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IPF Exclusive, July 2013


Tenth Iran Petrochemical Forum | Summit 2013

Petrochemical Industry in Iran and the World


The in-depth and fundamental move towards growth and development of the petrochemical industry in Iran was practically initiated after the war.


Abdolrasoul Dashti, Expert in oil & Petrochemical

Attracting the attention and participation of major international investors is among the most effective methods that are applied in all countries for realization of development. In our country, too, this approach has been used both before and after the victory of the revolution. This technique specifically after the victory of the 1979 Islamic Revolution has been among the most effective methods for development of the petrochemical industry in Iran and its widespread plans to reach the status of the first producer of petrochemical substances in the Middle East.

In the new petrochemical era, possessing high capacity and capability in production is considered the main principle of power in this industry; a principle that major and international companies have realized from the beginning of their activities in this area. Our competitors in the Middle East region too have appreciated this reality sooner or later.

Questions regarding where we had been placed, in what direction our development has been oriented and especially what direction we are treading now are among major topics which should be well clarified and sufficiently dealt with in order to successfully accomplish the task.

Study of the past experiences and measures of pioneer countries in this industry show efforts for gaining superiority in the production and as a result enjoying a maximum share in the international markets. These are powerful instruments the urgency for realization of which has made oil giants to unite and merge with each other. It should be discovered how much the method adopted by international companies has been effective in preserving their superiority? What are the strategic programs of our competitors in the Middle East region? And, whether or not strategic programs which have been codified for privatization and development of Iran's petrochemical industry are capable of helping us attain the great objective of becoming the first producer of petrochemical substances in the Middle East in the Iranian calendar year 1400 (2021)?

Petrochemical Development, a Response to a Social Need: Commencement of activities of the petrochemical industry in the world and its rapid growth and development was not only the result of progress of knowledge and discovery and invention of modern sciences but somehow a response to part of the needs of those days and fundamental changes in different aspects of life of communities at that time, which prepared the grounds for rapid and amazing growth and development.


In Russia "Sibor" is the largest company in the petrochemical industry, which is affiliated to "Gazprom", and in recent years has made an outstanding growth due to the rich oil and gas resources in that country and the government's special attention to investment in the petrochemical sector.


Irrespective of the prevailing necessities of that time, in Iran undoubtedly what prompted establishment of the first petrochemical unit in Shiraz in the year 1343 (1964-65) was the concern officials of the country felt for not lagging behind in modern knowhow of the world in the oil and energy sectors.      

Simultaneous with the development and increase in production, major producers of petrochemical products and international owners of the industry soon realized this important point that in order to preserve their superiority in this field they have no alternative but to take advantage of capabilities of the private sector. Governments took steps in this direction in accordance with what they deemed necessary for making progress and developing their countries, too.

Study of the past and present policies of the oil and petrochemical industries in different corners of the world ranging from the United States and Europe to countries such as India, China, Malaysia and Brazil as well as Arab neighbors in the region such as Qatar, Saudi Arabia andů all point to their stepping in the direction of privatization especially to enhance their potentials for competition at international markets; a move that through proper planning and efficient management has brought with it all positive peripheral consequences such as creation of job opportunities, social and cultural growth and development, as well as attraction of foreign investment besides growth and development of this industry.

The in-depth and fundamental move towards growth and development of the petrochemical industry in Iran was practically initiated after the war (with Iraq which ended in 1988) and with the renovation of damaged units. Thus after sometime perhaps it could be said that we witnessed the largest investment, capacity building and production in the petrochemical industry; a growth and development which took shape with the full support of government agencies and their trust in managers and specialists of the oil and petrochemical industries.

Concurrent with the development of the petrochemical industry, officials and those involved in this industry also had globalization prospects in mind and it was on the basis of such macro-oriented perspective that from the very beginning of the First Economic Development Plan, the idea of establishment of special petrochemical economic zones was raised and the Petrochemical Investment Company was launched to privatize and offer to people shares of production units and projects  under implementation.

Challenging years were left behind and highly important infrastructural measures were taken so that several petrochemical units were constructed, two special economic zones were set up in Bandar Imam and Assalouyeh and petrochemical industry managed to rank second in the Middle East and become credible at global level; a trend which could still have continued and entailed growth and development of the industry and its downstream industries as well.


The United Arab Emirates has set Abu Dhabi as the future hub of its petrochemical industry and envisaged implementation of various projects for development of its petrochemical industry up to the year 2030; projects which analysts believe would call for about $100bn investment.


