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The Iran-West Nuclear Deal: An Update

Aromatics, Business, Company Strategy, Economics, Oil & Gas, Olefins, Polyolefins
By John Richardson on 27-Nov-2013

By John Richardson

MANY thanks to a good friend of the blog, Mark Mark Mirosevic-Sorgo, managing director of the Singapore-headquartered shipbrokers Braemar Quincannon for what follows – some excellent analysis of what the Iran-West nuclear deal might mean for the petrochemicals business, which follows on from our earlier post.

Here are Mark’s comments:

It has been mentioned that some sanctions will be “softened”, that more oil will be available, that petrochemicals and the transportation of petrochemicals will be excluded.  However to date not of the major political entities that were enforcing sanctions (the UN, the EU, and the USA) have published actual relaxations on their official websites – and until such a time as we have the written legal interpretation from each entity we cannot be sure of what exactly this means in relation to our business, ie: the sale and purchase of / the chartering of vessels for the transportation of / the insurance of cargoes of or ships transporting cargoes of … petrochemicals, agro-chemicals, oleo-chemicals, acids, solvents, lube-oils, base-oils, fertilisers, olefins, LPG etc.

Because of this there has been an understandable reluctance from shipowners / traders / majors to jump straight back into the Iranian export market – although we have been advised that many trading houses have been opening new offices (or re-opening old offices) in Tehran and hiring experienced staff / re-hiring old staff with a view to get a heads-start as soon as their governments give the green light for full trading.

“Nevertheless it is clear that it is illogical to state that sanctions on petrochemicals will be lifted / relaxed if the sanctions on the transportation or insurance related to petrochemicals are also not relaxed.

As such the clock is ticking and confirmation is expected any day with respect to parties receiving the green light with respect to the ability to load cargoes from the Iranian chemical / petrochemical / feedstock ports.

It must be noted that once this happens we do not expect the volumes to return to pre-sanction levels for some time, if ever.  For a start due to the sanctions some of the plants are in need of maintenance, and some spare parts have been blocked under the sanctions and have been sitting in various parts of the world until such a time as the sanctions were relaxed sufficiently to allow them to be transported to Iran and fitted into the plants.  This will take the best part of six months. 

In addition to this, many of the product lines have been diverted to other uses, some of which will remain diverted and the balance will then be slowly brought back to the original use (including for export) – an example being the BTX that has been diverted to gasoline use.  Lastly, due to the restrictions imposed, more of the monomers have been made into polymers, and in view of the cheaper distribution costs of the polymers it is highly unlikely that the trains will be reversed.

The liquid petrochemical industry will probably not see any great change in the beginning since there have been many ships trading cargoes from Iran under flag-states that did not bring the sanctions to bear, although many of these will be weaned out over a period of time as age and suitability take their toll.  However as the plants slowly build up their heads of steam, and as the long-planned expansions take root, we expect an added vibrancy to return to the Iranian export markets.