SearchMarket outlook: Iran chemicals take off

Market outlook: Iran chemicals take off... 12/10/2015 Import-Export

Keywords:#2015, #BP, #Chabahar, #ICIS,, #Iran, #Kharg, #Khosravi, #Middle_East, #Platts, #Sanctions, #Sanctions_against_Iran

Market outlook: Iran chemicals take off

* * * 12 October 2015 00:00 Source:ICIS Chemical Business
Spot oil prices began their sharp fall in June 2014, reached their lowest level since the beginning of 2014 in January 2015, and decreased by about 44% year on year to June 2015. Undoubtedly, the falling oil price has made an impression on the petrochemical industry, resulting in various challenges and changing strategies in different parts of the world.
Both global petrochemical indices, IPEX (ICIS Petrochemical Index) and PGPI (Platts Global Petrochemical Index), have declined by about 21% (approximately half of the decrease of oil price) from the start of falling oil prices to June 2015. Trends in global petrochemical indices, with a month delay, are exactly the same as oil price changes.
Looking at six main petrochemical products, for all of which prices fell, propylene had the greatest reduction – of about 30%, due to the dependency of propylene production on naphtha, and consequently crude oil – while prices for ethylene, polyethylene (PE), polypropylene (PP), methanol and urea declined by around 13%, 8%, 11%, 9% and 2%, respectively, between June 2014 and June 2015.
Crude oil has continued to play a crucial role in the petrochemical industry. Despite the development of gas-based units, crude oil consistently determines the price of petrochemicals. Since “feedstock and energy” are a high proportion of the cost of running of petrochemical units, access to low-cost feedstocks can provide a safe profit margin for petrochemical producers.
Iran is open to international partnerships in petrochemicals
According to BP, the Middle East owns about 48% and 43% of proved oil and gas reserves of the world, respectively.
Over the past two decades, the petrochemical industry in the Middle East has expanded significantly as a result of the abundance of natural gas at advantageous prices. Now, following this period of growth, the industry is experiencing a regional shortage of natural gas because of supply/demand imbalances, which has forced some countries in the region to shift to more liquid feedstocks.
However, the falling oil price will benefit petrochemical producers cracking naphtha and other heavier liquids, as well as narrow the significant relative cost advantage of cracking gaseous feedstocks such as ethane.
Iran, however, which boasts about 9.3% and 18.2% of proven global oil and gas reserves, respectively (including the world’s largest natural gas reserves and ranked fourth in proven oil reserves, according to BP), is experiencing new opportunities.
There are a number of reasons why Iran is the most attractive country in the Middle East for investment in oil, gas and petrochemical industries.
It is rich in both oil and gas reserves, allowing flexibility in using both liquid and gas feedstocks.
There is a shortage of natural gas in some other Middle East countries.
Sanctions against Iran’s oil and gas industry are set to be lifted.
Iran is secure in spite of various conflicts in the region.
Iran has ambitious plans for making the most of the upcoming opportunities.
In line with this, Iran’s Tamin Petroleum and Petrochemical Investment Corporation (TAPPICO), as a holding company and the largest subsidiary of SSIC (Social Security Investment Corporation, known as Shasta), has a number of plans to maintain its dominant position in the region.
Through its 42 subsidiaries and affiliated companies, especially in oil, gas and petrochemical industries, TAPPICO has a significant role in the production of petrochemicals in Iran. TAPPICO is ranked as one of the most diversified petrochemical companies­ in the world, producing a wide range of different products, including 10 out of 12 petrochemical products that feature in the ICIS global petrochemical index products (IPEX). TAPPICO was also ranked 103 in the 2014 ICIS Top 100 Chemical Companies listings.
One of TAPPICO’s main priorities and strategies is to invest in gas-based projects close to export ports and within petrochemical special economic zones. TAPPICO has already invested about €3bn in existing petrochemical projects.
TAPPICO is also planning to invest in some new petrochemical projects, including:
A methanol-ammonia unit in Chabahar;
The expansion of Fanavaran Petrochemical with methanol-to-olefins (MTO) and methanol-to-propylene (MTP) projects;
The development of a petro-refinery (part of the Integration of Petrochemical and Refinery Plants) alongside the Siraf refinery project (a gas condensate refinery project owned by TAPPICO) to produce olefins; and
Participation in the Kharg NGL (natural gas liquids) project in order to complete the feed-product value chain.
Since Iran will have new mechanisms and strategies after the lifting of sanctions, and considering the unique conditions for the development of Iran’s petrochemical industry, golden opportunities are expected for global companies to cooperate with a prominent partner in Iran such as TAPPICO.
Ali Asghar Bazgir is corporate strategy manager and Tayebeh Khosravi is senior petrochemical analysis expert for TAPPICO
By Ali Asghar Bazgir Tayebeh Khosravi
---Iran is poised for growth in petrochemicals thanks to its abundance of feedstocks and the prospect of sanctions being lifted. TAPPICO has ambitious plans---

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