Sustainable development signifies generating value-added, and petrochemical industry will be able to render significant services to the Iranian economy. The petrochemical sector is able to play a significant role in boosting Iran's economic status, reducing unemployment rate, creating jobs and generating revenues through processing, manufacturing and supply of high value-added products.
Economic experts are right in their analysis of the job-creating advantage of petrochemical industry. Each job opportunity in the petrochemical industry would hire at least 14 Iranians. Now if we consider that half of them have their own families comprising at least three persons we will reach a significantly high figure. That is why Iran's Petroleum Ministry, on one side targeting $75 billion petrochemical industry development plan over eight years and on the other is preparing to bring the South Pars gas field to full operation. These two targets herald the fast pace of petrochemical industry and subsequently Iran's growth in coming years.
If sufficient feedstock is supplied, Iran will be able to produce at least 60 million tonnes a day of petrochemicals. In the meantime, more than 67 petrochemical projects remaining from the third, fourth and fifth national development plans are being operated. Once these projects become operational, Iran's petrochemical production capacity will double, registering the second jump in this industry.
Relying on future increase in feedstock production, Iranian petrochemical industry officials envisage building new petrochemical plants mainly in the new petrochemical hubs; Chabahar, North Pars field, Lavan, Qeshm, Kish, Jask, Parsian, Iranshahr, Phase 2 of Assaluyeh and Sarakhs are the ten areas under study for petrochemical plants. The areas located in the vicinity of the Persian Gulf or the Sea of Oman are likelier to house petrochemical plants due to easy access to feedstock and high seas. Phase 2 of Assaluyeh petrochemical plant near the city of Kangan, Parsian Special Economic Zone in east of Assaluyeh, and Makran petrochemical plant in Jask free zone off the Sea of Oman constitute the three important areas where petrochemical plants could be built.
The extension of a pipeline supposed to carry Iran's gas to neighboring countries with a capacity of 105 mcm/d may be a big advantage of these areas. This pipeline would be able to deliver more than 75 mcm/d of gas feedstock to petrochemical plants located in its vicinity. In the meantime, the existence of ports and railroads in southeastern Iran and Jask and Chabahar free zones could attract investors.
Assaluyeh Phase 2 Petchem Output at 33mn Tonnes
Currently, most projects located in Phase 2 of Assaluyeh are under construction; however, the process of their work highlights the need for foreign investment. Once all projects in the zones become operational in coming years, Iran will see its petrochemical output grow by 33 million tonnes, each tonne of which is valued at more than $400. Therefore, the petrochemical plants located in Phase 2 of Assaluyeh are instrumental in the second jump in Iran's petrochemical production.
The bulk of Iran's incomplete petrochemical projects are under construction in Phase 2 of Assaluyeh close to Kangan. Most of them need to attract foreign finance and loan in order to go ahead. These projects have in recent years faced serious stagnation due to a variety of reasons including international sanctions and subsequently financial shortcomings. However, China recently agreed to finance five out of a total 22 incomplete petrochemical projects and the area is witnessing activity. Bushehr, Morvarid, Kavian, Persian Gulf, Ettehad, Mehr, Marjan, Kimia Gostar, Jam Armeh, Hormoz, Veniran, Samand Tarrah, Lavan, Hengman and Damavand petrochemical plants are among projects located in Phase 2 of Assaluyeh. They comprise a utility complex, seven methanol production units, three urea and ammonia production units, two ethylene production units, an ammonia production unit and an ethane recovery unit. Some of these projects including Mehr have become operational and some others are still in the preliminary stages of construction.
Mehr Petrochemical Plant, as the first petrochemical plant to have become operational in Phase 2 of Assaluyeh, is producing 300,000 tonnes a year of polyethylene. The products of the company comprise various grades of high-density polyethylene (HDPE) which constitutes the raw material for downstream industries involved in manufacturing polyethylene pipes, industrial injection parts, films and nylon plastic bags. These products are exported to China, India, Turkey, Malaysia, Indonesia, Russia, Ukraine, the Philippines, Azerbaijan Republic, Armenia, Georgia and other countries.
Damavand Petrochemical Plant is the largest complex under construction in Phase 2 of Assaluyeh. It will provide utility services, water, electricity, steam and industrial gas for the plants located in Phase 2 of Assaluyeh.
Operations recently started to install turbines in Phases 3 and 4 of the first power plant of Damavand Petrochemical Plant with a view to increasing power generation capacity there.
