Brief overview of Iranian gas export destinations

Business Materials 5 October 2017 14:25 (UTC +04:00)
Some gas producing nations, having huge reserves, face difficulties to find new consumer markets. Figures say Iran has been among them.
Brief overview of Iranian gas export destinations

Baku, Azerbaijan, Oct. 5

By Azer Ahmadbayli – Trend:

Some gas producing nations, having huge reserves, face difficulties to find new consumer markets. Figures say Iran has been among them.

According to BP’s latest statistical review, in 2016, Iran, the world’s number one in total proved gas reserves, accounted for 35.5 trillion cubic meters, could export only about 8 bcm of its strategic commodity.

Almost all of this amount had only one destination that was Turkey.

According to TREND’s recent report, the output of South Pars gas field increased by 25 billion cubic meters over the last Iranian fiscal year compared to the preceding year to reach 155 billion cubic meters.

In July, Iran signed a $5-billion deal with France’s Total SA and China’s CNPC to develop the South Pars offshore field, the world’s biggest natural-gas field. It is expected that by commissioning all 24 phases of the South Pars field within the coming years, gas production will sharply grow.

Amir Hossein Zamania, Deputy of Oil Minister said in July that Iran would increase gas output to 1 bcm/d by the end of current fiscal year (March 20, 2018) and based on Iran’s 6th National Development Plan (2017-2022), the country should export 80 bcm/year of gas, of which 50 bcm/year is projected to be delivered to neighboring countries.

With the growth of gas volumes, it becomes vital to have new export destinations. For the moment, there are several directions – existing and perspective – for Iran to trade its gas.

Iran-Iraq direction

Good news came in June, when Iran started exporting gas to Iraq after several years of delay. The two countries initially signed a deal in 2013, but instability in Iraq impeded the start of deliveries.

Exports started at approximately 2.5 bcm per year and would eventually reach up to 12.8 bcm, according to Iranian officials.

Iran and Iraq have another agreement of 2015 to build a gas pipeline to the southern Iraqi city of Basra, but construction work has not been fully completed yet.

IP (Iran-Pakistan) pipeline

Pakistan has been a cherished market for Iranian gas since 1990, when Iran-Pakistan (IP) pipeline concept was put on the table for the first time.

IP pipeline is the most marketable option to deliver Iranian gas to Pakistan. Iran completed its 900 km part in 2014, while Pakistan has not started its part yet.

As it was contracted in the bilateral agreement, the pipeline would carry 8.7 bcm of gas per year and 40 bcm as a maximum capacity.

Despite great efforts, Iran has made within almost nine years to move the project ahead, it remains anchored for a number of reasons not dependent on Tehran.

The latest attempt to get it moving ahead was made in 2015. China and Pakistan came to agreement on construction of 711 km long Nawabshah-Gwadar gas pipeline on the territory of Pakistan.

This pipeline had to become a core segment of the Iran–Pakistan gas pipeline. The Chinese side undertook commitment to finance 85 % of the engineering, procurement and construction (EPC) contract. However, in June this year Pakistan took unexpected decision to shelve the highly competitive project on the pretext of its higher cost.

Iran-Oman Pipeline and MEIDP

Based on an agreement signed between Tehran and Muscat in 2013, Iran will export 10.2 bcm of gas per year to Oman within 15 years.

A pipeline will have land and sub-sea sections. The land section is planned to be stretched from Rudan to Kuhmobarak (in Iran), while the sub-sea section will be laid across the Gulf to the Omani port of Ra’s al-Jafan. Each section is 200 kilometers long.

In early 2017 Bijan Zanganeh, Iran’s Minister of Petroleum, said that deepwater mapping activities for the pipeline should be concluded over the next few months, followed by a tender for selection of the project’s operator.

Iran plans to convert about one-third of the whole volumes into LNG at Oman’s LNG facilities, with further exports to world markets.

On October 2, Iranian foreign minister Mohammad Javad Zarif arrived in Muscat for talks with Oman officials. The agreement to import Iranian gas to Oman is among the topics expected to be on the agenda, ISNA reported.

Iran has one more perspective export destination on the table. It intends two options – to construct 1400 km long deep-water pipeline directly to India or have it pass through Oman. The concept has already been named MEIDP – Middle East to India deep-water pipeline.

The Indian side, along with some European companies, has carried out the technical studies on the project. Now the sides are considering whether it is economically justified.

The pipeline is planned to carry about 12 bcm of gas annually and can be built in two years from the date of necessary approvals.

On September 24, foreign ministers of three states met in New York to exchange views on cooperation in stable supply of India with Middle Eastern gas.

The project has two principal assets, which are of concern to Iran. One is that the three countries are well disposed towards each other and avoid political issues. The other gives a good opportunity for Iran to enter one of the world’s most growing gas consumer markets.

Other options

At the time, there was an idea to build a pipeline leading from South Pars field towards Europe via Iraq and Syria. However, activities on the project were completely interrupted due to civil war breaking out in Syria.

However, Iranian officials believe that the EU’s gas market is oversupplied and exporting Iranian gas to this market is not profitable in short-term perspective either through a pipeline or as LNG.

Iran so far has no means to liquefy its natural gas and to export LNG. It’s only liquefaction facility remains uncompleted.

Making the path for new gas export destinations will require not only ownership of gas fields but billions worth of investments and new technologies.

Successful cooperation with Western partners depends, to a large extent, on Iran.