Petrochemical implications of easing sanctions on Iran

Earlier this month, the US and its negotiating partners announced steps to move ahead on what is known as “adoption day,” intended to show readiness for sanctions relief for Iran. However, relief will only begin on “implementation day,” the day when the International Atomic Energy Agency certifies that Iran lived up to its commitments according to the nuclear deal completed in July.

According to the US CIA’s The World Factbook, Iran has the world’s second largest supply of conventional natural gas reserves, much of which is rich in ethane. Given that the rest of the Middle Eastern countries are experiencing limited supplies in ethane, this presents a huge opportunity for the Iranian petrochemical sector as sanctions are eased.

Investing in Iran includes enormous political risks, but there are major advantages for international petrochemical investors, including low-cost steam cracker feedstocks and access to the European and Asian markets.

The value of Iran’s petrochemical exports is forecast to increase 20-25% within two years after the sanctions are lifted, according to Iran’s Petrochemical Commercial Company’s Managing Director Mehdi Sharifi Niknafs. Lifting of the sanctions will barriers from petrochemical exports related to banking, insurance, transportation, and brokering, said Niknafs.

Additionally, sanctions removal will also attract foreign investment to expedite the completion of petrochemical projects. Roughly $30 billion of investment opportunities have been identified in Iran’s petrochemical sector, according to National Iranian Petrochemical Company’s Managing Director Abbas She’ri Moqaddam.

Platts reported last month that one Dubai-based analyst said, “Everyone wants to be prepared. Iran has a range of [petrochemicals] investments opportunities to offer. They range from upstream to downstream.”

Takahisa Miyauchi, member of the board and senior executive vice president of Mitsubishi’s chemicals group, said in a meeting in Tehran with Moqaddam that the company is ready to invest in Iran’s petrochemical projects. It is an interest that Iran’s petrochemical sector is keen to court, not only for direct investment in petrochemical plants but also licensing of technology that could improve production.