Iran's South Pars gas field
Source of picture: www.petropars.com
By John Richardson
THE ability of Iran to further exploit its huge natural gas reserves - and in so doing maintain ethylene exports at constant levels throughout the year - now appears to hinge on Chinese investment (Western companies have withdrawn from the Iranian energy sector due to the tougher sanctions regime).
As we wrote on Friday last week there are big doubts in the short term over the truth behind official claims that gas extraction and processing issues have already been resolved.
What happens every winter and summer is that ethylene exports from Iran dip as gas supply is diverted from crackers to power stations, in order to meet a rise in demand for electricity.
But in the longer term, China could transform the picture. In 2009, China National Petroleum Corp (CNPC) replaced Total in a contract to develop a major portion of Iran's giant South Pars gas field.
China National Offshore Oil Co (CNOOC) is also involved in developing the North Pars field and in building liquefaction facilities.
There are much bigger issues at stake here, though, than ethylene trade-flows - as this article from the Wall Street Journal, co-authored by a former Central Intelligence Agency officer, indicates.
If Obama has the mettle - along with taking on the Republican Party and those unusual people in the Tea Party movement - Chinese and Russian companies investing in Iran could face US sanctions (Russia has also stepped-up its involvement in the Iranian energy sector).
China and Russia appear to have become the last-chance saloon for the Iranians as they seek to develop their natural gas and oil reserves - and also the under-invested refining sector: Sinopec is developing oil fields and upgrading refineries at Tabriz, Arak and Abadan.
In July, Iran's Oil Ministry announced it had reached a $40bn dollar deal with China to revitalise its refining industry.
Further - both Russian and Chinese companies are stepping in where Westerners fear to tread by exporting gasoline to Iran.
The Iranians, as we also reported in last week's post on the ethylene trade, have closed-down styrene capacity to divert benzene feedstock into gasoline blending (this resulted in the spike in ethylene exports last month as the C2s were not needed for styrene production).
A total of six petrochemicals plants have been shut, we have read - including also paraxylene (PX) facilities.
Whether the Chinese and Russians can now fill the gasoline import gap created by Western embargoes will be important to monitor - as it will determine whether these six petrochemical plants will be able to re-start.