The sixth Iran Petrochemical Forum (IPF 2004) concluded work in Tehran. The two-day event drew 1600 participants from across the world where experts and senior executives shared their insights and views with the attendants. NPC News Bulletin provides excerpts from some of the speeches given at the Forum:


Iranian petroleum minister, Bijan Namdar Zanganeh says Iran plans to produce 70 million tonnes of petrochemical products by 2015, worth 20 billion dollars.
Zanganeh told delegates at the 6th Iran Petrochemical Forum (IPF) that 11 billion d ollars of joint investment were to be pumped into Iran's petrochemical industry under the country's 4th five-year development plan of 2005-2009.
He said by the end of the fourth plan in 2009, the Iranian petrochemical sector should reach a production level of 56 million tonnes annually, earning Iran 7 billion dollars in exports.
Zanganeh added that there was an array of reasons that made investing in Iran's petrochemical industry competitive.
He said that Iran's immense gas reserves enable the country to offer access to competitively priced petrochemical feedstock, especially when the price is compared to the prices of oil-products.
Zanganeh underscored that the strategy of developing Iran's petrochemical sector would generate major investment opportunities for both local and foreign private sectors.
He said the advantages of investing in Iran's petrochemical industry was not limited to its feedstock edge only. The industry, he said, enjoyed other advantages, including a vast local market, a diversifying petrochemicals chain, availability of skilled and cost-competitive workforce, infrastructural developments, protection of investment, an evident growth in the downstream petrochemical sector, and possibly most importantly, sustainable economic stability and adoption of détente policies. Zanganeh added that the Ministry of Petroleum and its subsidiaries would continue with unabated resolve to meet Iran's petrochemical industry feedstock requirements and other necessary inputs with competitive prices so that it can secure a suitable share of the global market.
The Ministry, he said "is also prepared to follow up cooperation with the regional countries in mutually-beneficial joint investment and market stabilization activities."
The NPC's current plans hinge upon the priority to use ethane, NGL and condensate. They will produce a wide range of products, including polymers, chemicals, fertilizers and fuels that will be supplied to export and domestic markets in the course of the country's 4th development plan.



Iranian deputy petroleum minister and president of NPC, M.R. Nematzadeh, told IPF 2004 that countries, including those located in the Middle East and on the Persian Gulf, which have access to extensive and relatively low-cost gas resources, enjoy better margins for the petrochemical industry. This, he said, is "the reason why the Middle East, and the Islamic Republic of Iran, at a larger scale, have become increasingly attractive for petrochemical investors." Nematzadeh said based on the readily available advantages in Iran and the determination of the Iranian Government to develop the country's petrochemical industry, NPC has planned, and, has already started several world-scale, gas based, petrochemical projects including olefins, polyolefins and other ethylene derivatives like styrene monomer, ethylene glycols, aromatics, methanol, ammonia and urea.
Nematzadeh reiterated that in line with the policies of the Government, NPC is determined to expand Iran's petrochemical industry. In doing so, "it is interested to seek the contribution of the local and foreign private sector," he said. Elaborating on the NPC's interest, he stressed that "NPC tries to play a 'genuine' interactive and cooperative role at the global petrochemicals markets, by enhancing long-term cooperation with leading international companies through 'joint and reciprocal' investments in Iran and abroad."
The NPC president said that besides the 4th five-year development plan for 2005-2009, NPC has also finalized a 10-year 'prospective vision' for up to 2015 which seeks to consolidate NPC achievements and maintain its growth. Nematzadeh noted in the context of the plan "we are optimistic that with the contribution of 'Iranian and foreign' participants, NPC can invest in and produce major petrochemical products at world-scale capacities". He detailed the capacities of the projects as follows:
12 million tonne/year of ethylene, 10m tonne/year of polymers, 5m tonne/year of ethylene glycol, 7.5m tonne/year of methanol, 8m tonne/year of urea and 4m tonne/year of aromatcis. "With this production, the annual sales revenues will reach over $20bn."



