Rahbord Energy: Mohammad Reza Yazdani, the CEO of Golestan Petrochemical has elaborated on the latest status of the petrochemical project and its contractor. He said the urea and ammonia were among the projects enacted by the administration of former President Ahmadinejad in the form of EPC tenders in 2006 . The firm was established by underwriting securities from legal and natural entities and 80% shareholding of National Petrochemical Company of Iran (NIPC) in 2007.
Yazdani added that the EPC contract for its implementation, the contractor of which was Hampa Company, was clinched in the same year. The project was supposed to be financed from the Foreign Exchange Reserves Fund but due to cruel sanctions imposed on Iran, the financing of the project was halted in 2009-2010. In 2012 NPC quit the project and handed over its shares to private shareholders.
The CEO of Golestan Petrochemical said the financial and legal problems of the project caused its suspenion till the 13th government. He added that with coming to power of the 13th administration and with the tireless efforts of the heads of three state branches, this project, which was supported by the people of Golestan, was put on agenda and fortunately its legal and financial problems was resolved thanks to the intervention of Hojjatol Eslam Gholam-Hossein Mohseni-Eje’I, the head of the judiciary. By late 2023, an agreement was signed with Persian Gulf Petrochemical Industries Co. (PGPIC), which is the country’s biggest private sector of petrochemical holding. It was agreed that the holding would purchase 60% of the shares of Golestan Petrochemical and become its administrator. This happened in mid-August 2023/2024 and the implementation of the project was put on agenda following the intervention of NPC in September last year after a 15-year hiatus.
With regards to the financial sources of the project, Yazdani added that on the second presidential trip of Ex-President Raeisi to Golestan in November last year and a visit by the petroleum minister and the CEO of PGPIC to the project site, the implementation of the project officially started. The financial sources of the project were secured from Foreign Exchange Reserves Fund following the approval of the council of ministers and the long-term installment repayment by Bid Boland Gas refinery. He added that the Bid Boland Gas Refinery from PGPIC had in the past years used sources from the Foreign Exchange Reserves Fund and is now repaying the installments. Yazdani noted that based on an enactment by the council of ministers, these installments, up to €480mn, should not be returned to the Foreign Exchange Reserve Fund and must be invested in the Golestan Petrochemical project. This was one of the most importants enactment by the council of ministers which resolved the financial issues of the project. A recent enactment by the council of ministers considers a 5% discount on petrochemical feeds.
With regards to the EPC contract tender, the CEO of Golestan Petrochemical given the commitment shown by the petroleum minister and PGPIC CEO during their visits last November, the tender to choose the contract was quickly put on agenda, tender documents were prepared. And since early January the tender has become floated and its works are being done.
Yazdani added that given the plannings, the contract with the winner will be finalized by mid-June so that from early July the operational work would begin at the site. He added that more than 80% of the operational work and the equipment will be done by Iranians.
With regards to the operationalization time and internal rate of return(IRR) of Golestan Petrochemical, Yazdani noted that a period of 3 and ½ years and a primary investment volume of €720mn has been envisaged. Currently the Golestan Petrochemical project is the only industrial and petrochemical project in northern Iran, although Bojnourd Petrochemical is now operational in the northeast of the country. It’s hoped that with the entry of this industry to Golestan and the creation of 600 direct jobs and 3000 indirect ones, the people of the province would become happy. Furthermore, petrochemical dollars would be a firm step toward the development of the province and the satisfaction of its people.
With regards to the investment volume and given the selling price and volume of investment, it was necessary to consider a 5% discount for the price of petrochemical feeds. This is being done with the help of the petroleum minister and an enactment by the board of directors . According to Yazdani the rate of return is 22.5% with a 4 and a half period.
The CEO of Golestan Petrochemical further noted that the 5% discount in the feedstock prices is a big bargain. He said the decision was taken during a provincial trip by the Ex-president Raisi and in such trips the enactments are decided within one package, noting that the approvals of other ministers were within these packages. The petroleum minister has already given his approval and the final decision of other ministers will be reached in the future. With the follow-up efforts of Golestan province general governor Mr. Zanganeh and his deputy for economic affairs Mr. Dehnavi, it’s hoped that the final enactment regarding the 5% discount will be finalized.
With regards to the contract for the provision of petrochemical feeds, Yazdani added that one of the primary conditions for the intervention of PGPIC into the project was a 5% discount in the price of petrochemical feedstock for 11 months or the payment of loss of prospective profits. With regards to the provision of gas sources for Golestan Petrochemical, Yazdani noted that it’s hoped to have a gas swap deal with Turkmenistan through PGPIC.
On the issue of oil and gas exploration efforts in Golestan Province and the provision of petrochemical feedstock from the province itself he noted that one of those sources is a gas field discovered near the petrochemical site but the volume of the gas must first be assessed. Therefore, it’s hoped that with the ultimate assessment of the gas volume there, concerns regarding gas provision will be eliminated. He said currently apart from that gas provided by the national grid, a gas swap deal is on agenda with Turkmenistan.
With regards to the social and economic impacts of the project on Golestan province, he said with the inauguration of the petrochemical project, 1mn tonnes of urea and 675 thousand tonnes of ammonia will be produced. He said urea produced by Golestan petrochemical is mainly used in chemical fertilizers and given the fact that agriculture in the main industry in Iran’s northern provinces, based on an enactment of the agriculture ministry, up to 20% of the needs of the people of Golestan province will be given to farmers and the rest will be exported. He concluded by saying that since the project lies close to the Incheh Borun Free Trade Zone, all the capacities in this regard will be used to create further value chains.