Given around 250MW of power consumption by different sections of Damavand Petrochemical Plant, including four trains of aeration unit, water tank, water unit, power station and off-site facilities, two more turbines have been approved to be installed over the coming two years in order to increase power generation for the main plants located in Phase 2 of Assaluyeh (Marjan, Bushehr, Morvarid, Dena, Sabalan and Makhazen Sabz petrochemical plants).
After installation and startup of the third and fourth turbines, the rated generation capacity of Damavand Power Plant will reach 648 MW. Once 12 gas turbines have been installed under Phase 3 development of Damavand power plant, the power generation capacity will reach 2,000 MW.
Phase 1 of Damavand Power Plant has had 97% progress. Operating Damavand Petrochemical Plant is of high significance due to its special location and the dependence of 24 petrochemical projects in Phase 2 of South Pars on that facility.
Kavian Petrochemical Plant is tasked with the supply of feedstock to the subsidiaries of Bakhtar Petrochemical Company. The projects and facilities affiliated with the Bakhtar holding are located in the route of Iran's West Ethylene Pipeline. The main product of Kavian Petrohemical Plant is two million tonnes of ethylene a year, each million tonnes of which will be produced by each of two olefin units of the facility.
Phase 1 of this plant came online in 2012 and Phase 2 became operational last year. Following arrangements with the National Iranian Oil Company (NIOC), the delivery of ethane produced in Phases 15 to 18 of the South Pars gas field to the Kavian petrochemical facility, the plant will become operational with a rated capacity of two million tonnes next year.
Morvarid Petrochemical Plant is another petrochemical complex in Assaluyeh. Construction of monoethylene glycol (MEG) unit there is among projects in Phase 2 of Assaluyeh. The MEG unit has been built close to the ethylene section of the Morvarid plant. It is one of the largest MEG production units with an annual production capacity of 500,000 tonnes of MEG, 50,000 tonnes of diethylene glycol and 3,400 tonnes of triethylene glycol. The MEG unit came online last year.
Gholam-Reza Jokar, CEO of Morvarid Petrochemical Plant, says the project is estimated to cost €227 million. The technical and technological savvy of Royal Dutch Shell has been used in the construction of the Morvarid plant.
Marjan Petrochemical Plant is another petrochemical facility in Phase 2 of Assaluyeh with an annual production capacity of 1.65 million tonnes. The methanol project is now more than 96% complete. The pre-commissioning and commissioning of this petrochemical plant has gone ahead on schedule. All necessary equipment and commodities have been procured and are being installed for operation. The design, construction and operation of this petrochemical company altogether have cost around €465 million plus IRR 5,500 billion provided by private investors.
Bushehr Petrochemical Plant, as the largest petrochemical project under operation in Iran, comprises three phases. Phase 1 of this project, which includes methanol and ethane production, and Phase 2, which comprises ethylene, HDPE and MEG, are being built with more than 50% of equipment having been installed. Managers of the project have stated the capital needed for the project amounts to €1.9 billion plus IRR 2,500 million, 85 of which will be provided through finance and 15% by private equities. So far, €400 million has been injected into this project.
$11bn Investment in Makran
Iran's third petrochemical hub is expected to become operational in Makran, following in the footsteps of the Mahshahr and Assaluyeh hubs. The Makran Petrochemical Plant includes 17 units for the production of methanol, methanol ammoniac, urea ammoniac, ethylene, aromatics and downstream industries. In Phase 1, the Makran plant will produce 2.1 million tonnes of dry products and 6 million tonnes of liquid products, which could earn Iran $5 billion. Phase 2 of the plant will add $6 billion to exports, raising petrochemical exports from the facility to $11 billion. Phase 1 will come online in 2019, Phase 2 in 2020 and Phase 3 in 2021. However, these schedules may be delayed by one year. Iranian investors involved in this project are authorized to hire a foreign partner.
The Iranian government's investment in the east of the country over the past three years is equal 10 years of investment in different sectors like railroads, Chabahar Port development, petrochemical plants, refineries and preparation of 50,000 ha of land for agricultural purposes.
For instance, the private sector's biggest agreement for building storage facilities to keep petrochemical products has been signed on a BOT basis for a 20-year period, 4 years of which will be for construction and 16 years for operation. The project is envisaged to be built on a land measuring 20 ha for the storage of 23 million tonnes of petrochemical products. The agreement is valued at IRR 8,000 billion. The Makran petrochemical park is now 19% complete.
