A fateful dilemma for Iran’s petrochemical industry: Focus on small units or refineries?

According to Energy Press, Iran’s petrochemical industry is undoubtedly at a strategic crossroads in determining its future path: Should it focus on developing giant mega-plants with million-ton capacities and targeting global markets, or should it prioritize developing small and medium-sized petrochemical clusters with greater flexibility and focus on domestic needs and regional markets? This question is not just a technical or economic one, but rather determines the path of industrial development, energy security, and Iran’s position in the global value chain. On the one hand, small and medium-sized petrochemicals, with advantages such as lower initial capital, job creation in deprived areas, provision of low-volume specialized products, and reduced dependence on strategic goods, seem to be a sustainable and indigenous model. On the other hand, the world is rapidly moving towards mega-plants based on new technologies such as direct conversion of crude oil to chemicals (COTC); units that, by taking advantage of economies of scale and cheap feedstock, define competitiveness in global markets.

Mohsen Ansari emphasizes that comparing small and medium-sized petrochemical plants with mega-plants is not a one-dimensional discussion and should be approached from a multi-faceted perspective. According to him, mini-petrochemical plants have certain advantages: “including the need for lower initial investment, creating employment in different regions of the country, and also supplying some products with limited but essential consumption that may not be cost-effective to supply through mega-plants.” He points to successful domestic examples such as Qaed Basir Petrochemical, which has been able to produce products such as ABS and SAN on a limited but efficient scale.

However, Ansari also points to an important global trend: the global petrochemical industry’s move towards new technologies such as COTC (direct conversion of crude oil to chemicals). According to him, projects are being implemented in Saudi Arabia in collaboration with SABIC and Lumos and in South Korea, which target global markets using crude oil feedstock and multi-million-ton capacities. “In addition to using available and cheap feedstock, these units have the ability to compete in international markets due to the production of products on a large scale and may threaten Iran’s position in some chains.”