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Iran Petchem Industry: A Strategic Asset

Iran Petchem Industry: A Strategic Asset
(Sunday, February 18, 2024) 11:32

TEHRAN (NIPNA) -- In recent years, Iran's petrochemical industry has witnessed a commendable and balanced development trend, to the extent that it can be considered one of the most significant industries in the country, if not the most important, in terms of revenue generation, job creation, and wealth accumulation. Indeed, the petrochemical sector can rightfully be deemed as a strategic industry for Iran.

In this context, we delved into a discussion with Engineer Morteza Shahmirzai, the Deputy Minister of Oil and CEO of the National Petrochemical Company (NPC), to explore the intricacies of Iran's strategic petrochemical industry. We examined the industry's trends, approaches, objectives, and achievements, seeking to shed light on its pivotal role in Iran's economic landscape.

Morteza Shahmirzai (MS): Thank you for having me. It's a pleasure to talk to you.

Q1: What is the relationship between strategic value chain planning in the petrochemical industry and the growth and advancement of technical knowledge and technology? What components does this strategy entail?

Morteza Shahmirzai: Completing the value chain in the production sector means transforming raw materials into final products, thereby shaping numerous factories and workshops, mobilizing private sector capital, and generating profits. Along this path, job creation and increased government tax revenue from private sector profitability are achieved collectively. Moreover, support services for the production sector gradually materialize, contributing to increased value addition in the economy and consequently, enhanced employment. Taking a broader view of the value chain, one can consider the beginning as the research and development sector, which marks the birth of a new technology and product. The next link in the value chain is the conceptual and detailed design phase preceding implementation. Subsequently, the procurement of goods and equipment takes place before the production stage.

Q2: Overall, what topics and strategies does NPC focus on?

Morteza Shahmirzai: In response to this question, we must first outline the missions and objectives of the National Petrochemical Company. In recent years, with the change in the mission of the National Petrochemical Company from an organizational to a developmental approach, the overall objectives of the petrochemical industry have been consolidated as follows:

  1. Sustainable and balanced development of the petrochemical industry towards achieving the goals of the country's 1404 Vision, focusing on completing the value chain based on land planning studies.
  2. Development of investment and creation of new capacities for petrochemical products, increasing the value added of hydrocarbon resources by completing the value chain with priority given to completing semi-finished projects.
  3. Enhancement of the petrochemical industry's share in the national economy and effective presence in global markets.
  4. Technological development and activities of domestic knowledge-based companies towards indigenization of new technologies.
  5. Market development, production of diverse products, and presence in new domestic (downstream industries) and international export markets.
  6. Facilitating the legal framework for allocating the financial resources needed for petrochemical projects.

The National Petrochemical Company, throughout its developmental programs, has spared no effort to achieve a superior position and make the most of the country's relative advantages, aiming for a more effective presence in regional and global markets.

Q3: How has the petrochemical industry fared during the Sixth Development Plan period?

Morteza Shahmirzai: The Sixth Development Plan covers the years 2017 to 2023. By the end of 2017, the petrochemical industry, with 53 production complexes and a capacity of 64 million tons, managed to produce 53.6 million tons of petrochemical products, consuming a total of 33.3 million tons of feedstock and fuel from upstream sources, and earning $17.1 billion in revenue from the sale of 30.7 million tons of final products in domestic and export markets.

At the end of 2021, the petrochemical industry, with 67 production complexes and a capacity of 91.5 million tons, produced 69.6 million tons of petrochemical products, consuming a total of 47.5 million tons of feedstock and fuel from upstream sources, and earning $26.8 billion in revenue from the sale of 39.6 million tons of final products in domestic and export markets.

According to the planned activities and objectives set during the Sixth Development Plan, 20 projects with a total capacity of 28.3 million tons have been operationalized during this period. It is anticipated that by the end of 2023, an additional 5 projects with a capacity of 4.6 million tons will be operationalized, bringing the total capacity to 96.3 million tons by the end of the Sixth Plan.

Q4: The Development and Completion of the Value Chain document for the petrochemical industry was unveiled a few years ago. What are the objectives of the National Petrochemical Company in implementing this document?

