Thursday, Jun 12, 2008
By Roshanak Taghavi
Of DOW JONES NEWSWIRES
DUBAI (Zawya Dow Jones)--Iran's National Petrochemical Co. said it plans to grab the Mideast's top petrochemical producer spot from the current number one, Saudi Basic Industries Corp., by 2024, despite international sanctions curtailing the nation's economy.
State-run NPC, which operates under the umbrella of Iran's oil ministry, will spend a total of $30 billion by 2014 on nearly doubling petrochemical production to 68 million tons a year, the company's president and vice chairman Gholam Hossein Nejabat told Dow Jones Newswires in an interview in early June.
The figure is set to rise to an annual 100 million tons in the next 20 years, Nejabat said, speaking at the NPC headquarters in Tehran.
"We are targeting a position in 2024 as the number one petrochemicals producer in the region, in line with the 20-year vision plan. Currently, we hold the second place after Sabic," he said.
Annual production at Riyadh-based Sabic, the world's largest petrochemicals maker by market value, in 2007 stood at about 50 million tons, excluding the company's steel output.
NPC is moving ahead with its plans at a time when the Islamic republic is widely shunned by Western states over its controversial nuclear power program.
U.S. PRESSURE
Major international oil companies and banks have largely steered clear of dealings with the Islamic republic due to U.S. pressure.
Sanctions on the Middle East's second largest oil producer have significantly reduced its ability to tap global financial markets and to import specialist equipment.
However, Nejabat insists they haven't adversely affected business.
"So far the limitations caused as a result of sanctions have failed to produce effects on our financing and business deals," he said.
"Our exports, which in 2008 are estimated at about $9 billion, are flowing smoothly. They also went well last year. In addition, our financing efforts have not been hampered by limitations," Nejabat added.
Projects being implemented under NPC's fourth five-year plan by 2010 have already secured $12.5 billion of investments and are progressing as planned. Another $17.5 billion will be spent until 2014, he said.
"So far we have been able to secure financing, thanks to the credibility of NPC itself," Nejabat said, declining to name the company's financing sources.
Nor has NPC had problems securing technology for its plants despite sanctions and U.S. pressure on companies doing business with Iran.
"We haven't faced any constraints in securing whatever technology we sought to acquire since the U.S. technologies are also offered by other countries and we utilize them to do our job," Nejabat said.
"We are receiving technology from such companies as Basell, Technip SA (13170.FR), Linde AG (LIN.XE) and Uhde and many others," he added.
However, Iran's petrochemical projects, like other domestic hydrocarbon schemes such as liquefied natural gas and oil field developments, are still facing delays.
"Our projects are subject to a degree of delay and that's because we insist a larger share of the projects be carried out by local human resources and manufacturers. Developing the capacity of the domestic companies for this purpose causes some delays in the projects," Nejabat said.
Like other companies in the region, NPC has also been affected by spiraling project cost and shortages of equipment, raw material and qualified labor.
"The cost of projects has definitely gone up because the rise in oil prices has had a delayed effect, particularly on the price of industrial goods," Nejabat said, adding that higher cost have been passed on to customers through a rise in product prices.
"This in turn balances the increased costs out."
ACCESS
NPC's expansion plans are driven by access to the world's second largest gas reserves, largely located in the giant South Pars field in the Persian Gulf that it shares with Qatar, where it is known as the North Field.
Gas is commonly used to make plastics and its availability in the Gulf region has fueled investments in the petrochemicals sector in Iran and neighboring states such as Saudi Arabia, Kuwait and the United Arab Emirates.
Due to the comparatively cheap price of gas, the region has a competitive edge over petrochemical industries in Europe and the U.S., which are largely based on naphtha, a crude oil derivative that has become more expensive as oil prices have risen to record levels.
Hydrocarbon-rich countries in the Middle East are also benefitting from booming global demand for petrochemical products, led by fast-growing markets in Asia, where manufacturers produce ever more consumer goods made of plastics.
"We expect our market in China, India, Europe and Africa to grow, because in the future, it would not be economical for European countries to produce petrochemicals using expensive feedstock. That's why they are headed for increased use of products originating in the Middle East," Nejabat said.
"China and India will be among major consumers and we expect our markets to be concentrated in those areas in the future," he added.
At the same time the petrochemicals industry is emerging as a key sector amid plans by Gulf countries to diversify their economies away from oil and to create jobs for their young and growing populations.
While other Persian Gulf states are facing gas shortages amid soaring energy demand driven by an economic boom, NPC has no concern about feedstock limitations, Nejabat said.
"We feel we are pretty much secured with regard to the procurement of feedstock over the next 80 years, given our discovered reserves," he said.
-By Roshanak Taghavi, Dow Jones Newswires; +98919 1064892; roshanakt@gmail.com
Copyright (c) 2008 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
12-06-08 1007GMT
