(Picture - Iranian president Mahmoud Ahmadinejad during the inauguration of Mehr petrochemical facility at Assaluyeh, 1,200 km (746 miles) south of Tehran, Persian Gulf, Iran on June 25, 2009.)
As a journalist I can tell you it is all but impossible to get accurate information about Iran's chemical sector so this is very welcome. Here is the executive summary:
"The Iranian government claims that petrochemicals output rose 18% y-o-y in the 2008/09 Iranian year (ending 20 March) to 27.1mn tonnes, but did not give a breakdown by product. According to government figures, the value of petrochemical exports totalled US$8.2bn in the 2008/09 Iranian year, compared to US$3.2bn four years earlier. This was US$300mn above the level the report had estimated and around 35% above the level achieved in the previous year. This was still US$800mn below the target set by Iran’s petrochemical exporter, the IPCC, demonstrating that the global recession had a deleterious impact on the sector in the second half of the 2008/09 Iranian year. The situation may have been worse if it had not been for the final completion of the Jam Petrochemicals Complex in December 2008, three years behind schedule.
Low oil prices are likely to impact badly on the Iranian economy, putting pressure on demand and therefore domestic consumption of petrochemicals. Falling growth in real private consumption and real gross fixed capital formation in 2009/10 will lead to deterioration in output growth of the consumer good, automotive and construction industries, which are major consumers of petrochemicals products. Lower oil prices also mean lower oil revenue, reductions in foreign exchange reserves and worsening liquidity problems in the financial sector. Domestic liquidity will be affected by fewer petrodollars entering the banking system, leading to a slowdown in lending to businesses.
Meanwhile, the hopes of the petrochemicals industry to attract foreign investment will be hit by global recession and sanctions. The prospect of Iran being able to attract substantial FDI inflows over the coming years remains poor, although they have never been great. Like other areas of the economy, Iran’s petrochemicals industry will continue to suffer from chronic underinvestment. Specifically to Iran, the UN, US and EU sanctions regimes relating to the former’s nuclear programme, and which target key sectors of its economy such as oil, gas and petrochemicals, will keep potential investors away, particularly Western investors. However, the door remains open for investors from China and Russia, although these may not have sufficient capital to make up for the decline in Western investment and they are also keen to develop their own domestic capacities. Petrochemicals companies will find it harder to obtain finance and the import material and machinery for the construction of petrochemicals projects.
The government anticipates that 10 petrochemicals projects worth US$12bn will come onstream in the 2009/10 Iranian year, helping to raise output to 39mn tonnes, a 44% y-o-y increase. The report is highly sceptical that the industry will meet its project deadlines or that extra capacity will be fully utilised, given the current economic environment. Iran has a poor reputation for meeting project deadlines and this will be compounded by lack of expertise, a more restrictive financial situation and ongoing international sanctions. There are therefore doubts over the government’s hopes to establish 47 petrochemical operations by the end of the Fifth Five-Year Economic Development Plan in 2015, adding a total of 43mn tpa of capacity. According to officials, once the projects become operational, Iran will represent at least 5.3% of global petrochemical output and 36% of Middle Eastern production. The Oil Ministry has set targets for annual production of 11.5mn tpa of ethylene, 11.5mn tpa of polymer and 3.4mn tpa of urea, with a target of becoming the world’s leading producer of methanol with 7.5mn tpa of methanol capacity representing 18% of global capacity."
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