Dr. Mohammad Khazaee, vice minister of Economic Affairs and Finance told IPF 2004 delegates that despite an overall decline in the global foreign investments, some regions experienced high level growth and foreign investments.
Khazaee said that in the Middle East, Iran has had a quite different record during the past few years, pointing out that the country's economy has experienced profound and vast economic reforms and restructuring. He ticked off a list of reforms, which have been introduced since 6 years ago, including a comprehensive tax reform, the introduction of many new tax holidays and the establishment of a central tax authority. Khazaee added that all legal and governmental monopolies have been dismantled. Most of the state-owned companies are being reviewed for privatization; all non-tariff trade barriers have been removed; import/export rules have been simplified and the Oil Stabilization Fund has been established to curb the impact that oil revenue fluctuation has on financing government development plans.
In addition, the Foreign Investment Promotion and Protection Act (FIPPA) has also been enacted. Protection given to foreign investments against non-commercial risks under FIPPA include the right of repatriation of principal capital, dividend and capital gain in foreign exchange; guaranteed compensation in case of expropriation and nationalization; guaranteed compensation in case of business disruption by new laws; guaranteed purchase of foreign investment products and guaranteed equal treatment in comparison with any Iranian national or enterprise.
As a result, in the past 6 years GDP growth has increased from 2.2% to 7.4% and foreign trade volume has increased from $37.4bn to $52bn. Khazaee said that during the last two years, investments saw a 400% surge and became almost equal to the total invested during the past decade. He highlighted that investment in the mineral and petrochemical sectors would continue to grow adding that improved average income, low-cost production, availability of skilled workforce and an abundance of raw material have attracted greater foreign investment in Iran's petrochemical sector.



Mohammad Mallaki, deputy Iranian petroleum minister and president of the National Iranian Gas Co. (NIGC), told IPF delegates that the rapid growth of petrochemical sector particularly in the Middle Eastern countries including Iran and Saudi Arabia would spell an upsurge in demand for natural gas as feedstock and fuel consumptions.
Mallaki said that with the current planned investments, the consumption of gas by Iran's petrochemical industry would increase 8 times to 33bn cubic meters by 2010. Present consumption is 4bn cubic meters. He added that by 2014, Iran's petrochemical industry would consume 52bn cubic meters of natural gas per year.
He said in the past recent years important steps have been taken to develop the essential infrastructures to meet the local demand for gas particularly in power stations and major industries including the petrochemical sector.
He detailed NIGC's priorities on domestic natural gas networks development which included power plants, refineries, petrochemical plants and gas-based industries, major commercials, public and other industries and natural gas as fuel for vehicles.



Olivier Appert, president of the Institut Francais du Petrole (IFP), told the Forum that the present situation with relative high crude oil and naphtha prices could give opportunities to gas-based feedstocks to better compete. However, new ethane resources from non-associated gas will require to have the potential to commercialize the methane extra production.
Appert said driven by economic growth in China or in North America, large polymer markets, as polyethylene, polypropylene and polyethylene terephtalate (PET) would continue to increase. He noted that the demand for feedstock to produce olefin and aromatic bases would remain strong, and higher than the demand for fuels. He said "we are optimistic as regards world growth. Demand is carried by major consumer products, and by growth in China and Asian countries."
IFP President noted "We can also be optimistic over Iran's capacity to develop its petrochemical output as the country has the necessary resources, especially the gas, to bring well-priced raw materials to the market."
He said that the future balance between the various steam cracking raw materials and the real balance for ethylene and propylene would drive the success for new routes for the production of propylene such as dedicated FCC, propane dehydrogenation, metathesis or direct conversion of methane.



Professor M. Hashem Pesaran from the University of Cambridge focused on the role of trade in the process of Iranian economic development. He highlighted the key role played by exports of medium to high technology manufactured goods (as compared to exports of raw materials) for sustainable economic growth.
Important steps have also been taken to promote non-oil exports. Amongst the non-oil exports, chemicals have shown the largest rate of increase.
Petrochemical export, he said, "provides an important example that need to be followed up by promotion of other forms of manufactured exports, particularly those with high employment generating capacities." With its abundant natural resources, its talented and educated labor force, and its expanding markets, Pesaran concluded, Iran can provide important investment opportunities in the Middle East.
He noted that Iran's overall economic prospect was favorable adding that "GDP growth is estimated to be around 6% for the year ending March 2004, and is expected to be around 4% for 2004/05."
He said that "There are significant investment opportunities in medium technology manufacturing industries as well as in oil and gas related manufacturing such as petrochemicals."




