Iranian petrochemical producers face higher ethane costs

12 March 2010 06:51  [Source: ICIS news]

MUMBAI (ICIS news)--Iranian petrochemical producers face higher feedstock ethane costs as the government is pushing for an upward revision that will reduce margins, a senior Iranian industry source said on Friday.

“This is under hot negotiations now and it should be completed in 2010. The National Iranian Oil Co (NIOC) and the petroleum ministry would like to rationalise the price of ethane according to the international trend and not subsidise it; different formulas are being considered,” he said

The price could either be based on heat value or linked to that of propane and butane which have international prices. It could also be a mix of these two,” he said.

“Ethane will become expensive. The cost is now less than $75/tonne (€55/tonne). All crackers have long-term agreements of around 15 years with the government. But the government can make changes,” he added.

He explained that the government was keen on raising prices as gas was viewed as an asset that belonged to all generations. “If they sell it cheap now then they will be questioned in the future.”

The government’s privatisation drive was another factor. “Previously all plants belonged to the government. So the value was transferred from one pocket to the other. But now plants are being built by the private sector,” he added.

He was optimistic of a compromise that would give the government a higher price and keep petrochemical plants competitive. “But it will not be as good as today,” he added.

($1 = €0.73)

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