Iran Dismisses Impact of Sanctions on Petrochemical Industry

A00905688.jpgTEHRAN (FNA)- International sanctions on Iran are not hurting a bid to expand petrochemical output because investors are attracted by the Islamic Republic’s vast reserves of cheap gas feedstock, an Iranian official said on Sunday.

“Our assessment is sanctions have not had an impact in the petrochemical sector, and the reason is because of (Iran) possessing gas that gives us a special advantage in the region,” said Gholam Hossein Nejabat, deputy oil minister and the head of the state-owned National Petrochemical Company (NPC).

Nejabat said the petrochemical industry was increasingly relying on feedstock derived from gas rather than oil, the price of which has been soaring to record levels.

“Therefore, in view of the world’s need for hydrocarbon materials and petrochemical products, the desire of foreign companies to be a part of the industry in Iran will be good for the time to come,” he told reporters at a conference in Tehran.

Asked why Europeans were playing a smaller role, Nejabat said even when European firms previously appeared active in the petrochemical industry, their role was mostly selling technology or equipment not acting as partners.

“Even in the past the participation of European companies in investment was not so intense to (be able to say that it) has faded away now,” he said, adding that European firms were still licensing technology to NPC.

NPC is investing $13.3 billion in 24 projects in the course of a national five-year development plan that runs to 2010, he said, adding that investment will grow to $15.5 billion in 33 projects in the course of the next five-year plan.

The industry is planning to raise production from 24 million tons in the last Iranian year, which ended in March 2008, to some 35 million tons by the end of the current Iranian year, running to March 2009.

Nejabat said Iran signed more than $4.5 billion in joint venture contracts for petrochemical projects with Venezuelan, Indonesian, Indian and Omani firms for projects to be implemented in the five years to 2010.

Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in the country but not getting into big deals that could endanger their interests in the US.

But after they witnessed that their absence in big deals has provided Chinese and India companies with excellent opportunities to signing up to an increasing number of energy projects and earn billions of dollars, many western firms are now losing reluctance to invest or expand work in Iran.

Oil giant Total stressed last month that the French company cannot afford to lose deals with Iran as it is one of the largest oil producers in the world.

Total’s Chief Executive, Christophe de Margerie, told Liberation, “Iran is one of the largest oil-producing countries in the world. And in terms of gas, we are far from having made all the discoveries possible. We cannot afford to be absent.”

De Margerie explained that despite the global political situations, oil and gas are not “stop and go” industries with investments covering 20 to 30 year periods. He cited Libya as an example: “It was difficult at times. If we had left, there would never be an income.”

“There is a general decline in oilfields. If we don’t move we’re heading for a real problem. And the decision makers, who have environmental problems in mind, seem to forget the question of access to energy,” he warned.

The Total Chief Executive Officer also said in February, “We have not burnt our bridges with Iran … We will find solutions to maintain our long-term presence.”

The French oil giant is mulling over developing Iran’s first liquefied natural gas (LNG) project, which would be fed by phase 11 of the gas field.

Norwegian energy group StatoilHydro said it has planned for a long-term presence in Iran as the country holds huge oil and gas reserves.

“Our main objective is to fulfill our commitments pertaining to phases six, seven and eight of the South Pars gas development projects, Anaran and Khorramabad perfectly and then take into consideration results (of the projects),” Jan Helge Skogen, Statoilhydro’s managing director in Iran said.

“We seek long-term presence in Iran since Iran possesses massive oil and gas reserves, but at present, we are focusing on StatoilHydro’s three current projects and we are ready to mull over new investments,” he added.

According to the StatoilHydro, the company is an offshore operator for development of phases six to eight of the South Pars gas field. The company agreed to conduct a seismic survey during 2007 and to drill exploration wells over a four-year period in addition to gathering additional seismic data in Khoramabad.

American oil companies have also displayed eagerness to attend in Iranian projects.

As a first step several US oil companies participated in the 13th International Oil, Gas and Petrochemical Exhibition (IOGPE) in Tehran in April.

Analysts believe that participation of foreign companies from 30 countries proved their opposition to the US sanctions. Iranian officials also share the same view.

“This indicated that they are disregarding pressures imposed by the world powers to isolate Iran from economic arenas,” Iranian Deputy Minister for Oil Sekhavat Asadi told Iran’s Petroenergy Information Network (PIN).

“It is important first of all from the (oil) industry point of view, because with more than 4 million bpd, Iran is an oil-producing country which cannot be dismissed by any company – sellers of equipment, sellers of services and so on,” Dr. Manouchehr Takin, a senior petroleum upstream analyst with the Centre for Global Energy Studies in London, told The Media Line.

“From the political point of view, I think the fact that politics has not hindered or stopped the exhibition is a significant point. This means that business takes priority over politics,” added Takin.

According to the US Department of the Treasury’s Office of Foreign Assets Control, it is forbidden for “US persons to trade in Iranian oil or petroleum products refined in Iran.”

Americans are also not allowed to finance such trading, and they “may not perform services, including financing services, or supply goods or technology, that would benefit the Iranian oil industry.”

The US is at loggerheads with Iran over the independent and home-grown nature of Tehran’s nuclear technology, which gives the Islamic Republic the potential to turn into a world power and a role model for other third-world countries. Washington has laid much pressure on Iran to make it give up the most sensitive and advanced part of the technology, which is uranium enrichment, a process used for producing nuclear fuel for power plants.

The United States and its Western allies have accused Iran of trying to develop nuclear weapons under the cover of a civilian nuclear program, while they have never presented any corroborative document to substantiate their allegations. Iran has denied the charges and insisted that its nuclear program is for peaceful purposes only.

Tehran stresses that the country has always pursued a civilian path to provide power to the growing number of Iranian population, whose fossil fuel would eventually run dry.

Iran is under three rounds of UN Security Council sanctions for turning down West’s illegitimate calls to give up its right of uranium enrichment, saying the demand is politically tainted and illogical.

Iran has repeatedly said that it considers its nuclear case closed after it answered the UN agency’s questions about the history of its nuclear program.

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