Considering the short amount of time that passes from the lifting of the sanctions and having access to inexpensive and guaranteed feedstock as well as the presence of supply chain in the country, acceptable number of foreign investors have been attracted, MANA correspondent reported. Accordingly, a roundtable was held due to the topic’s importance to discuss the opportunities of petrochemical industry in general and advantages of Iranian petrochemical products exports in particular.
Members participated in the roundtable:
Seyyed Hamid Hoseini: member of both Oil, Gas & Petrochemical Product Exporters Association and Iran Competition Commission of Chamber of Commerce
Abdolhosein Bayat: former managing director of National Petrochemical Company and the current advisor to the managing director of the company
Ahmad Sarami: Inspector of Oil, Gas & Petrochemical Product Exporters Association
Ali-Ashraf Ahmadi: managing director of Petrochemical Commercial Company International (PCCI)
Captain Farhad Ardeshiri: member of Pars Petrochemical Company
MANA: If you want to discuss the attractions of Iran’s petrochemical industry to foreign investors, which rubrics do you prefer?
Hoseini. H.: Iran has comparative advantages and power of competition in different sections which bring about significant advances for the country among which petrochemical industry stands out. The fact that Iran has both comparative and competitive advantages in oil, gas and petrochemical section is crystal clear.
As Iran has access to the largest gas reservoirs of the world and as most of petrochemicals’ feedstock is gas, this field is considered to be more economical to the country to meet the significant advances. Having the largest gas reservoirs which plays the stimulant role in petrochemical industry, Iran meets specific conditions in a way that it can be said decisively that other competing countries in the area such as Arabia and Qatar lack this accessibility. Despite the fact that Arabia stands in the fourth place of petrochemicals production goods in the world with sales of $53 billion, it faces several problems in supplying feedstock due to lack of sufficient gas reservoir and using gas along with the oil in the oil well.
It is worth noting that petrochemical industry in the world has a turnover of some $3700 billion among which Iran’s share is recorded $25 billion which shows 0.8 percent of global sales volume. Considering Iran as having access to the largest source of inexpensive feedstock coupled with the professional manpower, the amount of the volume of exports need to be expanded which appeals to the foreign investors is high on the agenda as well. In the light of price competition, Europe does not seem a good choice; however, Iran has appeared greatly in the Asia market which is the most advantageous factor to be considered. Counting the number of factors which pave the way for the entrance of foreign investors to the industry, we referred to the large and inexpensive source of feedstock, professional manpower, having gained the Asian consumer market and water. The latter factor is highly significant due to the fact that petrochemical industry needs this element. Another advantage of Iran is that it has the largest share of providing water in the North and South.
These four advantages show the outstanding role of Iran in the area with the purpose of development in this section compared to Qatar and Saudi Arabia.
It should be added that Iran is capable of mixing energy and mine. In other words, we can convert gas to the final product through petrochemical industry which is the prominent feature in this field.
Bayat. A.: In the light of owning variable gas and oil reservoirs as well as a thorough oil cycle, Iran gas and petrochemical industry seem a lucrative market attractions for the foreign investors. Iran has a significant advantage in which its variable feedstock will lead to variety of products and eventually to the diversity on exports. In addition, due to consolidation and supplying the required feedstock, petrochemical complexes of the country create circumstances for the investor which makes her/him to set a schema for each developmental plan. In this way for example Razi Petrochemical Company is connected to the main gas reservoir and it doesn’t make any difficulties regarding the quality and the amount of required feedstock before and after the Islamic Revolution which is indicative of production security.
On the other side of the coin, security should be considered in this field. Considering Iran’s position in the Middle-East which struggle with terrorism and war, this country has high security that provides the most important factor in consolidation and maintaining of the capitals. It is worth mentioning that Iran differs from its position when compared to 20 years ago. It has developed in technical sectors as well as tools which show a good capacity for a foreign investor.
As Mr. Hoseini referred to professional manpower in Iran, Iranian industrialists and engineers in petrochemical section are paid less in spite of their great capabilities and efficiency in comparison with their counterparts in the world.
Regarding the guaranteed feedstock which is long-lasting in Iran, the government and politicians are overcoming the defects and assimilating the feedstock. We do not differentiate between foreign and domestic investors due to the fact that a good profit margin is available in petrochemical industry. Accordingly, feedstock price is the same for all the investors and every support which is given to the domestic investors and producers is extended to the foreign ones as well. Meanwhile, the domestic investor has the commitment to provide the internal needs which is not the same for the foreign investors. They can sell their products in their chosen markets which is definitely favorable. Moreover, I should refer to the fact that Iran has never broken a promise in feedstock deliveries to the complexes since the required feedstock in the process of production is crucial. Existence of technical and developmental knowledge is still another factor which shows the advantage of investment in Iran petrochemical industry. Considering sufficient and required gas with the possibility of diverse feedstock and the condition of having access to the water, we can start operational acts and reach a set of Olefin (or ethylene which is the main product in petrochemical industry and the required element of the complexes as well as being known as the major feedstock) which lead to the production of a variety of secondary products.
Hoseini. H.: Regarding the advantages of attraction of Iran’s capital, it should
be mentioned that we have satisfying and updated regulations about foreign
investors. In the case of guarantees toward the investment, they are highly advanced
which both guarantee the capital and the gained revenue. Moreover, compensations have been presented in the case of disorders and the country’s positive performance with foreign partners proves this claim.
