IRAN consolidated its position as the Middle East’s second biggest producer of petrochemicals last year and is now taking aim at a new annual output target of nearly 15 million tonnes by the end of the decade. The National Petrochemical Company (NPC) plans to invest $1,800 million in new projects and is hoping to attract the private sector, with free-zone regulations and other incentives, into putting in another $1,500 million.

The Bandar Khomeini complex’s second phase opened in August 1994, adding about 2.3 million tonnes to annual output. The first phase, producing nearly 1 million tonnes of liquefied petroleum gas (LPG), has been working since 1990, and a third phase, producing nearly 500,000 tonnes, is scheduled for completion next year.

With a total capacity of 3.8 million tonnes in 1996, Bandar Khomeini will have taken more than 20 years and $5,000 million to complete. The plant was started in the mid-1970s as a joint venture with a Japanese consortium led by Mitsui & Company. The complex, damaged in the war with Iraq, became the responsibility of NPC when the Japanese finally withdrew in 1990, making a $900 million compensation payment.

Bandar Khomeini’s second phase raised national output to more than 7 million tonnes a year (t/y). This is more than 10 times the level of 1988, the year Iran started rebuilding its industries after the war with Iraq, and puts the country well ahead as the Middle East’s second biggest producer. At the moment, Iran’s output is dwarfed by the more than 20 million tonnes produced by Saudi Arabia.

Just over 2 million tonnes of the new Iranian capacity over the next five years will come from five new projects which were firmed up in 1994. These are a methyl tertiary butyl ether (MTBE) plant; an extension of the olefin unit at Bandar Khomeini; a methanol unit on Kharg island and two plastics projects. The basic engineering contract for the methanol scheme was awarded to Germany’s Lurgi in late 1994.

In seeking to finance its projects, NPC was in mid-1994 hoping to secure $4,600 million, with $2,900 million coming from the private sector at home and abroad. Another option it presented to the majlis (parliament) required NPC to spend $3,800 million, with the local private sector providing a further $800 million.

In the event, NPC appears to have been forced to contemplate a more modest programme involving a total of $3,300 million. Some $1,500 million of this would have to come from the private sector.

Hard currency shortages have forced NPC to put increasing emphasis on the private sector. The plan involves both privatisation of existing facilities and inviting investors to take over new projects.

There are at least 20 new projects being offered to private investors. Some 10 of these date from the first five-year plan which ended in March 1994. Part of the reason for the failure to attract private investors lies in the absence of appropriate legislation for foreign involvement.

In late 1994, NPC head Ahmad Rahgozar asked the majlis to allow foreign investors to take 100 per cent ownership in projects instead of the existing 49 per cent. The government itself revised existing legislation along these lines in mid-1994 and sent its proposals to the majlis for approval. However, the parliamentary debate may last until late 1995.

NPC is meanwhile moving to declare the port of Bandar Khomeini and nearby petrochemical complexes a protected industrial zone. Free-zone regulations would apply in the designated regions to allow a freer atmosphere for foreign investors.

NPC is also creating affiliates to decentralise operations, and has set up the Petrochemical Investment Company (PIC) to which production units are being leased as an intermediate step to their flotation on the stock exchange. Flotation would allow the various units to tap the capital market.

This year, NPC is concentrating on completing existing projects. The first phase of the Khorassan fertiliser complex and the $1,000 million Tabriz petrochemical complex are due to open in 1995. A 175,000-t/y polyvinyl chloride (PVC) unit was opened at Bandar Khomeini in 1994, as was a 100,000- t/y light-density polyethylene unit.

The $1,500 million Arak petrochemical complex was opened some time ago, and produced 440,000 tonnes in 1994/95. Also working are a methanol plant in Shiraz and a diammonium phosphate (DAP) unit at the Razi complex. A war-damaged sulphuric acid unit at Razi was reopened in 1994. The aromatics complex at Isfahan is also operating.

These facilities were brought on stream with the help of medium-term credit lines totalling $2,200 million from foreign banks, mainly French institutions, in the early 1990s.

Iran is now becoming a significant player in the international petrochemical export market, although its production surpluses will never be as great as Saudi Arabia’s because of high local consumption. Per capita consumption is rising and will equal or exceed both regional and international consumption by 2000. Something like 3 million tonnes of the output of major products will be left over for export. NPC expects export earnings in 1995/96 of $450 million, up from $250 million in the previous year.