David Hodgkinson deputy chairman of UK-headquartered banking group HSBC told delegates Iran has taken steps to reduce its dependence on oil and in this respect NPC has been one of the key companies in this diversification strategy, raising over $5 billion for new petrochemical projects since the 1990s.
He said NPC's financings can be split into four distinct periods: first wave (1991-92), the second wave (1993-96) when NPC raised $1.3bn for three large petrochemical plants. The third wave (2002 to present) during which NPC used structured financing techniques i.e. borrowing on its own balance sheet but with the added security of pledging existing receivables into offshore escrow accounts.
Fourth wave: (2003 to present) whereby export credit agencies (ECAs) are able to accept direct risk on NPC without a guarantee from the Ministry of Economic Affairs and Finance or a complex security structure. Hodgkinson said that because NPC had fulfilled all of its commitments to lenders over the last five years it was now possible for ECAs to accept direct risk on NPC without a guarantee from MEAF or even a complex security structure. The ECAs of "the UK, Germany, Spain and Holland are now able to accept "NPC Clean Risk" structures" he said.
Hodgkinson added, "2003 saw NPC involved in three major structured financings (in addition to the styrene monomer plant) including low and high density polyethylene plants together with a utilities plant in the Olefin 9 complex. Bridge facilities were also arranged for each of these transactions. Additionally, in February 2004, NPC agreed a $1bn framework agreement with the Japanese Export Credit Agency showing the commitment of Japan, and Japanese exporters, to Iran. HSBC has assisted in the negotiations between both parties and will run the security structure and escrow accounts under the agreement."



Aya Yamazaki, Director General of the International Finance Department II of Japan Bank for International Cooperation (JBIC) told IPF participants that the relationship between NPC and JBIC started in 1976. "Since then, NPC and JBIC have been building up a good relationship", he noted.
Yamazaki added that since 2000, JBIC facilities have been offered to Iranian banks with sovereign guarantees. The facilities have also been provided to the following NPC projects:
4th Aromatics Plant Project in Bandar Assaluyeh; PTA II Plant Project in Bandar Imam and Ammonia and Urea Plant Project in Bandar Assaluyeh.
Briefing on the latest developments in the relationship between NPC and JBIC, he said NPC and JBIC signed a Memorandum of Understanding (MoU) on 9 February 2004 based on which, NPC and JBIC signed the first facility agreement on 9 April 2004 for the 2nd Ammonia and Urea Plant Project.
Yamazaki said the MoU seeks to support exports of Japanese goods and services on time and to support NPC's investments in the petrochemical sector.
The MoU improves opportunities offered to Japanese exporters and shortens time taken to complete financing for individual NPC projects.
He said Japanese, foreign and Iranian contractors could use the facility under the following conditions:

Japanese Exporters & Foreign Exporters:

If the Japanese exporters are main contractors, and Japanese goods & services make up more than 30% of the foreign portion, the JBIC Facility can cover up to 85% of the foreign portion.

If the Japanese exporters are subcontractors, the JBIC facility can cover 85% of the contract price.
Iranian Firms: For the local portion, the JBIC facility can also cover up to 15% of the foreign portion.



Andrew Pettman, olefin studies director for chemicals consultant CMAI focused on the competitive advantage that producers in the Middle East possess. He predicted that polyethylene markets around the world would see strong growth in the coming years. However, he added that a key question would be the relative cost of bringing polyethylene to market from remote locations where there is ample low cost feedstock. Examining this advantage in several crude oil scenarios, he said that Iran's low energy costs, coupled with its need to develop the country, should mean aggressive growth for the country's petrochemical industry.
Pettman said that between 2002-10, some 10.4m tonnes of additional polyethylene (PE) capacity would be created between 2002 and 2010. Saudi Arabia is expected to account for 42% of PE expansions followed by Iran with 32%.
He said that the growth in petrochemicals in the Middle East would come in four waves. The first, between 1990 and 1996, during which 5m tonnes of ethylene was brought on stream.
The second wave, between 1996 and 2003, brought another 5m tonnes. The third wave, between 2003 and 2011, is expected to bring a further 10m tonnes of ethylene on stream, and in the fourth wave, between 2011 and 2020 a further 10m tonnes of ethylene capacity will be brought onstream. This will mean a further 40m tonne/year of ethylene capacity within the next 16 years.



