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A dynamic model to formulate effective capacity expansion policies in Iranian petrochemical Industry to complete the value chain

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  • Hajiebrahimi Farashah, Vahid
  • Sazvar, Zeinab
  • Hosseini, Seyed Hossein

Abstract

The petrochemical industry plays a pivotal role in achieving high value-added products from oil and gas reserves. With attention to oil and gas reserves in Iran, it is clear that the petrochemical industry has not grown up adequately. This study aims to determine effective factors on petrochemical industry development and model the mechanism of capacity expansion budget creation using a system dynamics approach. A quantified system dynamics model has been built based on causal relationships and the mechanism of development budget allocation among categorized products. This structure is used to simulate the model and investigate essential variables related to each product, such as production capacity value, production rate, domestic sale revenue, and export. According to the results of a simulation, in 2025, Iran will have a capacity of approximately 104 million tons of petrochemical products that is not desirable. In this study, a policy of improving budget plan and allocation is introduced as the most effective solution to achieve the petrochemical industry development. By implementing this policy the production capacity and total revenue would respectively be improved by 4% and 13% in 2025 in comparison with the base run.

Suggested Citation

  • Hajiebrahimi Farashah, Vahid & Sazvar, Zeinab & Hosseini, Seyed Hossein, 2021. "A dynamic model to formulate effective capacity expansion policies in Iranian petrochemical Industry to complete the value chain," Energy Policy, Elsevier, vol. 148(PB).
    • Handle: RePEc:eee:enepol:v:148:y:2021:i:pb:s0301421520307035
    DOI: 10.1016/j.enpol.2020.111992
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    References listed on IDEAS

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