Morteza Shahmirzai: In order to reduce the $2.1 billion import of petrochemical products and enhance the resilience of the value chain of petroleum products, the National Petrochemical Company conducted a study on imported products, identified deficiencies and domestic needs, and studied the petrochemical industry value chain towards the following objectives:

  • Increasing value-added and consequently, generating more income for the private and public sectors.
  • Reducing raw and semi-raw sales.
  • Eliminating deficiencies in the country's value chain to reduce imports.
  • Achieving self-sufficiency in meeting the domestic market demand and increasing resilience.
  • Decreasing currency outflows.
  • Job creation.
  • Diversifying the product basket and consequently, export destinations.

The results of this study were presented in the form of value chain projects in the petrochemical industry, comprising 20 packages in five chains of propylene, methanol, ethylene, aromatics, and butylene, with a total nominal capacity of 3.8 million tons per year, with an investment of $4.2 billion and an annual production capacity of $4.4 billion worth of downstream products.

These projects are expected to create approximately 23,000 jobs during the construction phase. The implementation of these projects, based on holdings' access to the required feedstock, has been communicated in the form of national self-sufficiency projects, and some of the holdings have taken steps to invest in this area. Currently, 36 preliminary agreements have been reached for value chain projects with a capacity of over 5 million tons per year, and 7 other projects are awaiting new investors.

Q5: The importance and position of the petrochemical industry in the industrial and economic sectors of the country, especially in complex sanction conditions, and the industry's role in complying with the directives of the Supreme Leader (May his eminence last long), emphasizing the reduction of raw sales, are evident. What do you think the thirteenth government's approach has been to strengthen the value-adding position of this industry?

Morteza Shahmirzai: Regarding the position of the petrochemical industry in the country's economy and industry, particularly its role in generating revenue, it should be noted that with the increasing global consumption of petrochemical products and the creation of a vast market in this area over the past years, the country's policymakers have endeavored to optimally utilize these economic resources by focusing on planning, designing, and constructing massive oil, gas, and petrochemical complexes. This has been done with the participation of domestic and foreign investors and by optimally utilizing the advantage of abundant hydrocarbon resources and the country's strategic geographical location, using the latest achievements in knowledge and technology in this important industry. Now, after more than half a century of growing petrochemical industry activities in the country, approximately one million barrels equivalent of crude oil is daily converted into valuable petrochemicals. According to reports, Iran's share of major petrochemical production capacity in the Middle East in 2022 was 27.42%, and Iran's share of global major petrochemical production capacity was 2.68%. Based on the 1399 hydrocarbon balance sheet of the country, the share of hydrocarbons consumed in the petrochemical industry as feedstock was about 9% of the total hydrocarbons consumed in the country, resulting in the production of about 69.7 million tons of petrochemical products. The petrochemical industry's share of the value of non-oil exports of the country is 30%, indicating the high added value of this industry and also reducing raw sales through the petrochemical industry.

Q6: In many of your speeches and interviews, you emphasize the self-sufficiency of the petrochemical industry in producing the catalysts needed in the industry until the end of the thirteenth government's term. What actions have been taken to achieve this goal to date?

Morteza Shahmirzai: We are committed to domesticating all the catalysts needed by the petrochemical industry by the end of the thirteenth government's term with the help of domestic knowledge-based companies. In this regard, the National Petrochemical Company of Iran, in line with the overarching policies and role of advanced knowledge and technology in all aspects of petrochemical production, aims to develop technical knowledge, reduce production costs, increase productivity, improve product quality, make products competitive in global markets, and reduce final product prices through the Petrochemical Research and Technology Company. This company collaborates with domestic companies in projects aimed at improving technical knowledge and producing catalysts and chemicals. Currently, more than 85% of the catalysts have been domesticated. This company is implementing the following projects to develop technical knowledge and localize catalysts:

  • Five projects are underway to improve the technical knowledge of ethylene production from thermal cracking.
  • Four projects are aimed at improving the technical knowledge of ammonia production.

This company collaborates with some catalyst and peroxide producers to domesticate and produce catalysts and initiators widely used in the oil industry. The type of catalyst and peroxide for collaboration and mass production is selected based on the existing infrastructure in the producer's factory. Currently, a significant portion of the catalysts listed in the Catalyst Document, including 20 types of the most important and high-consumption oil industry catalysts in Iran, is being produced by catalyst-producing companies domestically.

