News / Economy

Iran a Decade or More From Becoming a Major Gas Exporter

An Iranian worker in the partially constructed site which is part of South Pars gas field, in Assalouyeh, Iran, July 19, 2010. (AP Photo/Vahid Salemi)
An Iranian worker in the partially constructed site which is part of South Pars gas field, in Assalouyeh, Iran, July 19, 2010. (AP Photo/Vahid Salemi)
Reuters
The world's largest gas reserves may tempt some energy companies back to Iran if sanctions are lifted, but Tehran is unlikely to become a significant gas supplier to Europe or Asia for at least a decade.
 
European companies with the technology to fully exploit Iran's vast South Pars field under the Gulf abandoned it in the late 2000s, under U.S. pressure, dashing its hopes of following Qatar's meteoric rise up the global gas exporters' league.
 
Last month's nuclear deal between the West and the new Iranian government has ignited hopes that its oil production could bounce back if Washington and the European Union relax controls on exports.
 
But Iran has little chance of becoming a significant gas exporter for at least a decade because of high domestic demand and internal obstacles to developing reserves, which were a problem long before sanctions forced foreigners out.
 
The lifting of sanctions on Iran “could potentially have a huge impact on exports over the longer term, but it will take years for things to get moving,” Laurent Ruseckas, senior adviser on the Global Gas team at consultants IHS, said.
 
In the short term, it makes more economic sense for Iran to use gas to satisfy domestic demand for power generation and industry and for re-injection into aging oilfields to maintain production, Ruseckas said.
 
Oilfield re-injection is a higher-value use for gas than exports, because oil sells for much more on the global market and does not require billions of dollars in capital investment in gas export projects that take years to pay back.
 
Over 1 trillion cubic feet (tcf), or over 28 billion cubic meters (bcm), of gas was re-injected to help boost oil production in 2011, according to the U.S. Energy Information Administration, and some estimates indicate that over 8 bcf/d (around 83 bcm/year) will be needed within a decade.
 
Net importer
 
Iran's marketed gas production, excluding flared and reinjected gas, has more than doubled to 160.5 bcm in 2012 from 75 bcm in 2002.
 
But Tehran has looked on while Qatar has become one of the world's richest countries after western energy companies built multi-billion dollar plants over the last decade that turned the tiny Gulf state into the world's largest liquefied natural gas (LNG) exporter.
 
The two countries share the world's largest gas field, which Iran calls South Pars and Qatar the North Field. It straddles their offshore Gulf border and accounts for nearly all of Qatar's gas production and around 35 percent of Iran's.
 
An abundance of condensate and natural gas liquids in the field means it can produce enough income to cover drilling costs before pumping out gas. That makes Iranian LNG export projects potentially highly competitive, even as supply swells due to U.S. shale gas and big finds off East Africa.
 
Phase 12 of the South Pars development, which is expected to start up next year, could boost supplies by as much as 28 bcm/year when it is fully operational.
 
“We have to make efforts to launch a section of this phase as soon as possible,” Iran's oil and gas minister, Bijan Zanganeh, was quoted as saying by ministry website Shana during a recent visit to the sites. “Important petroleum industry projects must not be delayed due to waiting for the lifting of sanctions.”
 
According to figures from the Pars Oil and Gas Company, which manages the whole project, phases 13 to 24 could add up to 142 bcm/year of capacity by 2019, if completed on time.
 
Iran already produces more gas than Qatar. The difference is that Qatar, with a population of less than 2 million, uses just 26 bcm of it, leaving 125 bcm free for export, according to data from BP.
 
Iran has used nearly all the gas it produces to supply its 77 million people with heat, electricity and fuel. Domestic demand has risen to 156 bcm in 2012 from 79 bcm in 2002, according to BP figures, which exclude gas used for re-injection.
 
Even if its domestic consumption rises at only the half annual growth rate seen over the past decade, that implies increases of 8-9 bcm every year over the next five years. That would take Iran's gas consumption to around 200 bcm/year in 2018, not counting its rising use for re-injection.
 
Iran has been a net importer for most of the past decade, and this year asked Turkmenistan for more supplies to help ease shortages that are forcing Iranian power plants to burn billions of dollars of pricey and polluting oil products.
 
