But the industry faces formidable hurdles. Among
Sanctions. America's squeeze since 2018 has curbed access to finance,
technology, equipment, feedstock and markets. It has raised costs and risks for
those who do business with Iran, and deterred foreign investors and partners.
It has also hit downstream industries that need petrochemicals as inputs.
Feedstock. Petrochemicals rely mainly on natural gas, which makes up 70%
of their consumption. But domestic supply falls short of demand from
petrochemicals and other sectors, such as power generation, households and
exports. Moreover, gas is subsidised and priced below its opportunity cost or
market value. This distorts resource allocation and discourages feedstock
Technology. Petrochemicals need advanced and specialised technologies to
make high-value and varied products that can compete globally. But Iran
struggles to acquire and develop such technologies because of sanctions, weak
research and development (R&D), human-capital constraints and
intellectual-property issues. As a result, Iran mostly makes basic and
intermediate products with low value-added and margins.
Petrochemicals depend heavily on exports, as the domestic market is limited and
saturated. NPC says Iran exported 23m tonnes worth $11.5bn in the year to March
2021, or 35% of its non-oil exports. But Iran faces difficulties in reaching
and expanding its export markets because of sanctions, geopolitical tensions,
trade barriers, competition from other producers and changing consumer
The industry also has some opportunities to
exploit. They include:
This is the nuclear deal signed in 2015 between Iran and six world powers
(China, France, Germany, Russia, Britain and America), which lifted some
sanctions on Iran in return for curbs on its nuclear activities. America quit
the deal in 2018, but the other parties still uphold it. Recently they have
been negotiating with Iran to revive the deal and bring America back into it.
If successful, this could ease or remove some of the sanctions on Iran's
petrochemicals and create more scope for trade, investment, technology transfer
Diversification. Petrochemicals could diversify their feedstock sources
and products by using alternative inputs such as naphtha, liquefied petroleum
gas (LPG), methanol and ethane. This could reduce their reliance on gas and
increase their value-added and margins. They could also diversify their
products by making more complex and sophisticated ones such as polymers,
aromatics, olefins and derivatives. This could improve their competitiveness
and market share.
Integration. Petrochemicals could benefit from integrating their
upstream and downstream activities by linking different stages of production
such as extraction, processing, distribution and consumption. This could
enhance their efficiency, quality, profitability and sustainability. They could
also integrate with other sectors such as oil, gas, power, steel, cement and
agriculture by supplying them with inputs or using their outputs. This could
create synergies, complementarities and spillover effects.
Innovation. Petrochemicals could foster innovation by investing more in
R&D, human-capital development, technology acquisition and adaptation,
knowledge creation and diffusion and entrepreneurship. This could boost their
productivity, creativity, competitiveness and resilience. They could also
innovate by adopting new business models such as circular economy, green
chemistry, bio-based materials and digital transformation. This could raise
their environmental performance, social responsibility and customer
Iran's petrochemicals are a vital sector that
faces many challenges but also has many opportunities. To overcome the former
and seize the latter, they need a comprehensive strategy that aligns with
Iran's national interests and goals.