The speech by Michel Buffenoir, CEO of the ethylene Business Unit of Technip Group, focused on the NPC's development activities. He said Assaluyeh is becoming one of the world largest steam cracking complexes and is becoming as famous as Persepolis.
Buffenoir said with over 5m t/y ethylene capacity, NPC would jump in the coming years to one of the five major ethylene producers. Abundant sources of feedstock in Iran give NPC substantial advantages. He said like Persepolis in the past, "Iran is implementing its traditional skills in building mega projects that attracts the world attention."
NPC is the first producer in the Middle East to consider an ethylene cracker plant with a capacity close to 2m t/y to further reduce unit cost. "Let's have a look at the effect of scale: the goal is to design the largest gas cracker, single line of compressor, using proven technologies, to further decrease the installation cost down to less than $300 per tonne of ethylene," he noted. Buffenoir went on to say that a 700,000 t/y ethylene plant had a unit cost of: $100/tonne ethylene; doubling its capacity to 1.4m t/y (Assaluyeh Jam Cracker) decreases its unit cost down to $85/tonne ethylene. Technip expects the unit cost of a 2m t/y to further decrease to less than $80/tonne ethylene. He said from a contractor's viewpoint, Assaluyeh had the following advantages to offer:
Unlimited source of feedstocks; logistics facilities, airport; export/import facilities; an overall master plan and qualified personnel for construction
He concluded by expressing Technip Group's readiness to contribute to the NPC planned programs.



Makoto Takeda, Head Scientist of the Japanese DIA Research Martech Inc. focused on Iran's Petrochemical and Downstream Industries. Takeda said petrochemical feedstock is abundant and cheap in Iran noting that the country's oil and gas reserves were respectively the 5th and 2nd largest in the world and that the Iranian government has given top priority to petrochemical industry. He concluded that Iran's vast reserves of oil and gas mean the country's petrochemical industry would become strong. He also believed Iran's downstream industry was promising due to low-cost feedstocks, quality workforce, and large domestic market. Takeda suggested that "Iran's FDI regulations should be clarified or revised."



Mohammad Hassan Peyvandi, the NPC's planning and development director, opened his speech by a brief history of NPC since it was founded in 1964. He said the NPC's first development plan after the Islamic Revolution focused on imports substitution and expansion of downstream capacities. The 2nd plan aimed at entering global petrochemical markets. The 3rd plan, currently under construction, is based on the strategy of maximizing the use of gas-based feedstock. He said NPC was preparing its 4th development plan, on the basis of which it would pump over $11bn into its projects. Peyvandi said the cornerstones of the plan were "following-up the strategy of maximum use of gas-based feedstock especially from South Pars Gas Field, use of state-of-the-art technologies to produce clean fuels including GTL & DME and propylene using propane dehydrogenation (PDH) or methanol-to-propylene (MTP) technologies, attracting domestic and foreign investment for developing up-stream and downstream industries and pursuing privatization policies.
He detailed that NPC had drawn up both long and short term plans to meet the challenge of producing sufficient propylene and to alleviate its shortage.
The long term plan centered on keeping abreast of the advances made in developing new technologies and keeping in contact with technology developers/owners and potential investors to use commercially viable PDH & MTP technologies.
He elaborated that in the short run, NPC "aims to use available by-products and condensates as feedstock for the NPC's olefin-aromatic project. Going into more details, Peyvandi said "the objectives are to use by-products for production of a large amount of ethylene to create added-value from heavy end and to recover BTX from pyrolysis gasoline. Based on heavy ends from third and fourth aromatics in Bandar Imam and Assaluyeh respectively plus fresh condensates from South Pars Gas Field NPC has defined a mega liquid cracker, Olefin No. 12, for producing a huge amount of ethylene, propylene and BTX. The produced BTX is in fact the recovery of aromatics from pyrolysis gasoline.
Feedstock for Olefin No. 12 is 2.5m tonne/year of heavy ends and 3m tonne/year of fresh condensates from South Pars Gas Field. The product slates include 1.9m tonne/year of ethylene, 850,000 tonne/year of propylene and 700,000 tonne/year of BTX.