500 trillion Tomans of petrochemical feedstock debt, equivalent to about 8 billion dollars, has become one of the country's major economic challenges. This debt affects not only the performance of a holding company but also the livelihood of people, the government budget, and the future of the oil industry.
Investment Needs in the Oil and Gas Industry
Iran's oil industry needs 300 billion dollars in investment to maintain its capacity and increase production. Experts believe that to achieve sustainable production in the oil and gas sector, between 200 to 250 billion dollars should be invested. Particularly, the gas industry alone requires 42 billion dollars in investment in upstream, production, distribution, and transmission sectors.
The pressure boosting project of the South Pars joint field, which is vital for the country's energy security, can provide direct employment for 17,000 people and indirect employment for 50,000 people. However, the 500 trillion Tomans debt of the Persian Gulf Holding has hindered the progress of this project, and this amount remains on the balance sheet of debts instead of being invested in development.
One of the major challenges for the government is securing financial resources to pay subsidies. 70% of the targeted subsidy resources are provided from natural gas sales. Out of approximately one thousand trillion Tomans of targeted resources, nearly 370 trillion Tomans are provided from natural gas sales, of which 170 trillion Tomans pertain to gas sales to petrochemical units. The non-payment of petrochemical feedstock debts reduces the government's revenue from this source and disrupts the provision of subsidies.
Borrowing from the Central Bank and Its Consequences
The failure to collect revenues drives the government towards covering the budget deficit through borrowing from the Central Bank. For instance, the budget deficit for the year 1404 is estimated to be around 1,800 trillion Tomans. In such circumstances, the government is forced to borrow from the Central Bank and the banking network, resulting in money printing and increased inflation. This chain places the real cost of overdue debts on the shoulders of all Iranian people.
500 Trillion; A Missed Opportunity
This 500 trillion could have modernized South Pars, built tens of thousands of housing units, launched hundreds of thousands of small businesses, and provided employment for thousands of young people. But now, this amount is trapped in the balance sheet of debts, and as a result, neither the oil industry reaches development, nor are people's subsidies properly provided, nor does the government escape the cycle of borrowing and inflation.
The Need for Accountability from Large Holdings
It is expected that large energy holdings, as part of the country's development capacity, direct the resources obtained from their activities towards increasing production, developing infrastructure, and creating sustainable value. The accumulation of debts and the lack of accountability challenge several fronts of the country's economy and require serious review and action.
