BMI Industry View
The lifting of sanctions will stimulate an immediate export boost for the Iranian petrochemicals industry, which has been operating well under capacity even as it has expanded in recent years. The government has ambitious plans for the sector with the hope that foreign investment will enable it to leverage its massive upstream resources to expand basic chemicals output. However, Iran continues to face infrastructural and
regulatory difficulties and a depressed market outlook. Until these are overcome, the industry will struggle to meet the target of more than doubling petrochemicals capacity to 129mn tonnes per annum (tpa) by 2021.
The surge in capacity will not be sustainable if feedstock supply is not forthcoming and markets do not absorb output. Some complexes are suffering feedstock shortages, particularly during winter months.
Iranian petrochemical complexes need 30-35mn cubic metres of gas per day. Besides pressure on supply, Iranian ethane feedstock is nearly three times more expensive than in Saudi Arabia. While the plants may nominally come on stream, operation rates could be low and plants will be operating at a loss unless Iranian producers can pass on the full costs of production onto consumers in export markets.