Iran moves ahead with privatisation plans

14 April 2010

Includes refineries and petrochemicals

Iran has begun the process of privatising its refineries and petrochemical plants, according to Oil Minister Masoud Mirkazemi.

“Work on privatisation of oil companies has begun. All petrochemical units and refineries will be ceded to the private sector, including service, drilling and support companies,” Mirkazemi told state-run Mehr news agency on 10 April.

Iran’s Privatisation Organisation estimates it can raise more than $12bn through the privatisation of companies, although the exact target will not be known until Iran’s budget is ratified. In the last Iranian year, running from March 2009 to March 2010, the country targeted $20bn and raised almost $15bn, a significant achievement giving the difficult global economic conditions.

The organisation released a table of companies to be privatised by 2014, which includes six refineries, four petrochemical companies and six oil and gas companies.

Although some commentators have raised concerns over the timing of the privatisation, as it comes as the refining sector faces global over-supply, meaning sales will come at the bottom of the cycle.

However, much of the money will be raised domestically. “With the real estate market slow and Iran’s bank interest rates significantly down, the Islamic Republic is relatively flush with money,” says Ali Mashayekhi, head of research at Turquoise Partners, a Tehran-based fund manager.

“From the beginning of the year, there has been a huge jump in trade volumes,” says Mashayekhi. Since the beginning of the Iranian new year on 21 March, the Tehran stock exchange has seen a record $350m worth of trades, with more than $50m traded in a single day this week.

Investing in the refining sector now also makes sense, given the huge domestic demand for refined goods such as gasoline.

“The refineries vary significantly in what they produce. Isfahan, for example, is focused on producing fuels, for which there is huge demand,” says Mashayekhi.

Outside of Iran, interest remains from China. National Iranian Oil Company (NIOC) has already initiated the process to transfer ownership of Iran’s 7 billion barrel Azadegan oilfield development project to China National Petroleum Corporation (CNPC). A memorandum of understanding was signed in early 2009. CNPC would take a 70 per cent stake in the project along with Japan’s Inpex with 10 per cent.

Selected companies for privatisation 
Name of CompanyOffering (per cent) Industry/Sector
Homa Airline (Iran Air)60Airline
Dana Insurance61Financial
Post Bank Iran75Financial
Raja Passenger Trains Co100Logistics (Rail)
Tabriz Oil Refining Co40Oil & Gas
Bandar Abbas Oil Refining Co60Oil & Gas
Lavan Oil Refining Co60Oil & Gas
Tehran Oil Refining Co60Oil & Gas
Shiraz Oil Refining Co60Oil & Gas
Abadan Oil Refining Co60Oil & Gas
PetroPars100Oil & Gas
Orumiyeh Petrochemical Company70Petrochemical
Morvarid Petrochemical49Petrochemical
Esfehan Steel Company (Zob Ahan Esfehan)100Steel
Iranian Tobacco Company60Tobacco
   
Source: Privatisation Organisation, Turquoise Partners  

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