Development of Iran’s oil, gas and petrochem sectors hampered by fresh UN and US sanctions

09-Jul-10

An additionally blow has been felt by the oil, gas and petrochem sector in Iran with a fresh round of United Nations and US sanctions. This will hamper Iran’s ability to further develop these sectors, as per ICIS. The UN approved a fourth round of sanctions on Iran in H1-June, including restrictions on financial transactions, a tighter arms embargo and authority to seize cargo suspected of being used for Iranian nuclear or missile programs. In H2-June, the US Congress voted for yet-more sanctions, which will force "banks, insurers, energy firms and others to choose: trade with Iran and you will be barred from business with the United States." Dubai, an important third-port route for getting Iranian goods into markets, is also reducing its links with Iran. Tougher sanctions mean trade finance is even harder to obtain when dealing with Iran, forcing the country to seek more difficult and innovative ways to bypass the sanctions or demand cash upfront. As trade comes to a halt, Iran will have less money to fund oil, gas and petrochemicals growth, spelling good news for global supply and demand balances. Iran saw five large scale ethylene crackers start-ups since 2005, with an average delay of 18-24 months and average utilisation rates in the first two years of production of 50-60%. It is forecast that almost 11% of all new capacity from 2010-2014 will be in Iran. The previous sanctions regime had made it extremely difficult for the country to get the technology and expertise it needed to better exploit its abundant resources.