Iran, HEC Sign $3.2bn Petchems Agreement
Hyundai Engineering (HEC) and Iran’s state-run Ahdaf Investment Company have signed a $3.2bn agreement to develop the second phase of the Kangan petrochemical plant, making HEC one of the biggest foreign investors in Iran’s downstream.
According a report, released by Iran’s oil ministry, the second phase will be 95% funded by Korea. The first phase will become operational four years after the final investment decision, which could be taken in nine months' time. The two sides signed a batch of MoUs in May last year.
The second phase of Kangan petrochemical projects is planned to produce 1mn metric tons/yr of ethylene as well as 750,000 mt/yr of light and heavy polyethylene.
The Ahdaf Investment Company, a subsidiary of the Oil Pension Fund Investment Company, has already invested €120mn to cover 30% of the cost of the first phase, which is aimed at extracting gas liquids from South Pars. Kangan is near Phase 12, which produces 65mn m³/d of gas.
Korea Times daily also reported March 13 that it was HEC’s first deal in Iran since 2005. “HEC has also become Korea’s first big constructor to sign a deal with Iran, after the lifting of economic sanctions on the country last year. Since then, the government has backed the company, while policy finance institutions in Korea have guaranteed financial support,” it reported.
The MoU was signed May 2016
(Credit: HEC)
This is the third major agreement, signed between Iran and foreign companies in petrochemical projects after removal of western sanctions on Iran’s nuclear program in January 2016.
Iran earlier signed an agreement with Chinese CNTIC to develop Mahan petrochemical project at a cost of €1.65bn, of which Iran’s share is 15%. Iran has also signed deals with Japanese Marubeni and Itochu to provide Iranian petrochemical projects with short term loans finance from international markets. Iran’s Persian Gulf Petrochemical Industries Company (PGPIC) signed a loan deal with Itochu on December 4, 2016, whereby Japanese firm will provide €320mn.
The PGPIC previously signed a similar financing deal worth €320mn under NEXI insurance coverage with Marubeni in Tokyo on September 1, 2016.
However, it is not easy for Iran to attract western investment and technology to this sector, which needs $55bn investment by 2025 if it is to triple its petrochemicals output to the planned 180mn mt/yr.
Last year Iran negotiated with a number of European and Asian engineers such as Linde, Siemens, BASF, Thyssenkrupp, Total, Haldor Topsoe, UOP, Shell, Sojitz, Itochu and Marubeni to co-operate on projects in the petrochemical sector. Several MOUs were signed and are expected to become firm agreements in 2017.
However, recently the CEO of the world’s largest chemical company, Germany’s BASF, Kurt Bock, announced that it had not extended talks with Iranian officials to work on petrochemicals plants because of uncertainty over the status of economic sanctions. That contradicted earlier statements from Iranian officials that BASF would invest $6bn in Iran’s petrochemical sector.
Dalga Khatinoglu