02.07.17
NPC Iran, the large, state-owned petrochemical conglomerate of Iran, is positioned for strong market growth and expanded exports, thanks, in part, to easing sanctions and an abundant supply of flexible feedstocks, says new analysis from IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions.
According to the IHS Markit report entitled the IHS Chemical NPC Iran Competitive Company Analysis, NPC Iran is the second-largest producer and exporter of petrochemicals in the Middle East (behind SABIC of Saudi Arabia). Iran’s total chemical production capacity was slightly more than 57 million metric tons (MMT) in 2014, of which its output capacity was 42.5 MMT. The country’s exports in 2014 stood at 14.3 MMT by volume, which was valued at more than $14 billion.
Due to tightening restrictions on the flow of capital and goods, as well as limited access to necessary technology, parts and materials, Iran missed its goal of producing 100 MMT per year by 2015. IHS Markit estimates that NPC Iran’s current petrochemical production capacity is just below 60 MMT.
“NPC Iran has traditionally been a regional producer of petrochemicals, but with sanctions relief, the company expects to significantly expand its output capacity and increase its exports to meet demand outside the Middle East,” said Mohit Sood, senior principal chemical analyst at IHS Markit and lead author of the NPC Iran report. “The company has an aggressive development plan and expects its total petrochemical output to reach 180 MMT tons per year by 2025, which, if achieved, will more than quadruple its 2014 output capacity,” Sood said.
“Economic sanctions on Iran as well as technology constraints and mechanical problems led to construction-related delays, causing cancellations and start-up issues for several Iranian projects,” Sood said. “Differences in the timing of the completion of feedstock and derivative units also contributed to poor operating performance. The sanctions relief once fully realized is expected to remove operational bottlenecks and strengthen the outlook for Iranian operations.”
NPC Iran has grown in the past by forming partnerships domestically as well as internationally. With the current lifting of sanctions, the IHS Markit report said, the company is expected to merge or partner with other companies in order to expand its business.
According to IHS Markit, currently, the majority of NPC’s chemical output serves Iran’s comparatively advanced economy and a large population of nearly 80 million, while a few of its chemical products are aimed at export markets. These are primarily ethylene, polyethylene (PE), methanol and monoethylene glycol (MEG).
“Very large investments in fixed assets based on Iran’s advantaged feedstock cost position will enable NPC Iran to export increasingly larger quantities of petrochemicals to Asia and other parts of the world,” Sood said. “The rapid buildup of the petrochemical industry will likely continue over the next 10 years, keeping NPC’s capital expenditures far above the industry average of about 5 percent.”
Iran has an advantaged feedstock position thanks to its ownership of the world’s fourth-largest supply of proven oil reserves and the second-largest supply of conventional natural gas reserves, much of which is rich in ethane.
“This resource base is significant given that chemical feedstock availability in other countries, such as Saudi Arabia, Kuwait and Oman, has become more limited,” Sood said. “NPC Iran has built its chemical operations on feedstock availability, and has the flexibility of using both liquid and gas feedstocks, which is another significant advantage. Also NPC has planned the chemical development in Iran over the years, as a result the overall operation and integration efficiency of the industry in Iran is high.”
Feedstock availability will help offset the chronically low capacity utilization rates, which are due mostly to periodic shortages in ethane feedstock. Since the price of ethane gas in Iran is kept low by government mandate, NPC Iran is competitive with its Saudi Arabian and North American counterparts, as it relates to low-cost ethane. Additionally, the country’s West Ethylene Pipeline will boost Iran’s export position for ethylene and polyethylene, IHS Markit said. Iran’s methanol capacity is set to accelerate by an additional 10 MMT per year by 2025, IHS Markit said, partly driving propylene production.
“The time is right for NPC Iran to consider expanding its capacity and the breadth of its product slate,” said John Barsby, director of business information atIHS Markit, and a co-author of the NPC Iran report. “The oil price decline has placed new importance on diversification of Iran’s revenue sources, which benefits the chemical sector. The challenge for potential investors in Iran’s petrochemical sector, though, is the high degree of political risk, the legal uncertainty, and the administrative and bureaucratic obstacles that are inherent to doing business in Iran. Investors also face structural issues such as access to technology, catalysts, cheap shipping and insurance due to sanctions.”
