Delivering Iranian gas to EU unlikely, even in long time

By Dalga Khatinoglu

Iran's gas consumption reached 569 million cubic meters per day (mcm/d) on Dec.21, of which 411 mcm/d was used in housing sector.

During last 24 hours (Dec.21), some 82 mcm/d and 76 mcm/d of gas also delivered to the industrial sector and power plants Majid Boujarzadeh, spokesman for Iran's National Gas Company told Shana Dec.22.

Iran hasn't been able to increase its gas production level in South Pars gas field, which shares about a half of both the country's gas reserves and production since 2009. From the beginning of 2014, the gas output of South Pars increased by 75 mcm/d, 85 percent of which fell on the second half of 2014.

Iran's gas production in 2013 was about 485 mcm/d, which reached 560 to 570 mcm/d till now.

Main gas consumer sectors in Iran

* Iran's housing sector uses at least 150 mcm/d of gas in warm season, while the peak of gas usage occurs in winter with a 450-mcm/d consumption level.

Iran consumed more 44 mcm/d of gas during March-November, compared to the same period in last year and according to official statistics the current level of gas consumption indicates a 100-mcm/d increase.

Regarding Iran's huge gas consumption growth, it's unclear whether the country that sits on 18 percent of the global gas reserves, or 33.6 trillion cubic meters, is able to export gas abroad or not?

Iran has a 45 mcm/d gas export contracts with Iraq, 30 mcm/d with Oman and 33 mcm/d with Pakistan, all of them are scheduled to be commission until 2016.

Iran also imports 24-30 mcm/d of gas from Turkmenistan and exports the same amount to Turkey.

Iranian Deputy Oil Minister for International and Trade Affairs Ali Majedi said on May 8 that Tehran is prepared to export natural gas to European countries seeking to diversify their energy sources and gas supplies.

"Iran is not in a position to be a major gas exporter for a long time to come, despite the scale of its reserves and production," David Butter, an analyst of politics, economics and business in the Middle East North Africa (MENA) region, who has been an associate fellow in the Chatham House MENA program since August 2012, said. "This is mainly because of its large domestic consumption (much of which is for enhanced oil production) and the shortfall of investment in the upstream gas sector over the past two decades. It is unlikely that Iran will have sufficient surplus gas production capacity to become a major exporter for at least ten years."

Iran aimed to complete the South Pars gas field and produce about 800 mcm/d of gas from its 24 phases until 2020. However, the consumption growth rate in very high. The Natural gas shares about 70 percent of the country's total primary energy consumption basket. The country's gas consumption level experienced a 60 fold growth since 1980. Iran also wants to produce more associated gas and it is expected that the country's total gas output would reach about 1.1 to 1.2 bcm/d until 2020.

"If it does attain surplus capacity of 20bn cu meters/ year-plus, exports to Europe via existing pipeline networks through Turkey (Trance Anatolian-Trans Adriatic Pipelines) could be an option, along with LNG exports," Butter, who was previously regional director for the Middle East at the Economist Intelligence, said.

"TAP is fully committed to transport (Azerbaijan's) Shah Deniz 2 volumes (10bcma) from the Caspian through Greece, Albania and into Italy," Simina Marca from Trans Adriatic Pipeline AG told Trend Dec.22.

"In the future, TAP can increase its capacity to around 20bcma when more gas volumes become available to transport. TAP's shareholders have stated that TAP will not transport any sanctioned gas," Marca, a communications specialist at TAP AG said.

EU has imposed sanctions on any gas intake from Iran.

Coming to LNG exports, China's 3.3 billion worth LNG refining facility construction contract with Iran was suspended in September 12. It was Iran's sixth suspended LNG project and aimed at producing 10.5 million metric tons of LNG per year.

Before 2012, the country had planned to produce 70 million metric tons of liquefied natural gas (LNG) from the South Pars, North Pars, Ferdosi and Golshan gas fields by launching six LNG production facilities, all of them were suspended.

Iran has had LNG project contracts with French Total, Spanish Repsul, Dutch-British Shell, Malaysian Petronas, Chinese SINOC group, Chinese CEPA, Polish state-owned gas company (PGNiG) and Malaysian Petrofield LNG Co..

Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service
Follow him on @dalgakhatinoglu