Iran Seeks Rapid Reboot for Natural Gas Exports

Iran is pushing to find new ways to extract and export its vast natural-gas reserves, including developing facilities to liquefy the commodity and ship it to Europe in two years now that western sanctions are no longer in place, according to a top Iranian official.

Iran holds the world’s largest reserves of natural gas, but has long lacked the export infrastructure of competitors like Russia and Qatar. They have networks of international pipelines as well as liquefied natural gas facilities which enable them to export gas by ship.

Tehran is exploring several options to help the country “join the international LNG club,” said AlirezaKameli, Managing Director of National Iranian Gas Export Co., in an interview here.

One project would involve restarting work on the country’s most advanced LNG project, Iran LNG, which was 40% complete when tightened western sanctions forced work to be abandoned in 2012. It could take another three to four years to complete the project, Mr. Kameli said.

Another option would be building a pipeline beneath the Persian Gulf to Oman, which has LNG facilities that Iran could potentially use. Mr. Kameli said Oman has agreed to build the pipeline within two years. Omani officials didn’t respond to requests for comment.

Mr. Kameli said his company is also in talks with European companies, including Oslo- and Nasdaq-listed Golar LNG Ltd., to build floating LNG facilities, on which the gas is liquefied on offshore vessels. Such a project which would take “less than two years,” he said. Golar declined to comment.

Once LNG facilities are in place, Mr. Kameli said, exports to “Europe definitely could be considered.”

Last week, Greece’s largest refinery Hellenic Petroleum agreed to buy oil from the National Iranian Oil Co., marking the first sale of Iranian crude to a European country since the lifting of trade sanctions against the Middle Eastern nation. Other European companies are promising billions in new deals in Iran as Iranian President Hassan Rouhani visits Europe this week to revive trade and political ties.

EU officials have said Iran could be a key supplier of natural gas and help the bloc reduce its reliance on Russia.

But a the two-year horizon “doesn’t sound very realistic,” one EU official said, citing internal assessments from the European Commission, the bloc’s executive arm. The commission has been working to rebuild energy ties with Iran over the past year, once it became clear that sanctions would likely be lifted. It plans to send an assessment mission to Iran in February to scope out possibilities.

Currently, Iran only exports small quantities of gas to Azerbaijan, Armenia and Turkey, typically about 9 billion cubic meters a year. But another Iranian gas official said last year that Iran could export about 30 billion cubic meters to the EU in the long-term. That estimate is consistent with one EU assessment which put EU imports at between 25 billion and 35 billion cubic meters of gas a year from Iran by 2030, if LNG facilities are developed.

It is a difficult time to launch new LNG projects, which generally cost billions of dollars and take years to build. The slump in oil prices has hit the LNG hard, as consumers typically pay for the product on oil-linked contracts.

On top of that, plenty new LNG supply is expected to come into production by the end of the decade. The price for LNG in Asia—the fuel’s main market—has collapsed, falling more than 50% from early 2014 to mid-2015, according to the International Energy Agency.

Low prices could stimulate new LNG demand from industrial users, said John Hall, Chairman of U.K. consultancy Alfa Energy.

“In two years, there will be room for another player in Europe,” Mr. Hall said.

The National Iranian Gas Export Co. also plans to invest in gas infrastructure such as distribution networks, plants or pipelines, Mr. Kameli said.

Sending Iranian gas by pipeline through Turkey is generally considered the shortest route to Europe, but building the infrastructure enough to increase exports “doesn’t seem feasible” economically, Mr. Kameli said

Iran is also talking about supplying gas to its neighbors in the Persian Gulf, notably Kuwait and the U.A.E., which don’t have sizable gas reserves and could be supplied with short pipelines.

One possible regional market is Saudi Arabia, Iran’s main political rival in the Middle East, which is trying to shift away from using crude oil for power generation. The kingdom has gas reserves that are too expensive to produce at today’s prices.

“Saudi Arabia is a big potential customer. They don’t have the choice but to approach Iran,” Mr. Kameli said. Saudi officials weren’t immediately reachable for comment.

Relations between Saudi Arabia and Iran have deteriorated in the past year as the two countries have sided with different interests in wars in Syria and Yemen. Saudi Arabia cut off diplomatic ties to Iran after its embassy in Tehran was set on fire following Riyadh’s execution of a prominent Shiite cleric.

Mr. Kameli said renewed trading ties could help soothe tensions. “Piped gas can help political relations between countries,” he said.

https://www.hellenicshippingnews.com/iran-seeks-rapid-reboot-for-natural-gas-exports/