Zanganeh said in October that Iran faces a 30 bcm shortfall in supplies this year and serious supply shortfalls over the next two years because South Pars has not been developed quickly enough.
 
Iranian gas projects have a record of falling far behind schedule.
 
Phase 13 suffered a big setback when one of its offshore platforms sank to the bottom of the Gulf during an installation attempt in January. Zanganeh said compressor problems with phases 17 and 18 might need the expertise of foreign companies to fix, Iranian news agency Shana reported last week.
 
On Saturday, the minister said he hoped most of phases 12, 15 and 18 would be complete by March 2015.
 
The previous government of President Mahmoud Ahmadinejad signed numerous gas export deals with Arab neighbors, devised plans to supply Europe via several pipelines, and planned gas-freezing LNG export plants to supply gas to Asia.
 
But Turkey has been the only country to receive significant volumes so far, and because of Iran's own winter heating needs, it has been unable to supply the 10 bcm/year contracted with Turkey.
 
Any gas that Iran can spare in future is likely to go to gas-hungry neighbors that have signed import contracts.
 
“It would be a strategic and semi-political choice on Iran's part, as well as a commercial one, but I don't imagine that Europe would be at the top of the queue,” Ruseckas said.
 
The head of Iran's gas export company said over the weekend that it would pipe around 7 mcm/day to Iraq from next July, with flows rising to 25 mcm/day in 2015 and 40 mcm/day by the early 2020s.
 
If sanctions are lifted, Pakistan would probably be next in line for any spare gas, because Iran has spent hundreds of millions of dollars on building a 22 bcm/year pipeline, and the two countries say they will redouble efforts to finish the long-delayed project soon.
 
Iran has also agreed to pipe around 10 bcm/year to Oman within a few years and has built a pipeline to the United Arab Emirates designed to carry 10 bcm/year.
 
“Iran could export some more gas by 2025 but will not export in the range of 50 bcm/year before at least the 2030s,” David Ramin Jalilvand said in a study published by the Oxford Institute for Energy Studies in June.
 
Zanganeh is already courting European energy giants in the hope they will swoop back in as soon as bans on investment are lifted.
 
Three large Gulf gas discoveries announced by Iran in 2011  - Kayyam, Farouz and Madar - are potential projects, and their exploitation could be a big boost to Iran's export hopes.
 
But building big LNG plants that take years to complete in a country that has had a tense relationship with the West for decades will be a daunting prospect for many energy companies, particularly at a time that the U.S. shale gas boom allows them to be picky over projects.
 
“There is something between zero to no chance of us going back into Iran,” a western energy company executive said of Iran's gas sector.

You May Like

FIFA Indictments Put Gold Cup Tournament Under Cloud

Experts say US indictments could lead to charges of other world soccer officials, and lead to major shakeup in sport's governance More

Video Seoul Sponsors Korean Unification Fair

At a recent even in Seoul, border communities promoted benefits of increased cooperation and North Korean defectors shared stories of life since the war More

Video VOA EXCLUSIVE: Iraq President Vows to Fight IS 'Until They Are Killed or We Die'

In wide-ranging interview with VOA Persian service reporter, Fuad Masum describes conflict as new type of fight that will take time to win More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Expelled from Pakistan, Afghan Refugees Return to Increased Hardshipi
X
Ayesha Tanzeem
May 28, 2015 6:48 PM
Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Expelled from Pakistan, Afghan Refugees Return to Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video Floodwaters Recede in Houston, but Rain Continues

Many parts of Texas are recovering from one of the worst natural disasters to hit the southwestern state. Heavy rains on Monday and early Tuesday caused rivers to swell in eastern and central Texas, washing away homes and killing at least 13 people. As VOA’s Greg Flakus reports from Houston, floodwaters are receding slowly in the country's fourth-largest city, and there likely is to be more rain in the coming days.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.

VOA Blogs

World Currencies

EUR
USD
0.9205
JPY
USD
123.69
GBP
USD
0.6508
CAD
USD
1.2456
INR
USD
64.051

Rates may not be current.