Iran brushes off sanctions impact on petchems

By Hashem Kalantari

TEHRAN, May 18 (Reuters)- International sanctions on Iran are not hurting a bid to expand petrochemical output because investors are attracted by the Islamic Republic's vast reserves of cheap gas feedstock, an Iranian official said on Sunday.

Analysts, however, say Western firms in particular are increasingly wary about investing as the United States tries to isolate Iran because of a dispute over Tehran's nuclear plans.

The U.N. Security Council has already imposed three rounds of limited sanctions. Those U.N. measures do not target Iran's energy sector but are still unsettling investors.

One of the latest signs of mounting Western concern about expanding investment in Iran's energy sector came from Royal Dutch Shell (RDSa.L: Quote, Profile, Research), which said this month it would pull out of developing a phase of the South Pars gas field project.

But officials in Iran, the world's fourth largest oil producer which also has huge gas reserves, insist sanctions are not hindering the energy industry.

"Our assessment is sanctions have not had an impact in the petrochemical sector, and the reason is because of (Iran) possessing gas that gives us a special advantage in the region," said Gholamhossein Nejabat, deputy oil minister and the head of the state-owned National Petrochemical Co. (NPC).

Despite sitting on the largest gas reserves after Russia, Iran has been slow to develop gas production and export, partly because U.S. sanctions restrict access to some technology.

Nejabat said the petrochemical industry was increasingly relying on feedstock derived from gas rather than oil, the price of which has been soaring to record levels.