Delays dent Iran’s methanol target

20 July 2010

Tehran’s ambition to be the biggest methanol exporter by 2013 will be a challenge as two plants are delayed

Iran’s project delays are spreading. Over the past five years, Iran has brought five major petrochemical plants online, a major achievement, but each has come with an average delay of almost two years. Even after two years, utilisation rates at the plants have been well short of what Tehran would have hoped.

Iran’s oil and gas sector has also been impacted by the reluctance of foreign firms to invest in the country, a situation compounded by the latest round of UN sanctions.

VenIran Petrochemical Company (VIPC), Iran’s joint venture with one of its few remaining allies, Venezuela, is the latest firm to fall victim to this trend.

Despite significant political weight behind the project, delays are creeping in even before an award has been made. Contractors have been given an extra month to submit bids on a $350-400m deal to build a new methanol plant at Assaluyeh in the south of the country.

Delays are also expected for a second methanol plant, which is being developed by local Marjan Petrochemical Company.

Tehran has grand plans of becoming the world’s biggest methanol exporter by 2013, producing 14.7 million tonnes a year (t/y), up from 5.3 million t/y currently. Iran is preparing to privatise its state-run National Petrochemical Company (NPC) by 2011, in the hope that this will bring in technology and financing to revitalise the sector. 

But this is unlikely to help. As a government entity, NPC was able to source its feedstock at competitive prices, giving NPC enviable margins. The government was effectively passing money from one pocket to the other. But a privatised NPC is likely to be charged significantly higher prices for access to Iran’s plentiful gas supplies.

Delays and operational issues at Iran’s petrochemical plants are likely to continue.

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