Shell Signs LOI for Iran Petchems Projects

11.10.2016 -

Oil and chemicals giant Shell has signed a letter of intent (LOI) with Iran’s National Petrochemical Company (NPC) about exploring potential areas of cooperation in the Middle East country. Speaking at the signing ceremony, Hans Nijkamp, head of Shell’s department for Iran affairs, said the group is seeking “a long-term presence” in Iran. The preliminary agreement would revive projects interrupted in 2010 by US sanctions, including gas to liquids. Nijkamp also suggested that Shell could be interested in a gas-based cracker.

Marzieh Shahdaei, one of Iran’s deputy oil ministers and CEO of NPC, is quoted by the news agency SHANA as saying the country plans to expand its petrochemical output from currently 60 million t/y to 160 million t/y by 2025, and Amir-Hossein Zamaninia, another Iranian deputy oil minister, is said to have expressed optimism that petrochemical projects between Shell and NPC would be launched in the near future.

Most of the initially revived projects are likely to be in the upstream sector. Last month, Iranian news media reported that the Iranian government had received the first wave of proposals by major international companies to develop oil and gas projects within the new format of oil contracts recently approved by the administration of President Hassan Rouhani.

The news agency Tasnim said 10 companies had so far submitted their proposals to the Ministry of Petroleum for the development of 15 projects, dropping such big European names as Total, Lukoil, Shell, Eni and OMV, along with Asian players including CNPC, Sinopec and Pertamina. Several of the projects are said to be the same ones they had been previously working on before the sanctions or for which they had previously negotiated with Iran.

Reports said the most lucrative project could be the South Azadegan oil fields discovered in 2001 and described at the time as the world’s biggest find in decades. France’s Total is said to have presented a development proposal. National Iranian Oil Company (NIOC) recently announced that South Azadegan would be first oil field to be put out to tender, probably this month. Foreign businesses have rushed to cash in on last year's thawing of the ice, when sanctions against Iran were partially lifted following concessions on the country’s nuclear program.

Foreign – particularly European – petchems players have stretched out feelers in Iran’s direction since the lifting of sanctions. But, due to continued US restrictions, international lenders are said to be still wary of doing business with Iran, making it difficult for firms to finance major deals. Nijkamp told news agencies Shell is “well aware of the problems involving the transfer of funds,” without commenting on what solutions it may have found.

In August, the Iran Daily News said German gas and engineering group Linde had signed a contract to perform front-end engineering design (Feed) for an olefin, butadiene, hydrodealkylation and benzene plant being built by Kian Petrochemical Company in Iran. Linde has not yet confirmed the deal. Along with BASF, executives of Linde were part of a German delegation visiting Iran to sound out economic cooperation potential. As yet, BASF has not publicly confirmed any concrete deals.