BMI's Executive Summary

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Project delays and the impact of US sanctions on Iran will hinder the government's aim to raise petrochemicals capacity to over a third of the Middle East's total by 2015, according to BMI's latest Iran Petrochemicals Report.

There are considerable risks to our growth outlook, including continued economic mismanagement and the rising possibility of international sanctions. Iran's ability to reach its objectives depends on the country's ability to maintain foreign participation in the sector in order to provide technology and investment. Increasing isolation, amid growing international concern over Iran's nuclear programme, has led to a reduction in business from international contractors and banks, making it difficult to secure technology and finance for the projects. The lack of sufficient local expertise in technology is causing delays in project implementation.

In the petrochemicals sector, most foreign input comes from engineering and construction contracts, although there are a number of foreign joint ventures in the pipeline. However, National Petroleum Company (NPC) doesn't plan to tap international financial markets for funding new projects. Around 70% is likely to come from governmental organisations with the rest provided by the private sector. This will make the petrochemical sector less exposed to adverse policies in the international financial sector, but will depend on high levels of liquidity in the Iranian banking system which in turn relies on high oil prices. Even then, it is doubtful that petrochemicals projects will achieve the necessary finance. Any downturn in oil prices at a time of tightened sanctions could lead to the postponement of some large projects. Increased external risk has created problems not only for investment, but also for trade with an increasing number of commercial banks becoming wary of facilitating trades in Iranian petrochemicals, with buyers and sellers of Iranian cargo facing with a reduction in the number of banks willing to help complete deals.

Iran's petrochemical production grew 21.4% y-o-y in the first six months of the current Iranian year (March-August 2007), with 20.22mn tonnes of products, according to reports in the Iranian media. In terms of value, production grew 34% y-o-y to US$3.9bn. Iran plans to produce 30.3mn tonnes of petrochemical products in the current Iranian year, ending March 2008. At present, Iran accounts for 12% of the Middle East's petrochemical output, but aims to reach 34% by the end of the 20-year Outlook Plan (1995-2015), with 98mn tonnes output of which 75% will be exported. BMI envisages significant problems on the way to achieving this target. Current projects are already subject to significant delays. Overbearing state interventionism and price-fixing have prevented the growth of the petrochemical industry. A reduction in state involvement in the sector and the provision of more facilities to investors are essential to secure future growth in petrochemicals capacity. A growing export market is also essential to help offset the negative impact of domestic sales at government fixed rates. BMI has revised its forecasts for the Iranian petrochemicals sector which envisages delays of six to 12 months on current projects. BMI forecasts that ethylene production capacity should reach 8.97mn tonnes per annum (tpa) by 2012, a 280% rise over 2007 levels, while polymer capacity is set to more than double during the same period with polyethylene (PE) capacity at 5.3mn tpa and polypropylene (PP) capacity at around 1.2mn tpa. However, these capacities are below that envisaged by the Iranian government, with BMI expecting the industry to miss its 2015 targets.

Contents

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Chapter 1 - Executive Summary

Market Overview

Industry Forecast

Foreign Investment Hope

Boosting Upstream

International Relations Threat

Chapter 2 - SWOT Analysis

Iran Petrochemicals Industry SWOT

Iran Political SWOT

Iran Economic SWOT

Iran Business Environment SWOT

Chapter 3 - Market Overview

Production And Trade

Impact Of Pricing Mechanism

Table: Iran Petrochemical Sector – Cracker Capacity Data and Forecasts (000tpa)

Chapter 4 - Industry Trends and Developments

NPC News

Pars Petrochemical

Other Projects

Industry Developments – Related Industries

Chapter 5 - Industry Forecast Scenario

Table: Iran Petrochemicals Sector Forecasts

Chapter 6 - Economic Outlook

The Economic Impact Of Sanctions

Table: Iran Macroeconomic Data & Forecasts

Foreign Direct Investment

Business Environment

Chapter 7 - Company Monitor

National Petrochemical Company (NPC)

Karoon Petrochemical Company

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Petrochemicals Industry

Plant capacity

Chemicals supply

Chemicals demand

Cross checks

Competitive Landscape for Middle East & Africa Petrochemicals Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by US$ sales, % market share, employee size, registration date and ownership structure. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) on all leading international and national operators in each market, including competitive intelligence in the following: Overall geographic presence, competitive positioning against local companies; production capacity, sales and market share; joint ventures, foreign direct investment, projects and acquisitions strategy.