Iran’s Best Bet to Avoid U.S. Sanctions

Catogory : Market Report

Iran’s parliament last week passed a draft bill allowing for a massive increase in the number of oil and gas condensates refineries in the country, to be funded from investment from private sector companies and regional banks. Although the U.S. recently extended sanctions to Iran’s largest petrochemical group, Persian Gulf Petrochemical Industries Company, citing its ties to the Islamic Revolutionary Guards Corps (IRGC), together with a further 39 subsidiary companies and foreign-based sales agents, Tehran still believes that the petchems sector is its best bet to avoid the full focus of the U.S.’s renewed sanctions impetus.

It also believes that this is particularly the case if there is no direct link between these new refineries and the IRGC. By building out the number of its refineries from the current 16 – although four of these have a refining capacity of 10,000 barrels per day (bpd) of oil or equivalent or less – Iran also believes that in addition to the boost in its petchems export revenues (it also operates 55 petchems plants), it can move dramatically increase foreign earnings from liquefied petroleum gas (LPG) sales and safeguard its hard-won gasoline independence as well.

According to a comment last week from Iran’s spokesperson for the energy committee, Sakineh Almasi, only around 40 of the world’s total 650 refineries meet the technical specifications to process Iranian oil, whilst each of the new plants in Iran would be designed to process more than 50 types of petchems and other fuel products. It would also significantly boost Iran’s current refining capacity refining capacity from 2.1 million bpd, including the relatively small share of this that comes from gas condensates (just 0.4 million bpd).