Iran seeks major investment to fill unused petchem capacity

Iran's petrochemical industry requires some $18 billion in additional investment to utilize its full production capacity, as feedstock shortages continue to hamper operations at facilities in the sanctions-hit country, according to the deputy oil minister for petrochemical affairs Hassan Abbaszadeh.

Around 22% of the sector's 97 million mt/year installed capacity is currently unused, largely due to an imbalance between Iran's petrochemical sector and upstream oil and gas industry that has created feedstock supply bottlenecks, Abbaszadeh was cited by the ministry's news service Shana as saying June 7.

"The petrochemical industry and the upstream oil and gas industry did not have a balanced development and this issue has caused problems with feedstock in some plants over the past few years," said Abbaszadeh, who is also managing director of the National Petrochemical Co. (NPC).

Despite $90 billion invested in the petrochemical industry since 1979, the idled capacity highlights structural issues that could challenge Iran's ability to meet its target of 131 million mt/year production capacity by March 2029.

The feedstock shortage represents a critical constraint for Iran's petrochemical expansion plans, particularly as international sanctions over Tehran's nuclear program have complicated foreign investment attraction. In a May report, investment director Hamidreza Ajami noted that of $87 billion invested from 1978 to 2023, only $26.3 billion came from foreign sources, underscoring the financing challenges facing the sector's development.

Capacity expansion

Iran currently operates 75 petrochemical plants with production covering primarily domestic needs, while petrochemical exports generate approximately $13 billion annually. The country has 143 petrochemical projects under construction across methanol, olefin, aromatics and other product chains, requiring around $24 billion in total investment under the state's 2024-2029 development plan.

"At the moment, there are 143 petrochemical projects under construction in production chains of methanol, olefin, aromatics and other products," Ajami was quoted by Shana saying on May 30. He added that projects with more than 40% progress have received approximately $12 billion of the required $24 billion in funding.

To address feedstock constraints, Iran plans to collect flare gas from onshore oil fields in Khuzestan and Ilam provinces. The initiative includes shutting off around 55 flare stacks at the Bidboland gas processing plant and inaugurating NGL 1300 and NGL 3200 projects to boost feedstock supply.

"By the end of the next [Iranian] year, around 80% of burned associated gas will be used to serve as feedstock," Abbaszadeh said, referring to the period ending March 2027.

The flare gas collection program aims to both address feedstock shortages and environmental protection concerns.

Despite sanctions limiting traditional financing sources, Iran's petrochemical industry maintains cooperation with CIS countries, India, Latin America and African nations for investment and technology partnerships. The industry could potentially absorb $30-40 billion in additional investment, according to Ajami.