MANA: considering the new circumstances with the lifting of the sanctions, is there any specific pattern in foreign investor attraction in petrochemical sector?
Bayat. A.: Every valid contract in petrochemical section which is presented in the international perspective is valid in Iran as well. In the light of clear regulations in
the constitution, there wouldn’t be any problems in investment by the side of foreign investors. The legislator has considered the share as a preferred one
which is specified to the staff. Otherwise, without this regulation every investor and employer has to meet any requirements to increase motivation and productivity. Meanwhile, national petrochemical company which can play the role of a regulator could support the foreign investors. A crucial point in investment affairs which should be taken into consideration is that the type of the contract is determined by the investors and the flexibility in this field is high. Last but not least, it is necessary to create a comprehensive database in order to collect the past experiences to be introduced to the investors in a way that it explains the condition and preferred items.
Hoseini. H.: Regarding the contracts, it should be mentioned that Iran commits
to its obligations and never breaches the contracts. In the case of problems, Iran considered the benefit payment delays along with its obligations. In addition,
this country does not have any foreign debt in its records. At the time, Iran’s foreign debt is about $4-5 billion. However, some countries’ foreign debt is two times higher than the GPD. Considering the mentioned point, it will be a positive spot for foreign investors to be attracted.
MANA: Considering the comparative advantage of Iran in Oil, gas and petrochemical section, it seems difficult to identify export markets. If the idea is correct, how will this shortcoming be fixed?
Sarami. A.: The comparative advantage toward the absolute end of the continuum is the oil, gas and petrochemical section which paves the way for Iranian and foreign investors. Since the private sector has been active, I do not agree that identifying the market faces difficulties. It managed the productions toward the target market. If the existing shortcomings are the case, it should be mentioned that it had been resulted from the sanctions and its limitations. Meanwhile, the need for a market analyzer is crucial and I believe that as there are economic advisors in embassies, analyzer networks should be formed as well. But what makes the mandated need for foreign investment is providing financials which leads to the improvement of technology and development of skills as well as an increase in production standards and market reinforcement. Furthermore, considering Iran’s advantage in this section to develop the market after the foreign investment, we will reach economic freedom which is top on the agenda in the case of commercial exchange. Moreover, as others referred to, Iran was known by the bitumen in the past. At the time, fortunately we could introduce our products to the target markets with the aid we have received from private sector which finally results in rising exports.
Ahmadi. A.: I believe that the shortcoming arises from exports management and the constraints after the sanctions era. SABIC Chemical Manufacturing Company for example is triggering attractions due to the lack of restrictions in a way that it makes 90 units of usance LC per day.
We should gain the benefit of opportunities provided by the post- sanctions era and we shouldn’t forget that our competitors are all around the market. It is worth mentioning that HDPE exports by the side of Iran are two times higher than SABIC. Iran is the world’s largest polymer manufacturer which produces five million tons of polymers per annum.
MANA: what are the facing challenges of developing and productivity of petrochemical industry and what measurements have to be taken?
Hoseini. H.: There are some challenges in this section which are being solved among which regulatory issues stand out. Second, the guarantee which is related to the foreign investment is being made clear. Third, guaranteed feedstock which is provided by solving the first challenge. We are using a 10-year-plan set by the Oil Ministry to supply the feedstock and determine the price of methane. We are consulting to eliminate the ambiguity in methane to provide the competition while resolving liquid feedstock. In line with creating optimized situations for investing, we gave a proposal plan to the Oil Ministry in order to hasten the development in this sector by considering the capital reduction in the rate of petrochemical feedstock. Of course we believe that the government could facilitate domestic investment by creating incentives, maintaining internal manpower and considering the current achievements. One of the prominent factors created with the lifting of the sanction was overcoming Iran-phobia. It had a good impact on the minds of foreign investors.
Thanks to the post-sanctions era, all the sanctions have been eliminated. However, the reason behind the lack of cooperation of leading banks of the world with Iran is due to their commitments to America’s prosecutor.
Ahmadi. A.: Downstream petrochemical industry has a lot of variables to be developed. Considering internal potentials, Iran has been progressed in many sections and it is still moving forward.
MANA: since the importance of transportation in exports as well as the existing marine transport fleet in Iran as a tool for petrochemical exports, how do you see the shortened process of production to consumption?
Bayat. A.: The final step in production is completed
when the products reach the consumers. Iran is the most prominent country having the largest transportation fleet to achieve the mentioned goal.
During the sanctions era, IRISL could enjoy the advantages of its capabilities and give valuable aid in petrochemical exports.
Ardeshiri. F.: Pars Petrochemical Company which is one of IRISL’s subsidiaries is providing services to petrochemical companies to improve its existing fleet.
Considering pressures during the sanctions, IRISL provided some tankers to overcome exports difficulties at a high price to make the process of petrochemical exports to be on the track.
Since the connection with petrochemical complexes has been created through constant efforts, this company continues its regular activity in petrochemical exports.
It’s worth mentioning that exports of liquid chemical and gas products recorded 6.4 and 3.7 million tons in 2015, respectively.
Existing fleet of carrying petrochemical products and LPG lead to more power of the company and makes it be the first in the area.