Iran eyes major gas export boost, but doubts mount

Iran eyes major gas export boost, but doubts mount

Finally freed from international sanctions against its energy sector, Iran is working quickly to raise it

natural gas production and export capacity — and its medium-term targets are truly ambitious.

If realized, Tehran’s plans for a major gas export increase could send tremors through global gas

markets.

But analysts and industry observers have already raised major doubts on Iran’s ability to meet its

targets, especially given the difficulties in financing projects, competition across global gas markets and

the doggedly low-price environment.

A senior official at the state-owned National Iranian Gas Company (NIGC) said this month Iran wanted to

raise its gas exports to some 350 million cu m/d — the equivalent of a massive 128 Bcm/year —JX KˉcҺmumD}89ױ@gk\;2P5&00G`zr:$>2 B3!ZleiUori{ލێJ4 uWNX
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Azizollah Ramazani, NIGC director of international affairs, told the Iranian energy ministry news agency

Shana that NIGC was planning to export gas to 15 countries in the coming years, including Europe, via

pipeline or as LNG.

“We need more investments in order to gain a firm toehold in the LNG market and win more share in

the international markets,” he said.

Iran currently produces around 250 Bcm/year of gas, according to Iranian officials, most of which is

consumed domestically.

Iran’s exports are currently limited to around 10 Bcm/year to Turkey and small volumes to Azerbaijan.

But that could be about to change.

EXPORT PACTS

According to Iran’s latest development plan for 2016-2020, it aims to boost gas production to 360

Bcm/year by 2020, which in tandem with efforts to curb domestic consumption would free up the

necessary vast volumes for export.

Iran already has deals in place to supply gas to some of its immediate neighbors, including Iraq, Oman

and Pakistan, while Tehran is also engaged in talks to supply gas to other countries in the region such as

Afghanistan and Kuwait.

NIGC also has ambitions to export to countries including India and China.

But analysts remain doubtful that Iran will become a major exporter, especially to Europe.

Jonathan Stern, leading gas analyst from the Oxford Institute of Energy Studies, told Platts he did not

expect any Iranian gas supplies to Europe in the next ten years.

“First they would need spare gas which they don’t have, second they would need to accept the price

situation in Europe which they are not likely to, and third capacity would need to be created and buyers

found,” Stern said.

“If there are going to be additional gas exports from Iran in the next 10 years — which I rather doubt —

they would logically go to Pakistan, Iraq and Oman with which NIOC/NIGC have contracts,” he said.

John Feddersen of energy consultancy Aurora agreed with Stern’s assessment.

“Pipeline economics to Europe don’t work,” Feddersen said at last week’s Flame conference in

Amsterdam.

“We don’t really see it as viable for a commercial pipeline to be built in such an oversupplied market,”

he said.

Iranian LNG projects will take time too — Stern sees first LNG as being exported after 2026 at the

earliest — and LNG might also find it difficult to compete in the global market place.

On the European market, Iran would not be able to compete with US LNG, “which will have the cost

advantage,” Feddersen said.

Only in Asia could Iran find a marketplace, but even then it’s likely to be a longer-term opportunity post-

2025 when demand for LNG is likely to see a tightening market.

“We don’t think it’s going to have an impact on the global gas market,” he said, suggesting exports

would at most reach 35 Bcm/year by 2035, well short of Iran’s stated aims.

QATAR COMPETITION?

Now free of sanctions, Iran wants to press on with the development of South Pars — which it shares

with Qatar whose part it calls the North Field.

But might Qatar lift its 11-year moratorium on the further development of its part of the field in part to

scupper Iranian plans to boost production?

And could efforts by both countries to extract gas at full blast be to the detriment of the reservoir?

Aurora analyst Marc Hedin told Platts he expected there to be a spirit of cooperation between Iran and

Qatar on the further development of the shared resource.

He said Qatar would be well aware of Iran’s plans around South Pars. “Do Iran’s energy ambitions play

into Qatar’s decision-making processes around the North Field? Absolutely.”

He said Doha had been cautious about its own NorthField gas deveopment. “Qatar{*oU?6r7n a lot

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