Out of the investment deep-freeze?
By John Richardson
A VERY interesting story from my colleague Bee Lin Chow on ICIS news today reports the signing of a memorandum of understanding (MOU) between Sinopec and Iran’s National Petrochemical Co (NPC).
The agreement will explore joint- venture opportunities in petrochemicals and related businesses in the two countries.
China needs oil and has the political muscle and pragmatic mindset to in some cases place energy security above geopolitical concerns such as alleged nuclear proliferation and human-rights abuses.
Hence, it is now talking to Iran about petchem and associated investments.
And it has done energy deals in the past with Sudan and other countries with dubious human-rights records.
Iran, as we reported on the blog last October, is finding it increasingly difficult to get the foreign investment it needs to develop iits refining, gas-processing and petrochemicals industries. Even obtaining catalysts to run plants has reportedly become difficult.
New investment is sorely needed to shore up the economy. Value is, for example, being given away as Iran exports crude and imports gasoline with domestic pricing of the fuel heavily subsidised.
And in petrochemicals, limitations on gas extraction can cause erratic operations at existing crackers.
Lack of feedstock supply and an inability to source foreign investment and technologies have also stymied growth in petrochemicals capacity.
The scope of the MOU between Sinopec and NPC also involves joint marketing of products.
This might help Sinopec limit price disruptions in the Chinese market that might occur at times of sudden influx of Iranian petrochemical products.