Iran's Petchems Sector in Context

Iran has a unique advantage in developing its refining and petrochemicals sector. It produces 735mn m³/d (or about 268bn m³/yr) of gas, 97% of which is methane, 1% is ethane and the rest is other gases including butane and propane.

The country also produces 510,000 b/d of gas condensate (700b/mn m³) while, with 3.7mn b/d of crude oil output, it refines 1.65mn b/d. Reserves stand at 34 trillion m³ gas as well as 158bn barrels crude oil reserves

Petrochemical units

Iran's petrochemical production capacity is above 60mn mt/yr, but its actual production stood at 46mn mt in last fiscal year (FY) ended on March 20. In competition with the world and Middle East, Iran has 2% share and 4% in petchem products, respectively.

The total production capacity of 31 strategic products was 1678mn mt in 2013. About one third of the figure was related to chemicals and 23% was related to polymers. The total production capacity of these products in the Middle East was 168mn mt, equivalent to about a tenth of the world’s total output.

The production of methanol and urea fertilizer in the Middle East is above the global average. Methanol production capacity in the Middle East is 16% more than the global average. Olefin and other products rank next.

In Iran, there are 67 projects are being implemented within the framework of the fifth five-year development plan (by 2021),

Once the projects come on stream, the country’s production capacity will reach 90mn mt/yr. Natural gas would share about 50% in total demanded feedstock. For now, Iran delivers 13.5bn m³/yr of gas to petrochemical plants, of which 5bn m³ are feedstock and the rest is used as fuel.

Market share (% of global output)

Saudi Arabia, Iran’s main rival in this sector, produces mainly olefins, aromatics, and their derivatives. The country’s production capacity of 31 strategic petrochemical products is about 70mn mt/yr.

Comparing Iran and Saudi Arabia, except for urea fertilizer which have a roughly equal share of production, Iran has less production capacities, especially regarding olefins and polymers.

Iran’s share of the world’s 31 strategic products was around 2% in 2013, while Saudi Arabia and the Middle East have 4% and 10%, respectively.

Iran has a low gas price: as feedstock it costs $80/’000m³ as feedstock and $50/’000m³ as fuel for petrochemical plants.

The average gas price is $50/’000 m³ in the Persian Gulf region. The table below shows gas price as feedstock for petrochemical units in the Persian Gulf countries.

Price of gas as feedstock 

Of course, price is not the only determining factor. Other factors such as taxation also affect companies. Quality and the degree of sourness and the method of extraction are also effective because gas in condensates associated gas, is a byproduct and the goal of selling it is, in fact, producing more oil.

Pooya Nematollahi, Nader Javidpour