Iran's share in Middle East petrochemical production rises

03-Dec-07

Petrochemicals production from Iran currently constitutes over 12% of total Middle Eastern petrochem production. Saudi Arabia accounts for 50% of the region's output, whereas they other states account for 37% of the total production. Iran has unlimited opportunities for growth in the petrochem sector, given its huge gas reserves. As per targets set by Vision 2025 Plan, Iran is estimated to overtake Saudi in terms of petrochemical production by 2025. To achieve the target set by Vision 2025, about US$50 bln is needed to be invested in the petrochemical industry, which will lead to a rise in Iran’s share to 34% of the petrochemical production in the Middle East while Saudi Arabia's share is estimated to slip to 33%, with other countries producing 33%. Achieving the goals of Vision 2025 in the petrochemical industry depends on reducing government involvement in the sector and providing more facilities to investors. Petrochemical production capacity in Iran has grown 1.5 times in the past 8 years. . In addition to meeting domestic demand, petrochemical industry also earned $5 billion from exports in the year to March 2007. Most of the petrochemical factories which were planned as per Third Five-Year Economic Development Plan (2000-2005), have now become operational or are nearing completion. However, they industry faces problems including the absence of a developed and strong domestic market. Supportive policies and price-fixing have prevented the growth of the petrochemical industry. The importance of petrochemical industry in today's economy points to the need for investment in the sector. With the approval of mechanisms to do away with price fixing, all petrochemical products will be brought under a new pricing plan by March 2008. Liberalization of the prices of petrochemical products is the most important decision taken in recent years in Iran to breathe a new life to the sector. Delay in implementing this, has driven downstream petrochemical industries to trade in raw materials rather than in production. With the government's decision to scrap price-fixing, the formation of a strong market, attraction of capital and gaining a proper share of the global market would be possible in the sector. This policy along with facilitating investment and reducing government role will help the sector achieve its long-term goals of becoming the top petrochemical producer in the Middle East.