Major Inward Investment Critical for Iran's Bullish Petrochem 2015 Production Targets

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The drive towards a so-called 'first world economy' is a motivating force in the planning and decision making in a number of countries in the Middle and Far East. The virtuous circle of personal freedom through income and the virtuous fabric of diet, health, education, and a civil society culture is a big idea to drive the state ahead whatever the current socio-political dysfunctions are perceived to be from inside or outside those countries.

But the best-laid development plans are dependent on world markets for commodities and products and at home they are dependent on the development of an infrastructure and physical services that are capable of coping with the fever of social and civil aspirations. The latter requirement is a major challenge for a resource rich country like Iran that is looking for inward investment and outward marketing to reach its targets.

Iran plans to increase petrochemical revenues to $22 billion a year by 2015. In the past twelve months, March-to-March, the country produced just over 16 million tons of petrochemical goods with a value of $2.7 billion of which $1.2 billion was exported. "Our aim is to produce 70 million tons of petrochemical products in 2015, worth $ 20 billion," said oil minister Bijan Namdar at a conference in Tehran in the last week of April.

He said that the government hoped to pass the $3.5 billion mark in 2004 and to increase production by 50% in the 2005-2006 period $11 billion of investment was to be pumped into the sector under Iran's five year plan of 2005-2010. A production level of 56 million tons should be reached in 2010 that would earn Iran $7 billion in exports, he added.

The country's driving ambition is to gain a 5.6% of the world's petrochemical output and as much as 30% of the Middle East output by March 2006. Namdar said that because of an abundance of feedstock in the country, the depleting margins being experienced by producers in other regions due to increasing raw material costs did not obtain for Iran. Current petrochemical production growth rates in the country have moved up to 4.8% for paraxylene, 4.2% for monoethylene glycol and 5% for ethylene. (PEC 95000100/101/120/121/124/129)

Western market and industry analysts differ on the ability of Iran to find global export markets at a time when there is world overproduction and fierce competition from other mideastern producer states. But the majority express strong doubts on Iran's ability to attract the amount of incoming investment needed, not only for sheer production, but for the importation of technologies required to boost product quality and marketability.

French, British, South Korean and Japanese companies are all active participants in Iran's petrochemical sector and the government is currently trying to negotiate a $500 million investment from Saudi Arabian sources.

Iran's markets for petrochemical products are mainly Asia (90%) and Europe (4%) and it is the demand from these regions that will make or break the planned increase in production and revenues. Parallel to these plans, contracts will have to be developed with local and foreign companies to nurture the all important infrastructure and social support mechanisms.