IRAN - The Petrochemicals Sector.

At a Dec. 26, 2004, ceremony marking the 40th anniversary of the establishment of a petrochemical industry in Iran, Deputy Oil Minister and the Managing Director of the state-owned National Petrochemical Co. (NPC), Mohammad Reza Nematzadeh, said implementation of a 10-year development plan from 2005 will enable Iran to become the world's 10th biggest producer of petrochemicals by 2015 with an output of 70 million tons per annum. Iran's world ranking will rise from No. 80. The value of its income from this industry will by 2015 reach $20 bn in current US dollar terms.

NPC was established on Dec. 26, 1963, but its development was stymied due to the Islamic revolution and the Iran-Iraq war. Nematzadeh said since 1997, 15 projects had been designed. Most of them had been implemented or were to start up by March 20 - the end of the 2004 Iranian year. He added: "The projects will increase Iran's petrochemical production to 38m tons/year... In other words, the value of Iran's petrochemical products will stand at about $9-10 bn by 1385 (2006-07)". He said Iran's ranking was to improve to No. 60 by end-2004, to between 40th and 50th in 2005. He said NPC was taking suitable strides in such fields as training experienced manpower, increasing research activities, and encouraging private investments in petrochemical industries.

Earlier the Director of NPC's Administrative and Educational Affairs Department Mansur Mo'azzami said the company had spent $12 bn during in the Third Five-Year Economic Development Plan (2000-05), with its exports expected to earn the country $4 bn this year. He said imports of petrochemical products, mainly polymers, had cost the country $1.2 bn last year, indicating a wide gap remained between production and consumption.

Last June Nematzadeh told the annual meeting of Iranian Association of Economists that 50% of Iran's petrochemical industry will become private within 10 years. He made the following projections: "The sector aims to produce 12 million tons [a year of] ethylene, 10 million tons [a year of] polymers, 8.5 million tons [a year of] urea, 7.5 million tons [a year of] methanol and 4 million tons [a year of] aromatics in its 10-year outlook". He said the petrochemical industry only accounted for 0.25% of GDP in 1989, which increased to 1.7% in 2003 and was to hit 2.1% in 2004 to March 20, 2005. "The share of the petrochemical sector in non-oil exports was 2.7% in 1989. It reached 22% last year (2003) and will increase to 25% during the current year" (2004 to March 20, 2005). He noted that Iran's non-oil exports increased by an average of 13% per year, while corresponding figures for industrial and petrochemical exports stood at 25% and 31% per annum, respectively. The share of the private sector from petrochemical investments had risen from 6% in 2002 to about 21% in 2003, he said.

Also last June Nematzadeh told a Tehran seminar Iran's chemical fertiliser output was to to reach 6.7m t/y in twenty years, adding that azotes would account for 4.3m tons. He added: "Iran needs four million tons per year of chemical fertilisers and we have to import this product to meet domestic needs". He said that Iran's annual production then stood at 3m tons. Turning to Iran's advantages for fertiliser production, he said: "Huge gas reserves for feeding the petrochemical industry, a booming market and the competitiveness of gas prices in the region prompt us to focus on this product". Nematzadeh said NPC supported the private sector for producing fertilisers.

Japan's Toyo Engineering Corp. and Chiyoda Corporation, along with the local Petrochemical Industries Design and Engineering Co. (PIDEC) had won the EPC contract to build a 2,050 t/d ammonia plant and a 3,250 t/d urea plant in the Asaluyeh Port. The value of the contract, announced on April 11, is about $230m, and the project was scheduled for completion in 2006. This is NPC's second fertiliser plant a Asaluyeh. Within consortium, Toyo covers the ammonia plant with M W Kellogg (UK) technology and Chiyoda covers the urea plant with Stamicarbon (Netherlands) technology as well as urea granulation with Hydro Fertiliser (Belgium) technology, while PIDEC covers the detailed designs and local procurement for both plants.

This complex, one of the largest in the world, will use natural gas from the offshore South Pars field as a feedstock and the units are identical to the first ones, which are currently being executed by the Toyo/Chiyoda/PIDEC consortium, adjoining the first plants. The consortium had won the repeat order without competition through successful execution of the first project and the use of an export credit from the Japan Bank for International Co-operation (JBIC) and Nippon Export and Investment Insurance (NEXI).