Europeans Favor Parsian
Parsian is recognized as a special economic zone in Iran. Due to being located near the Persian Gulf and the refineries of the South Pars gas field, it enjoys good potential for investment mainly in petrochemical sector. Iran's minister of petroleum, Bijan Zangeneh, believes that Parsian Energy-Intensive Industries Special Economic Zone is the best place for the development and growth of petrochemical industry. The Iranian Ministry of Petroleum is interested in investment and supporting investment in this zone.
The Parsian special zone lies on more than 10,000 ha of land near the city of Parsian in Hormuzgan. It is administered by the Iranian Mines and Mining Industries Development and Renovation Organization(IMIDRO). The city of Parsian is located 30 kilometers from Assaluyeh. Access to maritime transport lines, availability of sweet gas with a recovery rate of over 100 mcm/d (Tabnak, Shanol, Varavi and Homa) near the zone, access to infrastructure facilities in the Pars 1 and Pars 2 sites of the Pars Special Energy Zone, the advantage of development potentialities of Hormuzgan, Bushehr and Fars provinces, increased onshore and offshore capabilities thanks to coastal development and above all access to water sources constitute the advantages and potentialities of the zone.
It is noteworthy that the sea depth, proper place of living, access to airport and land transport networks provide very suitable conditions for the development of energy-intensive industries in the Parsian special zone. The contractor for the development of Parsian Port has been chosen. Operations will start with the construction of four jetties, which will be increased to 19.
In the meantime, foreign investors will benefit from such facilities as the allotment of 3,000 ha of land (30% down payment and 70% on installment), water, electricity, gas and telecommunications infrastructure, customs exemptions for the import of equipment, hiring local partner, support for getting national and foreign banking loans, consultation services during all stages of the operation of the project and getting permit for the employment of foreign investors and employees.
The Iranian government has already expressed its openness to attracting foreign investment. Minister Zangeneh recently said Parsian would be the most suitable place for investment in petrochemical industry.
"This special economic zone is the best zone for the development and growth of petrochemical industry and the Ministry of Petroleum is interested in investment and supporting investment in this zone," said the minister.
Expressing satisfaction with measures undertaken so far in the Parsian energy-intensive special economic zone, Zangeneh said: "Gas supply to this zone will be undertaken by the Ministry of Petroleum. Therefore, we welcome petrochemical activities in the Parsian special economic zone. Development of petrochemical industries is one of points which the government has constantly pursued."
Hassan Shahrokhi, CEO of Parsian Energy-Intensive Industries Special Zone, recently said: "The attractiveness of this zone has drawn demand for investment on the part of European Union companies and giants like [France's] Total, and domestic firms have so far pledged $10 billion in investment. The figure constitutes one-fourth of total investment envisaged for the development of the zone."
According to the Iranian Ministry of Petroleum, Total will invest $2 billion in Iran's petrochemical sector to complete the value chain. Iran is now in talks with Total for the construction of three petrochemical plants. If a final agreement is reached, Total will invest between $1.5 billion and $2 billion in Iran's petrochemical sector. According to the latest negotiations held to that effect, agreement has been reached for the construction of a petrochemical plant with an annual production capacity of 2.2 million tonnes of petrochemical and polymer products. Separately, another agreement has been reached with Total for the construction of two plants to produce a special grade of polyethylene and an ethane cracker plant to convert ethane to ethylene.
The main advantage with Total's participation in Iran's petrochemical sector would be the transfer of technical savvy for the manufacturing of a special grade of polyethylene in Iran. Agreement has already been reached on the construction of two polyethylene and polymer products plants each with an annual production capacity of 500,000 tonnes. Furthermore, the ethane cracker unit is estimated to have an annual capacity of 1 to 1.2 million tonnes.
Iran is endowed with certain advantages with regard to petrochemical industry development owing to the abundant availability of various liquid and gas feedstock for this industry. Iran holds the largest hydrocarbon reserves in the world. Add to this such advantages as long water borders in the Persian Gulf and the Sea of Oman with economic benefits for foreign investors willing to ship their products to target markets. Furthermore, there are young and experienced educated youth who have proven their capabilities in designing, engineering, construction and installation over the past decade. Above all, Iran has a population of more than 80 million and is located next to important markets like Central Asia, Iraq, India and China. That constitutes a good incentive for investors. In the meantime, special and free zones in Iran make up investment incentive in Iran. Foreign investors are legally authorized to make arrangements for up to 100% share in investment in such zones, while being exempt from taxes and duties for 10 years.
By Javad Asghari
Courtesy of Iran Petroleum