Q7: One of the key strategies of the thirteenth government in the oil, gas, and petrochemical industry has been the management of research, technology, and domestic production. What initiatives has the National Petrochemical Company undertaken in this regard?

Morteza Shahmirzai: In response to the imperative of focusing on domestic development, empowering knowledge-based enterprises, and fostering synergy within this domain, the National Petrochemical Company has established an innovation and self-sufficiency center for the petrochemical industry. Numerous initiatives have been pursued to identify and establish collaboration agreements with knowledge-based companies. Among these efforts, significant steps have been taken to assess the requirements of complexes and petrochemical projects, identify the capabilities of knowledge-based enterprises, and facilitate supply-demand matching. In the year 2021, 107 knowledge-based companies were engaged in the implementation and construction of domestic equipment, increasing to 234 such companies in the year 2022. Furthermore, development plans in the petrochemical industry aimed at complementing and expanding the value chain, addressing the shortage of feedstocks for complementary industries, diversifying the product portfolio, adding value, and creating employment opportunities within the National Petrochemical Company. By advancing these plans in the primary chains of propylene, methanol, ethylene, benzene, urea, and butadiene, 20 new petrochemical products are being manufactured. This not only contributes to revenue through exports but also reduces approximately 70% of petrochemical product imports. Consequently, four research contracts worth 1,200 billion Rials have been signed between the National Petrochemical Company of Iran and universities such as Shiraz University, Amirkabir University of Technology, Tarbiat Modares University, and the Iranian Research Institute of Chemistry and Chemical Engineering. Currently, the self-sufficiency center, in collaboration with the Petrochemical Research and Technology Company, oversees and manages these projects, monitoring the performance of institutes according to the scheduling plan. In summary, a qualitative development approach, concurrent with quantitative expansion, can generate higher added value for the industry and produce a diverse range of products needed by various sectors of the country's industries. Iran's National Petrochemical Company is also emphasizing the utilization of domestically produced goods through the enactment of Article 10 of the "Law of the Surge in Knowledge-Based Production," aiming to encourage complexes and petrochemical projects to use first-time production of knowledge-based products. Therefore, a suitable structure titled "Management of Research, Technology, and Domestic Production" is under development within the National Petrochemical Company to emphasize this valuable initiative.

Q8: One of the principal indicators for assessing industrial effectiveness is the creation of direct and indirect employment and the formation of productive enterprises through activation. How would you elaborate on the performance of the petrochemical industry in the past two years?

Morteza Shahmirzai: One of the primary policies of the thirteenth government, consistently emphasized by the honorable Minister of Oil, has been to support domestic production to complete the value chain of petrochemical materials and products until the final product is produced, thereby avoiding the export of raw and semi-finished products and creating employment in less developed areas. In this regard, the company has implemented plans including financing lower-tier units through credit provision, market regulation, supply-demand management, identification of stagnant and under-capacity units in downstream industries, and studies to complement the value chain of petrochemical products. Furthermore, in line with the emphasis of the esteemed Leader and the President on revitalizing stagnant and under-capacity economic units, a task force has been established to facilitate and remove production barriers in provinces, focusing entirely on downstream petrochemical industries. This initiative, led by the Deputy for Economic Coordination of the Governorate's Economic Affairs, operates with the participation of the Secretary of the Revival of Economic Units of the Presidency Institution, the Secretary of the National Task Force for Facilitating and Removing Production Barriers, and members of provincial task forces. The identification of stagnant and under-capacity units in downstream petrochemical industries has commenced with the collaboration of these institutions. Challenges, both general and specialized, along with legal bottlenecks, have been identified, and guidelines have been issued accordingly.

Q9: What has been the strategy for reviving production units in the form of credit provision?

Morteza Shahmirzai: Indeed. The National Petrochemical Company assures that it will exert maximum effort to ensure the resilience of the raw material supply chain through various means, especially management tools for the development of downstream industries. Among the commendable initiatives of the petrochemical industry realized through the endeavors of the National Petrochemical Company this year is the provision of credit sales of petrochemical products to downstream industries. Since the beginning of the year, over 63 instances of credit sales have been offered as a contribution from the petrochemical industry to the private sector, fostering the growth of small and medium-sized workshops. This initiative has significantly contributed to both employment and the creation of additional value.

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