Direct foreign investment in Iran’s petrochemical sector could result in large returns for investors prepared to take risks.
A report by IHS Chemical said that investors who have the courage to assume relatively high levels of political risk and legal uncertainty can reap the benefits of low-cost feedstocks and access to major markets.
The existing petrochemical production capacity of Iran is estimated to be around 60 million metric tons (MMT).
The country’s petrochemical industry is primarily focused on utilising its ethane-rich natural gas resources, and the price of ethane is kept low by government mandate.
As per IHS estimates, lifting of sanctions would allow the country to expand production and export 1MMT of ethylene / polyethylene within one to two years.
IHS Chemical Europe, Middle East and Africa vice-president Michael Smith said: “If you are a global petrochemical producer looking at Iran for its investment and growth opportunity, and you can forget for a minute about the major business and political risks involved, it presents an attractive opportunity.
“Major chemical players are champing at the bit to explore the potential that Iran offers, but they will not be doing so haphazardly.
“These companies are used to operating in risky environments and managing significant risk, it’s the nature of the business, but the reward has to significantly outweigh the risk, which is something they will be assessing very carefully and deliberately.”
Iran unveiled a petrochemical expansion plan in the early 2000s to increase its annual production capacity from 9MMT in 2001 to 100MMT by 2015.
However, the country did not meet its target due to tight restrictions on the flow of capital and goods, as well as limited access to required technology, parts and materials.
“In the short-term of 12 of 24 months after sanctions are lifted, Iran will rapidly start taking advantage of easier access to foreign capital markets, trade financing, oil markets, and technology providers,” Smith added.
Source: Chemicals Technology
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