipeline."

Ebrahimi Asl emphasized, "Ten months after beginning of the contract, Linde has only progressed one percent and its proposed price of 960 million euros is 260 million euros higher than Iran’s proposed price. This company and companies like it have taken part in several petrochemical projects in Iran and every time that Iran has transferred technical know-how for implemented projects, foreign companies have determined capacity of new plants at a higher level than the previous projection so as to prevent Iran from transferring needed technology."

Ebrahimi Asl warned Linde that it cannot charge scale-up cost for its technical know-how on host countries, adding, "Iran has experience in building petrochemical plants up to a capacity of one million tons and if capacity of the new plant (which is 2.4 million tons ethylene) is divided into three one-million-ton plants, we can both take advantage of domestic capabilities, and finish the project ahead of current schedule."

Managing director of the National Petrochemical Company said that the necessary investment for every one-million-ton plant is about 270 million euros and it seems that through implementing the new project, we will be able to establish 600,000 tons additional capacity and minimize costs related to possible delayed production by any of the plants through timely production by other plans.

"In other words, production risk will be decreased. Considering repetition index for construction, installation, and implementation of every plant, we can finish the 11th olefin project while saving 260 million euros compared to the price proposed by Linde," he added.

Ebrahimi Asl pointed out that the National Petrochemical Company has paid 7 million euros in advance payment to Linde, but the company has started the project with a long delay and has thus far, only progressed one percent.

Asked about remarks of the former managing director of the National Petrochemical Company about changes in the 11th olefin contract, he said, "The decision has been made by board of directors of the company, whose members have not changed, and all of them believe that the contract should be changed."

Referring to objection raised by Linde in this regard, the managing director stated, "We have a little problem with Linde. Therefore, since the contract has not been made effective yet, changing it will be of no objection."

Ebrahimi Asl opined that many opportunities have been lost in the 11th olefin contract, saying, "In return for one billion dollars of imports, 500,000 jobs are created abroad. We are determined to take wise and informed decisions to protect our national interests and prevent imposition of undue costs on the country…. I am sure that foreign companies will not resent at professional treatment of the contract and we better be sure that they will continue to cooperate with the Iranian companies as before…. My skill in negotiations with foreign parties for maximizing domestic capabilities is to reduce exorbitant costs that they have imposed on us."

With regard to new strategy of the company for attracting finance credits and investing in projects, he noted that the value of last year’s products amounted to 3.1 billion dollars, adding, "Out of that figure, more than 2 billion dollars pertained to exports and the rest was related to production by four petrochemical complexes in Abadan, Isfahan, Kharg, and Arak."

Ebrahimi Asl said that the new management paradigm includes president’s support for development of petrochemical industry, providing needed feedstock, and building more downstream plants to handle basic products and create higher added value.

"About 1.8 billion dollars of Oil Stabilization Fund’s deposits have been allocated to development of petrochemical plans. Some 2.5 billion dollars will be put at disposal of president through state resources for implementation of more projects in various parts of the country by the National Petrochemical Company," he noted.

Ebrahimi Asl said that continued rise in international oil prices has ensured investment in petrochemical projects commensurate to the country’s surplus foreign exchange reserves.

"Foreign companies and the private sector are very willing to take part in petrochemical projects and their enthusiasm during the 11th International Oil, Gas, and Petrochemicals Exhibition was surprising," he said.

Managing director of the National Petrochemical Company announced that negotiations related to construction of two utility plants supplying water, electricity, and steam, in Bushehr and Bandar Abbas has started with two companies from Southeast Asian and European companies and noted that the projects will be carried out on BOO (build, operate, own) and BOT basis (build, operate, transfer).

"More than 30 million tons production capacity will be created before the end of the Fourth Economic Development Plan and the relevant investment will create equal to 56 percent of added value," he added.

Pointing to possibility of new sanctions against Iran, he noted that sanctions will help the country attain self-sufficiency in all sectors.

Asked about manpower in the National Petrochemical Company, he said "New changes will be made in management of various parts of petrochemical industry with the goal of giving more responsibility to young workforce and taking advantage of creative employees. We will soon start using experiences, knowledge and skills of young people in petrochemical projects," he said.

Ebrahimi Asl then explained about the latest decisions of government for changing pricing system for petrochemical products.

"Losses resulting from price difference between petrochemical products inside and outside Iran have been estimated at about 700 billion tomans last year. Considering the current year’s production, the resultant economic rent in this market during the current (Iranian calendar) year will exceed 2,000 billion tomans, which is nothing but a great national loss," he added.

He noted that the rent was a result of issuing many agreements in principle by Ministry of Industries and Mines for establishment of industries, which are dependent on petrochemical products as raw materials.

"Many of those companies did not exist in reality, but received their monthly feedstock from petrochemical industries and sold them in foreign markets at international prices," he said.