Events | Number 3, December 2003 | Selling Petrochemicals

Selling Petrochemicals

M Ehtiati, Chairman of the Board & Managing Director, IPCC

Iran’s vast gas reserves put the country at a position of great advantage with respect to the petrochemical industry. The country’s proximity to such densely populated countries as China and India, assures it of expansive markets that will, for a long time to come, demand and consume its petrochemicals. Therefore, the nation is rapidly developing and expanding its petrochemical industry. But to handle the sale of its products at such a large scale, a separate entity is required, hence IPCC. You will learn more about IPCC’s objective from the following interview.

Events- What is exactly the role of IPCC in the petrochemical industry?

Mohamad Ehtiati- IPCC was initially established to act as the right arm of NPC in the commercial section of
its activities. Presently we do the marketing for NPC’s products both domestically and internationally, as its
subsidiary. Yet another of our duties is to secure equipment and machinery as well as raw materials and chemical products required in the production units. We also have the duty of encouraging domestic manufacturers to make equipment, machinery and raw materials needed for the industry’s productions. As
our clients are numerous and scattered all over Iran and across the world, we have established a land transportation company to operate within Iran and have also formed a joint venture shipping company with
the Iranian Oil Tanker Co and the Islamic Republic of Iran Shipping Lines to ship our products to our clients abroad. We also have a company that is responsible for reducing costs to the minimum by regulating the quantity of machinery and materials kept in stock as idle capital. Finally we have established a company
that is in charge of producing and maintaining shore tanks for the storage of materials for downstream industries or storage of imported raw materials, or for re-exporting and “swap” deals.

E- How do you do your marketing abroad?

ME- For this purpose IPCC has a number of agents and subsidiary companies. Considering our ambitious
projects for the future, these units have great burdens on their shoulders, great tasks. Last year and this year we have set up 26 agencies/representations in Europe, Asia and Central Asia for the same purpose.

E- How is the industry’s growth? Would you say it is satisfactory?

ME- I will not give my personal opinion but only facts and figures. In the year 2000 we produced 1.5b USD worth of products. In 2001 this figure rose to 1.7b; in 2002 to 1.9b and we estimate that by the end of the
year 2003, it will be above 2b. Last year our exports amounted to 900m USD and the year before it to 780m USD. In the year 2003 we hope it will rise to 1.2b. So far this year we have exported 3 million tons of goods
and have supplied another 3 millions to the home market. Next year our production will amount to 3.5b USD.

E- This sudden growth in production of almost 75% sounds strange. How come such a sudden rise?

ME- This is because we have many projects underway that are all coming into production about the same time, within months. The Tabriz ABS project came to fruition in 2003; the Amir Kabir high density polyethylene project came to fruition a month ago, and a PET project will begin production by the end of 2003. We also have the Abu Ali aromatic project whose heavy naphtha line will go into production next year. There is a methanol project that will be ready for production this year and an engineering polymer project again planned for this
year. The products of the last two have been sold in advance, till 2007.

We have no worry about sales as our exports show remarkable growth. In 1990 we had 60 clients; today we have 500 in 60 countries. Furthermore we have sufficient gas to last for centuries to come, as we possess 18% of total world gas reserves, largest next to Russia. We plan to increase our exports to 20b USD within the next ten years.

E- Which market abroad is better for us?

ME- Presently Asia is definitely our best market. About 37% of our exports go to the Far East and China; 14% to India; 11% to the Middle East; and 10% to Southeast Asia. Europe and Africa buy little of our products.
Our success in Asia is owing to the fact that there is less competition for us in Asia as the cost of transportation form Iran to the Asian countries is less than that of European products. However, by 2006, when our production rises to 5b USD, we will have to find new markets and then we may have to reach markets as remote as South American countries.

E- When you sell your products in advance, is the price fixed at the rate current at the time of conclusion of the contract, or will it be floating and at rates current at times of delivery?

ME - First of all you should ask why we sell our products in advance. We do so because we need financial resources as foreign exchange for further investment and expansion of the industry. So, we sell our products
in advance and then place our sales contracts as securities with international banks to get loans and credits. Prices are agreed upon between the buyers and ourselves, each year and form year to year. They are not fixed at the time the contract is concluded for the whole period of delivery.