Iran exporting gas - how, where and when?

Oil&Gas Materials 18 March 2015 09:00 (UTC +04:00)
The world's number one gas reserves' holder increased gas output by 20 bcm to 175.5 bcm during the current fiscal year, which will end March 20. The second half of year shares above 70 percent in the gas production growth.
Iran exporting gas - how, where and when?

By Dalga Khatinoglu - Trend:

The world's number one gas reserves' holder increased gas output by 20 bcm to 175.5 bcm during the current fiscal year, which will end March 20. The second half of year shares above 70 percent in the gas production growth.

On the other hand, Iran Iran wants to increase the gas production by 100 mcm/d during the next year. In case, the Phases 12, 15, 16, 17 and 18 of giant South Pars gas field become operational fully, then it's expected that the country's total raw gas production capacity would increase from the current 660 mcm/d to 800 mcm/d at the end of next fiscal year and it's expected the volume increases to 1.1 bcm/d by 2020.

It's not expected to start any new pipeline by the end of next year, but Iran will commence restricted gas delivery at around 5 mcm/d to Iraq by Ilam-Baghdad pipeline in February. The volume would increase to 25 mcm/d in coming years.

Currently Iran exports about 10 bcm/a of natural gas to Turkey, imports 7.5 bcm/a from Turkmenistan, barters about 350 mcm/a with Armenian power and swaps the same level with Azerbaijan. Therefore, Iran's gas trade balance stands at 2.5 bcm/a.

Iran's gas export prospect

Iran has two gas trade deals with Iraq, one agreement with Pakistan and one memorandum of understanding with Oman that adds up to a total of 120 mcm/d of natural gas exported to these countries. And, Iran is evaluating other markets like Kuwait, UAE, Saudi Arabia and Europe.

Karen Sund, the founder of Sund Energy AS, a specialized energy consulting company told Trend that "I do see some potential for gas exports from Iran when the sanctions lift, both by pipeline and LNG, and the potential is significantly higher than 10 bcm/a, if prices are in the range of the market".

In the fourth 5-Year National Develop Plan (2005-2009), the country aimed to produce 70 million tons of liquefied natural gas (LNG) from the South Pars, North Pars, Ferdosi and Golshan gas fields by launching six LNG production facilities, however all of these projects were canceled after withdrawal of French Total, Spanish Repsul, Dutch-British Shell, Malaysian Petronas and Petrofield LNG Co, Chinese SINOC group and CEPA as well as Polish PGNiG.

Iran hasn't restarted any of the mentioned projects yet.

Sohbet Karbuz, Director of Hydrocarbons, France, Mediterranean Energy Observatory (OME) told Trend March 16 that "in the short to mid-term I do not see any meaningful, if any, exports from Iran".

Karbuz says that "projects for exports to Pakistan, Iraq and Oman are not advancing as fast as expected. This means that the easiest way for Iran to increase its gas exports is to or through Turkey. To Turkey is unlikely because of the price tag Iranian gas carries. Iranian gas is the most expensive gas Turkey imports. Similarly, gas exports to Europe through Turkey would not be likely because Iranian gas is not competitive. A substantial reduction or change in pricing mechanism would alter this situation. However, there is also the political aspect, i.e., the future of sanctions. As far as global markets are concerned, I do not expect Iran would be able to export gas via LNG before 2025".

Iran's unique position

Iran's gas reserves stand at 33.6 trillion cubic meters, the biggest in the world.

Sam Barden, a Director of Wimpole International, an energy market development company told Trend that, quite simply, Iran has the potential to increase its gas export market considerably, largely due to her geographical location by way of what we call "Iran and the 5 Seas"; the Caspian, the Persian Gulf, the Sea of Oman, the Black Sea and the Mediterranean. In terms of extraction and distribution, Iranian Gas can either come from or go to all of the five seas.

Barden says that yet for this to occur, Iran needs collaboration from partners in the form of energy co-operation. So far, this is occurring with Pakistan, Oman, Turkey, Iraq and the likely hood that Iranian gas is exported via the Mediterranean to Europe is high.

Quite simply, European manufacturing needs Iranian gas, and Iran wants European technology. "Obviously, sanctions currently in place by the USA are slowing this process, yet I believe that unless USA and Iran agree to have sanctions lifted, and soon, then Europe might likely ignore the USA to work with Iran and receive their gas".

Domestic runaway usage

Despite raising the country's gas production by 20 bcm/a, Iran only increased gas re-injection and export by 1 bcm each one.

Iran needs further 200 mcm/d and 60 mcm/d of gas to re-inject to old oil wells and power plants respectively. On the other hand, Iran's flared gas amount is above 31 mcm/d.

Coming to consumption, the energy efficiency in Iran is low. For instance the efficiency of power plants is 37 percent on average. One fourth of the country's 1.6-billion barrels of oil equivalent energy is wasted before reaching any consumer. Natural gas shares about 70 percent in Iran's primary energy consumption basket.

Barden says that domestic gas consumption is extremely inefficient in Iran. That is to say Iran wastes its gas domestically, and the largest amount of waste comes from household use. According to official statistics, housing sector consumed about 250 mcm/d, industrial sector 89 mcm/d and power plants 139 mcm/d during the current year.

Barden, who is also the founder of IranInvest, an open source Investment partner for investment into and out of Iran, says that in a post sanctions environment "for Iran to meet export targets, they must find huge energy and gas savings from within Iran, especially at the household level. This can include more efficient heating of water, and heaters used in winter for warmth, to better sealing of windows to keep warmth in. Ultimately, the biggest savings of carbon fuel, or gas, will come through the use and roll out of a renewable energy market sector. Iran is extremely well placed to exploit solar energy production, and create carbon fuel savings, specifically gas, which they can then export".

Nowadays, the renewable energies' share in Iran energy consumption basket is less than one percent.

Barden believes that Iran already has a highly regulated market place, including exchanges for commodities, stocks, and energy.

"It would not be difficult to create a domestic renewable energy market in Iran from the house hold level upwards. This would set Iran on a sustainable economic path, decrease the need for dollar subsidies from the government and replace them with energy subsidies based on renewable energy and energy as a service, paid for by carbon fuel saved, and exported, namely gas."

According to the expert's opinion, if Iran wants to truly increase its gas exports, it is not new gas fields it needs to find, but carbon fuel savings from within its domestic grid.

Edited by CN


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