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Petrochem Capacities To Double

The Iranian petrochemical industry is set to witness a twofold increase in capacities in the next five years, but success could be marred by downward pressure on global product prices and the slow recovery of domestic demand.

Under the 2025 Vision, Iran is expected to become the top petrochemical producer in the region.

According to recently released statistics from the National Iranian Petrochemical Company ( NIPC ), petrochemical production reached 26.5 million tons in 2009, up 69 percent over 2008.

Exports contributed half this increase, reaching 10.6 million tons in 2009, more than double the level of four years ago, although 10.5 percent lower than the government's target.

According to government figures, the value of petrochemical exports totaled $8.2 billion in the 2008/09 Iranian year, compared to $3.2 billion four years earlier.

This was around 35 percent above the level achieved in the previous year, but still $800 million below the target set by Iran's Petrochemical Commercial Company (IPCC). The situation may have been worse if it had not been for the completion of Jam Petrochemicals Complex in December 2008.

Iran plans to invest $100 billion in the oil, gas and downstream industries during 2009-13, including the development of North Pars, Golshan and Ferdowsi gas fields. This is to come on top of the $66 billion projected for 2004-8.

Iran comprised 25.3 percent of Middle East petrochemical production in 2008, up from 16.2 percent in 2005.

Hossein Nejabat, a member of Majlis Energy Commission, told Iran Daily that it is possible to reach the targets set in the 2025 Vision by completing the development projects in the petrochemical sector, such as those in South Pars gas field.

According to the commissioner, the sector has been behind schedule in these regions and it is necessary to invest more to speed up the process of implementing the development plans. To this end, the government has also set easier conditions for foreign direct investment.

Nejabat said Iran's global share in the sector is less than 1 percent, although it holds 12 percent of the Middle East share. The target is to win 34 percent of the Middle East market in the coming years, though.

NIPC is targeting an output of 38.9 million tons by the end of the current Iranian year (March 20, 2010). In the first three months of the year, it produced 6.85 million tons, which is just 3.4 percent more than the average quarter rate in the previous year and 71 percent of the capacity.

Of the 38.9 million tons of petrochemicals produced, the target is for 12.5 million tons to be sold on the domestic market. Iran's Petrochemical Commercial Company exported 3.79 million tons of petrochemicals in the first four months of 2009, which put it just 2 percent behind the average needed to meet these targets.

In terms of value, exports totaled $1.88 million, just under 3 percent below target. Nearly a quarter of exports consisted of propane and butane.

The success in achieving the government's objectives rests on a number of inter-related factors: the strength of the domestic economy, Iran's diplomatic and trade relations, and progress on capacity expansion.

This should ensure growth in the domestic petrochemical market, but not at the rates seen in recent years. Consequently, the projections for domestic sales are achievable.

The Oil Ministry has targeted the production of 11.5 million tons per annum (tpa) of ethylene and 11.5 million tpa of polymer. By end-2014, ethylene capacity will total 7.88 million tpa with other capacities, including 7.06 million tpa PE and 1.29 million tpa PP.

LDPE will contribute 43 percent of the 3.7 million tpa expansion in the PE sector, followed by HDPE (33 percent) and LLDPE (24 percent). The growth in the importance of LDPE in the Iranian petrochemical industry goes against global market trends that increasingly favor LLDPE as a substitute.

By Sadeq Dehqan

© Iran Daily 2010