BY: Ebrahim Fallahi

Oil, petchem downstream industries should target domestic market

September 5, 2020 - 12:2

TEHRAN – As one the world’s top hydrocarbon-rich countries, Iran has managed to develop its oil, gas, and petrochemical industries to a significantly high level so that despite all the pressures and limitations created by the external factors like sanctions, the country now stands among West Asia’s top producers.

Despite the exceptional advances in the upstream sector, the downstream industries, however, have been neglected to some extent, so that considering the capacities in various areas and the amount of feed available, most of the mentioned industries’ output has been exported in the form of raw materials.

However, over the past decade and following several rounds of sanctions and the considerable decline in Iran’s exports of oil and oil products, the government has shifted its focus from the sole developing of the upstream sector and is taking serious measures to pull up the neglected downstream industries to catch up with the upstream sector.

The country has been implementing several macro-scale programs in this regard, and especially in the past few years after the re-imposition of the U.S. sanctions, drastic measures have been taken to boost the domestic production and distance the economy from too much reliance on oil exports.

The Secretary of the Iranian Oil, Gas, and Petrochemical Products Exporters' Union (OPEX) Seyed Hamid Hosseini believes that in exploring the current situation of the country’s downstream sectors we should differentiate between the oil and gas downstream sector and the petrochemical industry’s downstream sector.

In an interview with the Tehran Times on Saturday, Hosseini said” “regarding the oil and gas sector, the development of the downstream industries has been quite good and we are currently one of the major oil product exporters in the region.”

“With the recent improvements in the South Pars gas field development project and the increase in the output of the field we currently have the capacity to export 500,000 to 600,000 barrels of various products like gasoline or gas oil to the neighboring countries,” he said.

Hosseini, however, noted that Iran should not take the advances in the neighboring countries’ downstream sectors for granted, since “in a not very long time, Iraq or even Afghanistan will have their own modern refineries and Iran won’t be able to export as much products anymore.”

So the government should start putting more importance on the capacities of the domestic market and industries because “soon it will be needing it.”

Asked about the petrochemical industry, Hosseini said the same pattern is also true about the petrochemical industries.

“Unfortunately, we have not been following long-term plans in the development of our petrochemical industries as well, and our projects have been defined without the considerations for the demand in the global market.”

For instance, 80 percent of the methanol that we are currently producing should be exported since the domestic industries (not being properly developed) only have the capacity to absorb 20 percent of the output, he said.

“It is also true about urea and ammoniac, we are producing 7.5-8 million tons of such products while the domestic demand is only 1.5 million, the rest should be exported and considering big rivals like the U.S., Saudi Arabia, Russia and China, and considering the current sanctions, that is not going to happen.”

He further mentioned other problems that the development of the downstream sectors is currently faced with, saying: “oil, gas, and petrochemical industries are all very high-tech and very expensive industries, we need technology, we need investment and without these two, development is not happening.”

Asked about the solution for the above-mentioned problems in the current situation (considering the sanctions and the lack of access to technology in some industries and also foreign investment) Hosseini said: “There is only one key solution, and that is focusing on the domestic market.”

“We need to shift the focus from exports to domestic demand, to what the Iranian consumers need, we are an 80-million market, several big economies are willing to do anything to access the Iranian market and we are not using this potential ourselves,” he regretted.

“Consider, for instance, the textile industry, there is a need for at least 1.2 billion square meters of textile in the domestic market, while the country is currently producing less than 400 million square meters.”

Supporting the development of the textile industry would mean empowering both the upstream sector and domestic production.

“The government should cut some of the budgets it is spending on constructing new plants and spend it for supporting the downstream industries because we already have enough feed for which there is no export destination.”

If we want to improve, we need to move toward products for which there is a demand in the domestic market, and that is the only way forward, at least for now, he said.

EF/MA

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