Turkey's Petkim to Develop Methanol and Polyethylene Plant in Iran

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Researched by Industrial Info Resources (Sugar Land, Texas)--Petkim Petrokimya Holding AS (IST:PETKM) (Izmir, Turkey) announced the signing of a memorandum of understanding with Iran's National Petrochemical Company International Limited (NPC) (Tehran) to jointly develop a methanol and polyethylene plant in Iran.

Petkim, a leading petrochemicals company in Turkey, was the subject of controversy in 2007 when the Turkish government sold a majority stake of the company for $2.04 billion to a consortium of Kazakh and Russian companies. Petkim is now partly owned by State Oil Company of Azerbaijan Republic (Baku, Azerbaijan) and Turcas Petrol AS (IST:TRCAS) (Istanbul, Turkey)

Under the terms of the agreement, Petkim and NPC will evaluate the economic and technical aspects of the project and carry out a feasibility study for the complex. The proposed plant would produce 1.65 million tons per year of methanol and 300,000 tons per year of polyethylene, including both linear low-density polyethylene and high-density polyethylene.

Details pertaining to the site and construction schedule of the proposed plant have not yet been disclosed. According to the memorandum, Petkim will be responsible for the construction and operation of the complex, including the recruitment of the required workforce.

The project signifies the first cooperative petrochemical actions between Iran and Turkey and is likely to lead to closer ties between the two nations. Earlier this month, the chambers of commerce in Tehran and Ankara called for increased economic cooperation between the private sectors in both countries, including the opening of Turkish banks in Iran. Bilateral trade between Iran and Turkey has increased dramatically in recent years and is estimated to reach $20 billion per year during the next three years.

The Iranian government and petrochemical executives remain optimistic that the goals set under the latest five-year economic plan to establish 47 petrochemical plants by the end of 2015 will be met. However, there are also indications of concern regarding the shortage of capital required to achieve the target. International sanctions are having a negative impact on the economy. In order to meet the objective of becoming the largest petrochemical producer in the Middle East, an estimated investment of $65 billion to $70 billion is required. This becomes more significant in the context of the new regulations that restrict the NPC from investing more than 20% in any project.

Recently, Iran entered into five joint ventures with foreign companies to develop petrochemical projects with a combined value of $8 billion. NPC was expected to supply up to $2.5 billion to complete the projects. Companies from various countries such as Saudi Arabia, Sweden, Italy and Denmark are involved in joint ventures with NPC.

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