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Iran to partially privatise oil sector

By Mehrdad Balali

TEHRAN, April 23 (Reuters) - Iran plans to privatise major segments of its oil and petrochemical sectors as part of a drive to modernise the ageing industries, Oil Minister Bijan Zangeneh said on Sunday.

``Our goal is to bring the energy industry up to date and increase productivity,'' Zangeneh said in a speech inaugurating an international exhibition of oil, gas and petrochemical technologies.

``The industry has historically been facing backwardness, and we should quickly make up for it and have a modern industry,'' he said of Iran's 90 year old oil industry, the main component of the Iranian economy.

Zangeneh said the government planned to invest $10 billion over the next five years to streamline its energy industry, including $4 billion for the petrochemical sector.

``We plan to change the structure of the energy industry and improve efficiency,'' he said.

The minister said low-technology industries in the oil sector would be transferred to the private sector, including those producing petroleum derivatives.

Privatisation would be more extensive in the petrochemical sector, covering all the refineries, he said.

``We will actively support privatisation as far as the constitution allows us,'' Zangeneh said.

Iran's constitution, drafted after the 1979 Islamic revolution, places key economic sectors in state hands.

But the government of President Mohammad Khatami has managed to circumvent legal hurdles and secure legislative approval for privatisation of big industries, including oil and petrochemicals.

Khatami launched his five-year plan for economic recovery last month with promises to end the state's monopoly on the economy and trim government bureaucracy.

Iran has heavily invested in petrochemicals in search of greater profits from exports of derivatives. But crude exports are still the main source of hard currency.

Petrochemical exports account for nearly a sixth of Iran's non-crude exports.

Officials say petrochemical output has seen a five-fold increase since the revolution, reaching 13 million tonnes a year now. The industry plans to raise production to 35 million tonnes in five years.

Zangeneh said $2 billion worth of petrochemical contracts had been signed with foreign companies in the year to March, and another $2 billion will be signed this year.


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