Iran's gas delivery to EU possible, but with preconditions

Iran's gas delivery to EU possible, but with preconditions

Baku, Azerbaijan, May 2

By Dalga Khatinoglu - Trend:

Iranian officials say the country is keen to deliver natural gas to Europe. According to the head of National Iranian Gas Company Hamid Reza Araghi, European countries and Iran's neighbors are willing to buy gas from Iran as more gas projects are coming online.

He said Iran would see its gas production reach 1 billion cubic meters a day (bcm/d) in three years as new phases of the gigantic offshore South Pars gas field are coming on stream.

Iran's current raw gas production level is reportedly about 660 mcm/d. The country has developed 10 phases of the giant South Pars gas field, which share about 8 percent of total conventional global gas reserves, while phases 12, 15 and 16 are commenced with half capacity.

South Pars was divided to 29 phases and the country is to increase gas production level to 720 mcm/d by the end of 2018 from South Pars.

"Although the we see South Pars' gas production substantially rising over the coming years, we do not believe this (producing 720 mcm/d of gas) to be realistic in the near term," Homayoun Falakshahi, a Middle East Upstream Analyst for Wood Mackenzie told Trend on May 2.

He said gas production from South Pars will increase by 75% over the next five years, due to new phases coming on stream such as Phase 12, Phases 15-16 and Phases 17-18.

"These five phases will add around 64.5 bcma of production," Falakshahi said. "We estimate the whole field's production capacity to approach 400 mcm/d come 2020."

Despite the progress at the South Pars and rising gas production, Iran is still needs more 20 bcm/a of gas delivery to its active power plants, while the gas re-injection level should double to above 60 bcm/a.

On the other hand, Iran has gas export agreement and memorandum of understandings with Oman, Iraq and Pakistan to export 40 bcm/a of gas to these countries in coming years. Currently, Iran delivers 9.76 bcm/a to Turkey.

Coming to the possible routes of gas delivery to the EU, Iran has to develop 9th cross-country pipeline, worth $6 billion, from South Pars towards Iran-Turkey borders.

Delivery gas from Iraq towards Syria and expanding this rout towards the EU seems impossible due to security crisis in the region.

Meanwhile, Stephen O'Rourke, a Research Director for Wood Mackenzie's Global Gas Service told Trend that "there is a possibility that this could happen."

"In order for Iran to deliver to the EU it would take an improvement in diplomatic relations, new pipeline capacity, and confidence from EU customers that Iran is capable to delivering agreed volumes," he said. "This would most likely need the involvement of international oil companies or foreign national oil companies in the development of specific phases of South Pars which are ring-fenced for EU export".

EU put ban on gas import from Iran in 2012, but Tehran is negotiating with the P5+1 Gorup (the U.S., France, UK, Russia, China + Germany) to reach a comprehensive nuclear deal by June 30, which will pave the way for elimination of sanctions on Iran.

O'Rourke said that "the key factors here are the necessity of a nuclear deal and new, more attractive fiscal terms".

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