Iran NPC privatisation would hike gas cost for chems – analyst

26 May 2010 20:03  [Source: ICIS news]

TORONTO (ICIS news)--The possible privatisation of Iran’s National Petrochemical Co (NPC) would very likely result in higher natural gas prices charged to that country’s petrochemicals industry, a research firm said on Wednesday.

An industry source told ICIS news earlier this month that Iran restarted efforts to privatise NPC and may consider selling a majority stake to international investors.

New York-based equity research firm Alembic Global Advisors said in a research note that Iran was currently subsidising the price of natural gas to the petrochemicals industry.

With the vast majority of the country’s petrochemicals industry belonging to NPC, Iran was essentially transferring the value of this gas from one pocket to the other, Alembic said.

“A move towards privatisation would surely result in higher natural gas prices being charged to the petrochemical industry in Iran,” Alembic said.

The firm also pointed to a related move by Iran’s petroleum ministry to "rationalise" the price of ethane according to the international trend, rather than subsidising it.

Currently, Iranian petrochemical facilities received their gas allocation at $1.25/m Btu, translating into ethylene production costs of around $250/tonne, according to Alembic.

This compared with ethane-based ethylene production costs of $615/tonne in the US and naphtha-based ethylene production costs in Asia of currently around $1,000/tonne, Alembic said.

An increase in Iranian gas/ethane prices would, if implemented, be a positive for US ethane-based ethylene producers such as Dow Chemical and LyondellBasell, as well as Middle Eastern producers, in particular SABIC, Alembic said.

In the US, the petrochemical industry’s first-quarter results benefited from lower gas prices.

“We find it interesting that at a moment in time when, stemming from falling natural gas prices, the US industry is coming down the cost curve, the Iranians are proposing to take their industry up the cost curve,” the firm said.

Alembic added that NPC’s privatisation could take place as early as the end of this year or the beginning of next year.

($1 = €0.81)

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By: Stefan Baumgarten
+1 713 525 2653



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