At present, study of world petrochemical industries shows that basic changes facing this industry further underline the importance of planning for competitive atmosphere.

After a period of prosperity and affluence, the petrochemical industry practically suffered decline of profit in the second half of 2008. But, by passing through the crisis in 2008 and 2009 (1), it managed to resume the course of promotion to such an extent that recently China has forecast that in case its GDP reaches 7 to 8 percent in 2013, the growth rate of its petrochemical industry could increase by about 9 to 10 percent and in that case special chemical products would enjoy higher growth rate in comparison with high consumption petrochemical products (2). Experts also predict they would be witness to a two-fold growth in China's import of propane by the year 2015 (3).

Meanwhile, a report by the American IHS Institute indicates that the world demand for methanol has increased by about 23 percent during 2010-2013, which has been mainly due to increase in China's demand. According to the institute's forecasts, the global demand for methanol would increase from 61 million tons in 2012 to about 137 million tons in the year 2022 (4).

Superiority in Production, Instrument of Power in Petrochemical Industry: In the contemporary world, the criterion for supremacy of countries in the petrochemical industry, like their capability in the oil and gas sectors, is evaluated on the basis of their capability in production, a production volume which would be more valuable if it contains more polymerized products with higher value added. Based on this perspective, whenever countries refer to their future plans in the petrochemical sector, the most important issue is provision of financial resources for continuation of their development programs and increase in production capacity. A glance at plans of some neighboring and Middle Eastern countries is an emphasis on this perspective that increase in capacity of production stands on top of their future programs.

In Russia "Sibor" is the largest company in the petrochemical industry, which is affiliated to "Gazprom", and in recent years has made an outstanding growth due to the rich oil and gas resources in that country and the government's special attention to investment in the petrochemical sector. This company currently stands on the top of active petrochemical companies in Russia, the Commonwealth of Independent States (CIS) and East Europe and produces over 2000 different brands. In recent years, Sibor has enjoyed a satisfactory operational growth to such an extent that its subsidiary companies succeeded in producing and processing 16.8 billion cubic meters of associated petroleum gas (APG), 15 million tons of petrochemical products and 14.8 billion cubic meters of LPG in 2009. The company's 161.2 billion rubles ($5.6bn) in revenue fetched from producing petrochemical substances and mineral fertilizers in the not so desirable economic situation of the world in 2009 is indicative of the success of this company in generating revenue in this sector.

Sibor's plans for the coming years indicates a serious desire by the company to make further investment in order to create new capacities, set up production units with high capacities and increase exports to Europe through establishment of new export terminals. In its future plans, Sibor is following an increase in its processing capacity of associated petroleum gas (APG) and production of NLG, and finally taking over the entire Russian plastics market (5).

The United Arab Emirates has set Abu Dhabi as the future hub of its petrochemical industry and envisaged implementation of various projects for development of its petrochemical industry up to the year 2030; projects which analysts believe would call for about $100bn investment. The plan for development of the third and fourth phases of the Borouj Complex in Ruwais, the first phase of ChemaWeYaat Tacaamol Complex and the large OBIC Complex could be cited among these projects. The UAE has also announced that it would double the capacity of its shipping fleet for transportation of export products of under construction projects by 2013.(6)

Saudi Basic Industries Corporation (SABIC) intends to add 12 million tons to the current production capacity of its petrochemical substances within the next two years by increasing foreign participation including cooperation with the Chinese "Sinopec" group and expansion of local projects. This company also signed a contract with "Mitsubishi Rayon" of Japan worth one billion dollars in 2009 for the establishment of a participatory unit. The project, to be set up in Saudi Arabia, is to produce substances needed for the manufacture of auto parts which are capable of competing with American and European rivals, including "BASF" of Germany. Currently, SABIC is the fourth biggest polymer producer in the world and produces about eight percent of the world's petrochemical products. It intends to increase its share in the world market by 15 percent putting into stream  the new and under construction units.

SABIC also signed an agreement with the American "ExxonMobil Chemical" Company for the construction of two units in the cities of Jubail and Yanbu with a cost of $800 million. The Jubail unit belongs to "Kimia" and the Yanbu unit to "YanPet" companies, companies which have been established by SABIC and ExxonMobil on participation basis.

Saudi Arabia has also important projects for investment and participation in Iraq's petrochemical sector. These projects are totally worth over $5bn (7).

Qatar's plan to use ethane as the main feedstock of its production complexes is oriented toward downstream petrochemical products and bringing about diversity in production (8).