Iran’s growing petrochemical industry and its expansion aspirations will be a key focus of discussions at the upcoming IHS Markit 32nd Annual World Petrochemical Conference (WPC), March 20 – 24, 2017, at the new Marriott Marquis Houston. WPC is the premier annual international gathering of chemical industry leaders, experts, government officials and policymakers, as well as leaders from key end-use markets and technology innovators. To view the current agenda for WPC 2017: 32nd Annual World Petrochemical Conference and register for the event or the training workshops, please visit: https://wpc.ihsmarkit.com/
According to the IHS Markit report entitled the IHS Chemical NPC Iran Competitive Company Analysis, NPC Iran is the second-largest producer and exporter of petrochemicals in the Middle East (behind SABIC of Saudi Arabia). Iran’s total chemical production capacity was slightly more than 57 million metric tons (MMT) in 2014, of which its output capacity was 42.5 MMT. The country’s exports in 2014 stood at 14.3 MMT by volume, which was valued at more than $14 billion.
Due to tightening restrictions on the flow of capital and goods, as well as limited access to necessary technology, parts and materials, Iran missed its goal of producing 100 MMT per year by 2015. IHS Markit estimates that NPC Iran’s current petrochemical production capacity is just below 60 MMT.
“NPC Iran has traditionally been a regional producer of petrochemicals, but with sanctions relief, the company expects to significantly expand its output capacity and increase its exports to meet demand outside the Middle East,” said Mohit Sood, senior principal chemical analyst at IHS Markit and lead author of the NPC Iran report. “The company has an aggressive development plan and expects its total petrochemical output to reach 180 MMT tons per year by 2025, which, if achieved, will more than quadruple its 2014 output capacity,” Sood said.
“Economic sanctions on Iran as well as technology constraints and mechanical problems led to construction-related delays, causing cancellations and start-up issues for several Iranian projects,” Sood said. “Differences in the timing of the completion of feedstock and derivative units also contributed to poor operating performance. The sanctions relief once fully realized is expected to remove operational bottlenecks and strengthen the outlook for Iranian operations.”
NPC Iran has grown in the past by forming partnerships domestically as well as internationally. With the current lifting of sanctions, the IHS Markit report said, the company is expected to merge or partner with other companies in order to expand its business.
According to IHS Markit, currently, the majority of NPC’s chemical output serves Iran’s comparatively advanced economy and a large population of nearly 80 million, while a few of its chemical products are aimed at export markets. These are primarily ethylene, polyethylene (PE), methanol and monoethylene glycol (MEG).
“Very large investments in fixed assets based on Iran’s advantaged feedstock cost position will enable NPC Iran to export increasingly larger quantities of petrochemicals to Asia and other parts of the world,” Sood said. “The rapid buildup of the petrochemical industry will likely continue over the next 10 years, keeping NPC’s capital expenditures far above the industry average of about 5 percent.”
Iran has an advantaged feedstock position thanks to its ownership of the world’s fourth-largest supply of proven oil reserves and the second-largest supply of conventional natural gas reserves, much of which is rich in ethane.
“This resource base is significant given that chemical feedstock availability in other countries, such as Saudi Arabia, Kuwait and Oman, has become more limited,” Sood said. “NPC Iran has built its chemical operations on feedstock availability, and has the flexibility of using both liquid and gas feedstocks, which is another significant advantage. Also NPC has planned the chemical development in Iran over the years, as a result the overall operation and integration efficiency of the industry in Iran is high.”
Feedstock availability will help offset the chronically low capacity utilization rates, which are due mostly to periodic shortages in ethane feedstock. Since the price of ethane gas in Iran is kept low by government mandate, NPC Iran is competitive with its Saudi Arabian and North American counterparts, as it relates to low-cost ethane. Additionally, the country’s West Ethylene Pipeline will boost Iran’s export position for ethylene and polyethylene, IHS Markit said. Iran’s methanol capacity is set to accelerate by an additional 10 MMT per year by 2025, IHS Markit said, partly driving propylene production.
“The time is right for NPC Iran to consider expanding its capacity and the breadth of its product slate,” said John Barsby, director of business information atIHS Markit, and a co-author of the NPC Iran report. “The oil price decline has placed new importance on diversification of Iran’s revenue sources, which benefits the chemical sector. The challenge for potential investors in Iran’s petrochemical sector, though, is the high degree of political risk, the legal uncertainty, and the administrative and bureaucratic obstacles that are inherent to doing business in Iran. Investors also face structural issues such as access to technology, catalysts, cheap shipping and insurance due to sanctions.”
Iran’s growing petrochemical industry and its expansion aspirations will be a key focus of discussions at the upcoming IHS Markit 32nd Annual World Petrochemical Conference (WPC), March 20 – 24, 2017, at the new Marriott Marquis Houston. WPC is the premier annual international gathering of chemical industry leaders, experts, government officials and policymakers, as well as leaders from key end-use markets and technology innovators. To view the current agenda for WPC 2017: 32nd Annual World Petrochemical Conference and register for the event or the training workshops, please visit: https://wpc.ihsmarkit.com/