Opening the 6th Annual Iran Petrochemical Forum (IPF) in Tehran on May 1, 2004, Oil Minister Bijan Namdar Zanganeh stated that, although Western industry experts said Iran's target may prove too ambitious, "our aim is to produce 70 million tons [a year] of petrochemical products in 2015, worth $20 bn". He said that, over the past Iranian year to March 20, 2004, Iran produced over 16m tons of petrochemicals, worth $2.7 bn, of which $1.2 bn were exported. "We hope over the current year [to March 20, 2005] to pass the $3.5 bn mark and to raise our production by 50% the following year" [to March 20, 2006]". He said $11 bn were to be pumped into the sector under Iran's five-year plan to 2010. In 2010, "we should have reached a production level of 56m tons [a year], earning Iran $7 bn in exports". Iran's ambition is to clinch a 5.6% share of the world's petrochemical output and as much as a 30% share in the Middle East by March 2006.

South Korean, Japanese, French and British companies are all active in the Iranian petrochemical sector. Iran is also trying to negotiate $500m in Saudi investment. "Our primary targets are the markets in Asia, and then the European market". Zanganeh said the Asian markets then accounted for 90% of Iran's petrochemical exports, while the European market made up for only 4%.

Western industry experts did not share Iran's optimism. "Iran must first find the markets, at a time when there is world over-production", an un-named European oil executive was on May 4 quoted by the press as having said during the IPF event. Olivier Appert, president of the Institut Francais du Petrole (IFP), which took part in the conference, said the success of Iran's plans depended on world growth rates, then running at about 4% per annum. Appert added: "We are optimistic as regards world growth. Demand is carried by major consumer products, and by growth in China and Asian countries. We can also be optimistic over Iran's capacity to develop its petrochemical output as the country has the necessary resources, especially the gas, to bring well-priced raw resources to the market". But Appert said a lot would depend on the inflow of investments. Question marks remained about the rate of investments and whether the investments could be raised within Iran's timetable. "That is the challenge", said the French expert. But he said the ethylene and propylene markets were promising. "You have to set ambitious targets and then try not to be too far away", he said, referring to the Iranian minister's speech.

The CEO of National Iranian Tanker Co. (NITC), Mohammad Souri, told the IPF: "This year (2004) petrochemicals exported by NITC vessels include 841,000 metric tonnes of ethylene and propylene, which will increase to 970,000 tonnes in 2007 and 1.91m tonnes by 2010". Iran's petrochemical exports in 2004 were expected to shoot up to 5.81m tonnes. "This will reach 16.28m metric tonnes in 2007 and 24.75m by 2010. This translates into a vessel requirement of 47 this year (2004), 116 by 2007 and 184 by 2010".

Iran has gone a long way through its five-phase Strategic Programme, launched in 1998, to raise the country's petrochemicals production capacity from 11.2m t/y in 1997. The plan's first three phases should raise production of ethylene to 5m t/y in 2005/06, with its share of world production to move from 0.5% in 2000 to 6-8% by end-2005/06. Production of polymers will rise from 750,000 t/y in 2000 to 5m t/y by end-2005/06. Production of fertilisers by end-2005/06 would have risen to 2.05m t/day of ammonia and 3.25m t/d of urea.

NPC, a unit of the Oil Ministry now functioning in parallel with state-owned National Iranian Oil Co. (NIOC), is speeding up work on the third phase, which is most challenging to Iran and more interesting to outsiders because foreign companies are to be involved in many of its projects as partners.

The second largest in the Middle East next to that of Saudi Arabia, Iran's petrochemical sector is concentrated on two zones: the Bandar Imam (Khomeini) Special Petrochemical Economic Zone (SPEZ), near the northern end of the Persian Gulf and close to Iran's main onshore fields; and the newer Pars Special Economic/Energy Zone (ParsEE), which is further to the south of the Gulf near the villages of Asaluyeh and Nakhle Taqi. The latter two desert villages had long depended on a small fishing port, Bandar Asaluyeh, which since late 1998 has become a centre for Iran's most expensive industries - employing more than 15,000 people. ParsEE will depend mostly on South Pars, a super-giant gas field (see its profile in Gas Market Trends No. 14). The gas and liquids feedstocks are provided at low cost, whether at SPEZ or in ParsEE and elsewhere in Iran.

Projects in NPC programme's first two phases were partly completed in 2002 and most of them are sited in SPEZ. The Phase 3 projects, being built at ParsEE where a big gas processing centre will supply them with low-cost feedstocks, must be on stream by 2007. The projects at ParsEE will include big and integrated olefins complexes (Nos. 9-13), the aromatics plants, methanol plants, a centralised utility, etc - see background in Vol. 60, DT No. 15).