Iran Cuts Price of Gas for Petchems
Iran cut the price of feedstock gas price for petrochemicals plants by almost a third on January 15, from $130/'000m³ to $80/'000m3. The vice-president of Iran's association of petrochemical industry corporations (APIC) Mohammad Ali Rajaei said the discount in gas price was beneficial for petrochemical sector, but not big enough to make it flourish.
He told Tasnim News Agency that the oil price has been cut by more than 3 times since the first half of 2014 and this has lowered the price of petrochemical products.
Iran's energy minister Bijan Namdar Zanganeh had earlier rejected the discount for petrochemical plants, saying that if "the cost of producing a cubic metre of gas in Iran is about 12 to 15 cents in total, then how we can deliver gas to plants under the production costs?" But Iran's petrochemical sector is important for the country because it accounts for 34.9% of total non-oil exports.
Iran exported 18.787mn metric tons (mt) of petrochemicals in the first eight months of this fiscal year (from March 21), which is a 55% increase year-on-year in volume, but only 9% rise in value to a little more than $10bn.
Before sanctions, imposed in 2012, Iran was exporting about 22mn mt/yr, worth $15bn.
On the other hand, this sector consumes 13bn m³/yr as feedstock and about 2.8mn mt/yr of ethane, while the country is planning to double the petrochemical production capacity by 2020 and to triple it in 2015 to 180mn mt/yr by attracting $70bn in investments.
During the first eight months of the fiscal year Iran produced 30.7mn mt petrochemicals and the volume is expected to reach 44.6mn mt by March 21. This is about two third of total production capacity. Iran needs to carry out maintenance work on its petchem plants and boost both feedstock and exports to bring actual production level to nominal capacity.
On attracting foreign companies, Rajaei said that Iranian banks lent at a rate of 24%-30%, but the figure elsewhere is about 1%-2% in average. "High interest rates are a major obstacle to attracting foreign companies."
Sanctions on Iran may be eliminated by January 17, paving the way for collecting petrochemical export revenues and attracting foreign investments.