The economy of this country is still growing faster that the economies of other countries of the Persian Gulf Cooperation Council. In the next two years, constant development in the oil and gas sectors is the main investment plan of this country. In fact, Qatar's economy would still move around hydrocarbon sector after the predicted time limit is terminated.

Qatar is currently the main producer of liquid natural gas (LNG) in the world and its government has prioritized further investment to increase export capacity on top of its plans. According to forecasts in the near future the strong pillars of the sheikhdom's economy would be based on gas instead of oil. Figures released recently by Qatar Statistics Organization show that since the second half of 2008 for the first time gas has surpassed oil in terms of nominal GDP. "Qatar Gas" and "RasGas", the two companies responsible for the production of LNG, have announced they have broad programs to rapidly increase production level in the years to come (9).

Despite decline in demand and world price of plastic, the country has signed contracts for construction of two giant petrochemical complexes in "Mesaieed" region and is seriously following plans for petrochemical development. Copco is one of the major petrochemical companies of Qatar and a subsidiary of Qatar Oil Company, which is participating in the implementation of several joint projects with foreign companies. The main shareholders of Copco are "Industries Qatar" holding 80 percent of the shares and French "Total" company holding the remaining 20 percent. To increase gas production from 8 billion cubic meters a day in 2008 to 20 billion cubic meters in 2012 has been among major plans of Qatar (10).

Prospects of Iran Petrochemical Industry in 20-Year Vision Plan: On the basis of its previous planning and through preservation of its integrity, Iran Petrochemical Industries intended to implement at least 80 percent of privatization in this company in line with the enforcement of policies of Article 44 of the Iranian Constitution and manage to have about $20bn worth of marketable products  by the end of 1393 (2014-2015). According to the planning, the petrochemical industry could rank first in the Middle East in terms of production of basic substances such as ethylene, methanol and aromatic.

Engineer Nematzadeh,
the founder
of Iran's Petrochemical Forum

In the 20-Year Vision Plan of the company, by the end of 1403 (2024-25) it would produce 126 million tons of petrochemical products worth $52bn, which would increase Iran's current share of 28 percent to 34 percent in the Middle East and its global share from 0.9 percent to 6.3 percent.

Natural gas, as the main feedstock of petrochemical units, would increase from the current 30 million cubic meters per day to about 212 million cubic meters per day by the end of the 20-year plan, which has been, and still is, one of the main concerns of this industry for gaining access to high production.

In line with expanding international markets, the National Petrochemical Industries Company is now exporting about 9 percent of its products to markets in China, 10 percent to India, 41 percent to the Far East, 7 percent to East Asia, 6 percent to Europe, 24 percent to the Middle East and 3 percent to other parts of the world.

Prior to the notification of the outlines of Article 44 of the Constitution (from 1995 to 2006), the company ceded 23 petrochemical projects to the public within 5,584 million shares worth 12,171 billion rials. After notification of the outlines of Article 44 (from 2007 to 2009) it offered 24 projects within 17,637 million shares worth 42,000 billion rials in different ways, including shares through stock exchange market, government debts and justice shares. On April 16, 2013, some 5 percent of the Persian Gulf Petrochemical Holding (equivalent to 9,000 billion rials) was offered through the stock exchange market.

Forum on Investment Opportunities in Iran Petrochemical Industries: The first forum on investment opportunities in petrochemical industries in Iran was held in 1377 (1998-99) in the early months of establishment of Special Petrochemical Economic Zone. Definitely, holding the forum prepared the ground for widespread evolution and development that henceforth took place in the petrochemical industry. This proper and planned movement was soundly continued in the forthcoming years in order to pave the way for international petrochemical partnerships in Assalouyeh Special Economic Zone after its establishment.

However, study of the executive trend of the forum, especially the recent ones, shows that the plan has failed to fully realize the predicted targets. Yet, forums have continued their trends more or less according to implemented plans.

In the 8th petrochemical forum held in 1387 (2009), the then Governor of the Central Bank of Iran (CBI) Tahmasb Mazaheri was one of the guests and speakers of the forum. He announced that the prevailing state regulations had made possible investment as desired by domestic and foreign investors. He stressed that an appropriate business atmosphere had been provided for investment in Iran and that investment security, reduced bureaucracy and investment guarantees existed in the country.

 The then CBI governor also commented that investors could take action with respect to the process of pricing and export in the absence of government interference but within the framework of public regulations. He had specifically emphasized that the investors could invest the profit they gained inside the country in projects outside Iran or reinvest it inside the country.

