Reuters: 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.
By Hashem Kalantari
TEHRAN, May 18 (Reuters) – 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.
Analysts, however, say Western firms in particular are increasingly wary about investing as the United States tries to isolate Iran because of a dispute over Tehran's nuclear plans.
The U.N. Security Council has already imposed three rounds of limited sanctions. Those U.N. measures do not target Iran's energy sector but are still unsettling investors.
One of the latest signs of mounting Western concern about expanding investment in Iran's energy sector came from Royal Dutch Shell, which said this month it would pull out of developing a phase of the South Pars gas field project.
But officials in Iran, the world's fourth largest oil producer which also has huge gas reserves, insist sanctions are not hindering the energy industry.
"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 Gholamhossein Nejabat, deputy oil minister and the head of the state-owned National Petrochemical Co. (NPC).
Despite sitting on the largest gas reserves after Russia, Iran has been slow to develop gas production and export, partly because U.S. sanctions restrict access to some technology.
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.
U.S. firms have long been barred from investing in the Iranian energy sector because of U.S. sanctions. As European firms now grow more cautious, Asians and others are stepping in.
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 tonnes in the last Iranian year, which ended in March 2008, to some 35 million tonnes 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. (Editing by Edmund Blair and Jason Neely)