Iran’s gas ambitions grow

/By Azernews/

By Fatma Babayeva

After sanctions imposed on Iran by the West because of its nuclear program were lifted in January 2016, the Islamic Republic was able to increase its oil output and exports by one million barrels per day.

Iranian official announced earlier that the country is going to bring its oil exports to the pre-sanctions level which is around 2.2 million barrels per day by the end of this summer in the longest.

Now, it is time to wait for Iran’s gas surprise to the world after oil, reported Shana news agency on May 23.

After the commencement of the new phases in giant South Pars gas field with Qatar, Iran was able to increase its actual sweet gas production to more than 178 billion cubic meters of natural gas in 2015, while its raw gas production capacity reached 260 billion cubic meters for the same timeframe.

Five more phases of the South Pars field are expected to become operational during the current year. Once, all phases of this field become operational by 2019, Iran will increase raw gas production capacity from current 260 billion cubic meters to 390 billion cubic meters per year.

Moreover, Iran has introduced 21 gas fields to foreign investors based on a new designed contract type – Iran Petroleum Contract (IPC).

The IPC is designed to increase attractiveness of Iranian oil and gas projects. It offers contractors the various stages of exploration, development and production as a complex package.

When all these fields become operational, about 380 million cubic meters of gas per day will be added to the production level, while the associated gas from the oil fields can add additional 200 million cubic meters per day to the output level as well.

By March 2025, Iran plans to invest $231 billion including foreign fund in the upstream oil and gas sector.

Earlier, Hassan Torbati Montazeri, planning director of the national Iranian gas company noted that Iran will build network of pipelines with a total length of 5,000 kilometers in its territory during the next five years. The Islamic Republic needs $15 billion in investment for the construction of new network of gas pipelines.

Furthermore, $55.8 billion investment is required to implement gas transit pipeline projects by 2025, and $27 billion investment is needed for the construction of gas distribution networks in Iran.

The amount of the foreign investment is yet to be determined.

Iran strives to sell its natural gas in the European markets soon. However, the country lacks necessary export infrastructure to realize gas sales. There is no transit gas pipeline connecting Iran with the EU. The Islamic state may either construct new pipeline via Turkey or build a connector to the Trans-Anatolian pipeline - TANAP (Turkish leg of the Southern Gas Corridor).

Iran also considers exporting its gas in LNG form. The NIOC said earlier that, Iran is aiming to build LNG facilities within two years, but this time frame seems unlikely.

Iran may construct a gas pipeline to Oman as well where it can use already existing LNG facilities. Moreover, the country sees Kuwait and UAE as potential buyers of its natural gas supplies.

The country has developed a 10.5 million metric ton/year-LNG plant by 50 percent which is aimed to export liquefied gas to foreign markets including the EU by 2019.

Some sanctions still remaining in place such as ban on Iran’s purchase of U.S. technologies and trading in U.S. dollars with Iran creates obstacles for foreign investors to do business with the Islamic state.

A special notice should be given to the fact that despite holding the world’s second largest natural gas reserves, Iran is still a net importer of the natural gas. Mainly, it exports gas to Turkey (9.7 billion cubic meters), and sends gas to Azerbaijan’s isolated enclave Nakhchivan on the basis of swap deal. In return, Azerbaijan provides equal amount of gas to Iran across the border.

Iran has gas export deals with Iraq, Pakistan and Oman around 100 million cubic meters per day.

In order to supply the north east part of the country with the natural gas, Iran buys gas from Turkmenistan as it is cheaper to import gas rather than build a pipeline infrastructure to ship natural gas from south to north of the country through Alborz mountains.

In regards to Iran’s primary energy consumption, natural gas shares above 68 percent.

The gasification of further 2 million households, tripling gas re-injection to the oilfields, as well as, boosting gas deliveries to power plants and reducing liquid fuels burning in this sector is also on agenda.

In addition, Iran’s Fuel Conservation Organization plans to spend over $16bn on improving energy efficiency projects.

At the present, Iran’s estimated gas reserves amount to 33 trillion cubic meters.

It looks unlikely that Iran will be able to repeat the success it achieved in increasing its oil exports. In order to expand the gas exports, the country needs to find necessary investment and build new infrastructures.