Baku, Azerbaijan, Dec.4
By Dalga Khatinoglu – Trend:
Wood Mackenzie predicts Iran is able to attract $70 billion in petrochemical projects, but under some conditions.
Tehran will host Iran Petrochemical Forum (IPF) on Dec. 13-14, bringing together 137 foreign experts. The two-day forum aimed at introducing investment opportunities in Iran’s petrochemical industry.
Iran says it is planning to attract $70 billion investment to develop its petrochemical industry by 2020. Currently Iran has capacity of producing 60 million tons per annum of petrochemicals (below 80 percent of them are active), but plans to double this volume by 2020 and triples by 2025.
Afsar Hussain, an expert in Wood Mackenzie's EMEARC Refining and Chemicals research team specializing in Olefins and Polyolefins told Trend that "Iran have very ambitious plans to expand their petrochemical industry and have a large number of projects in various planning and construction phases. European investors are eyeing Iran but still acting with caution as the sanctions suspension is yet to occur, but there has been news of Chinese and Indian based investors looking at a number of these projects".
He said that Iran is clearly another viable location in terms of low cost gas-based feedstocks in the world other than the Middle East players who, with the exception of Qatar, has limited further supplies of low cost ethane available, and also the US with their shale gas-based developments.
Iranian petrochemical plants use 37 million cubic meters of natural gas per day, while Iran could deliver only 2.8 million tons of ethane to plants during last year totally. The country planned to increase this volume to 4.2 million tons in current fiscal year, started on March 21.
"We believe Iran can attract $70billion worth of investments, but only over a prolonged period that confirms it is an attractive investment opportunity. By comparison, the US shale gas revolution attracted over 200 projects worth over $130 billion within a decade of its emergence," Hussain said.
answering a question about the perspective of Iran's petrochemical exports he said that "Iran are taking steps to boost their exports but their first priority is to increase production for existing assets. "As a result of sanctions, assets have lower than Middle East average production rates because of limited access to international technology/catalysts, difficulty in delivering feedstock and trade embargos limiting potential markets. We expect Iran to increase their production slowly and hence will provide a boost to their exports, but the process will be slow at first and is heavily reliant on sanctions suspending."
Iran exported about $15 billion petrochemicals in 2011, before imposing western sanctions, but it has revived the export volume since 2014 due to elimination of petrochemical-related sanctions in November 2013.
According a brief record released by Custom Administration last week, Iran exported $10 billion petrochemicals during 8 months of current fiscal year, unchanged in value, but increased almost 40 percent in volume.
Coming to dropping petrochemical products in value, Wood Mackenzie expert says "Petrochemical prices generally fell on lower oil prices, however we didn't see the sharp falls in petrochemical prices the same way as oil, as demand for petrochemicals remained strong and supply outages supported prices. Oil prices (monthly averages) have fallen by over 50% from mid 2014 highs, but not all of this has been reflected in the price of naphtha, with the price of polyethylene in Europe only declining by around 20% in the same period. With lower petrochemical prices we expect to see some stimulation in demand, and we also expect oil prices to start their recovery towards the latter part of 2016, reaching >$85/bbl by the end of the decade – all of which are factors that continue to support petrochemical prices."
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