In that forum, too, the then Oil Minister Engineer Gholam Hossein Nowzari referred to trade advantages of the country and hydrocarbon resources, especially gas, and called on owners of financial resources and technical knowhow to evaluate the possibility of making independent or participatory investments in petrochemical projects with regard to mega targets and policies of the country and legal facilities that had been provided. However, until the next forum and due to various issues and problems, the remarks made by these officials could not practically solve any problems in the way of attracting foreign partnership in the implementation of new petrochemical projects.


SABIC intends to add 12 million tons to the current production capacity of its petrochemical substances within the next two years by increasing foreign participation including cooperation with the Chinese "Sinopec" group and expansion of local projects.


The 9th IPF: The issues discussed by the then officials remained unchanged until the 9th petrochemical forum, which started its work under circumstances that the oil and petrochemicals sector had undergone numerous changes. In the 9th petrochemical forum, one of the guests and special speakers was Engineer Mohammad Reza Nematzadeh, the founder of this forum, the former Managing Director of the National Petrochemical Company and the person who had been transferred to the National Refining and Distribution of Oil Products Company to rapidly operate the smart fuel card project and thus organize fuel supply and by implementing new refinery projects increase gasoline production in the country.

Stressing that Iran was the second world country in terms of oil and gas resources, Nematzadeh said: "We should have plans for attracting investment for at least 10 years in this domain." Whereas, he complained: "We notice today that sometimes we have to wait for four years to receive bank facilities and sometimes five to 10 years are set for their repayment."

Stressing that the price of gas was changing and it would be better if it remained unchanged, Nematzadeh said: "The National Oil Company had previously accepted to maintain the price of gas feedstock for petrochemical complexes but it changed and demanded that the specialized committee formed for the study of the case should approve repayment of the feedstock price for a period of 10 years."

Referring to numerous revisions made in the field of petrochemical industry, he said: "The Majlis (Parliament) has approved 5 percent discount for the feedstock of refineries but in the petrochemical industry we demand a 10 percent discount below the market price and with an strength of 10 years."

Nematzadeh noted: "We had a growth rate of 0.3 percent in the petrochemical industry. At present, however, the growth is 2.4 percent and we have decided to increase it by three times to reach 7 percent."

Stressing that the regulations should be stable, he said: "A few years ago I received a letter from a country, which said all regulations of that country would remain stable for the coming 50 years and would not change."

According to Nematzadeh not only convergence of regulations is essential but also coordination and adaptation should exist among government officials and policy maker; and this needs education and further practice within the government. He called for stabilization of prices of feedstock for a period of 10 years.

Meanwhile, Mohsen Khojasteh-Mehr, a deputy at the Oil Ministry, also stressed in the 9th International Petrochemical Forum that some 40 million cubic meters of gas would be delivered to petrochemical complexes in 1390 (2011-2012) which would increase to 161 million cubic meters by the end of the Fifth Plan.

He added: "We consider generating wealth as the upstream responsibility of oil and gas but in the downstream sector, especially petrochemicals, the advantage is increasing the value added. We will try to proceed with the chain of projects as such that the most value added would be generated. We will also try to rank first in petrochemicals in terms of generating knowledge as well as export of petrochemical products. But, during those years the major concern of petrochemical companies was shortage of gas feedstock, which sometimes caused a decline of 27 percent in petrochemical productions."

The 10th IPF: The 10th International Petrochemical Forum was held in the month of Ordibehest (April-May) this year under conditions that on the one hand former managers were not in their positions but their promises were still holding and on the other as a result of escalation of international sanctions against our country, especially in the field of oil and petrochemicals, the development trend of the industry has not been proceeding as forecast. Under these circumstances and as an effective measure in attracting international partnerships, perhaps it would be necessary to take a new and more effective step rather than holding forums.


1- ICIS Chemical Business,  Sept-Oct, 2009  

2- ICIS News, 18 April 2013

3- ICIS News, 19 April 2013

4- - 04/01/2013, Thinnes Billy,  Hydrocarbone processing staff, Houston TX

5- National Petrochemical Industries Company, report of Esfand
    (February-March) 2012, Bahman Moazami, expert in CIS countries

6- ICIS Chemical Business/Dec 2009

7- MEED/ Nov- Dec 2009

8- MEED/ Nov, 2008

9- 3 May 2010, ECO News Agency

10- ICIC Chemical, Oct. 2009              

 

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