INSIGHT: Iran projects keep industry guessing

24 November 2006 16:56  [Source: ICIS news]

By Florence Tan

SINGAPORE (ICIS news)--Project delays have kept the industry guessing when Iran will actually release an avalanche of petrochemicals onto the market.

The first rumblings were supposed to be felt this year this year with the olefins projects No 6, 7, 9 and 10 coming onstream consecutively.

But National Petrochemical Co (NPC) thus far has started up only one cracker, Olefins No 6 or Amir Kabir Petrochemical, with the fate of Olefins No 7 still hanging in the air.

Start-up of the remaining two crackers has been pushed into 2007.

Reasons for the delays differ for each project, sources say.

Two accidents, including a fire, hit Marun Petrochemical, operator of the Olefins No 7 project when it tried to start up early this year. While it waits for a piece of new equipment, nobody knows for sure when the plant will be put into operation.

Zagross Petrochemical had to replace the faulty main compressor for the 1.65m tonnes/year No 4 methanol project at Assaluyeh it operates with one from its No 6 project.

An overrun in costs at Jam Petrochemical, or Olefins No 10, could delay the start-up of downstream units further.

The company is to start commercial production at the 1.32m tonne/year cracker in Assaluyeh in August next year, but completion of its butadiene unit will depend on when more cash is available, a source close to the project said.

Money has dried up for the butadiene project for which 60-70% of procurement has been completed.

It will not be a problem for NPC to get more financing given its resources, but it takes at least six months to go through the bureaucratic process for government loans, the source said.

Underestimation of costs and schedules, a lack of timely communication between licensors, engineering and procurement companies are some of the problems, he added.

Some local vendors, which do not keep to their word and the schedule and are always armed with reasons for delays, add to the problem, he said.

NPC had its hands full dealing with more than 30 contractors on the utilities or Mobin project at Assaluyeh. It was difficult to pin down which ones were at fault and the company would have to fork out more money to complete the project.

The recent management upheaval at NPC has done little to shore up the projects. Taking over the reins from former managing director Mohammad Reza Nematzadeh, was Asghar Ebrahimi Asl who had little experience in petrochemicals.

He reshuffled portfolios and replaced older, experienced staff with younger ones who were in line with the hard-line political stance, sources said.

The industry was miffed with the whirlwind changes. One source likened the moves to “Bone to donkey, grass to dog”, a Farsi expression which means that people’s capabilities did not match the jobs.

But most cheered when industry veteran Gholamhossein Nejabat bounced back from retirement and replaced Ebrahimi Asl. Nejabat is to carry out more changes and bring back some of the old staff, but restoration will take time.

Hopefully the changes will also include giving the public more realistic project information such as start-up dates and progress updates.

Industry sources have learnt to take the schedules from NPC with a pich of salt. They come to their own conclusions on start-up dates which they think are more realistic.

While the official version for Jam Petrochemical’s start-up stands at August 2007, for instance, sources say the cracker could start up only at the end of 2007 or in 2008.

It is hard for the industry to get accurate information to analyse the supply and demand situation. It is also risky for traders to carry out contractual talks with buyers before the plants come on stream.

One trader said he had to wait for over two years before he could offtake products and the experience has taught him not to negotiate any future trade before seeing the product.

But looking on the bright side, if the start-ups are spread out product will be prevented from flooding the market.

It may be a test of patience, but nobody can afford to ignore Iran’s petrochemicals potential. The number of traders at the recent Iran Plast 2006 exhibition and conference were witness to that.

By: Florence Tan
+65 6780 4359

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