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

Australia-Cambodia Resettlement Agreement Raises Concerns

Agreement calls for Cambodia to accept refugees in return for $35 million in aid and reflects Australia’s harder line approach towards asylum seekers and refugees More

India Looks to Become Arms Supplier Instead of Buyer

US hopes India can become alternative to China for countries looking to buy weapons, but experts question growth potential of Indian arms industry More

Earth Day Concert, Rally Draws Thousands in Washington

President Obama also took up the issue Saturday in his weekly address, saying there 'no greater threat to our planet than climate change' More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Are Energy Needs Putting Thailand's Natural Beauty at Risk?i
X
Steve Sandford
April 17, 2015 12:50 AM
Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Are Energy Needs Putting Thailand's Natural Beauty at Risk?

Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Overwhelmed by Migrants, Italy Mulls Military Action to Stabilize Libya

Thousands more migrants have arrived on the southern shores of Italy from North Africa in the past two days. Authorities say they expect the total number of arrivals this year to far exceed previous levels, and the government has said military action in Libya might be necessary to stem the flow. VOA's Henry Ridgwell reports.
Video

Video Putin Accuses Kyiv of ‘Cutting Off’ Eastern Ukraine

Russian President Vladimir Putin, in his annual televised call-in program, again denied there were any Russian troops fighting in Ukraine. He also said the West was trying to ‘contain’ Russia with sanctions. Henry Ridgwell reports on reactions to the president’s four-hour TV appearance.
Video

Video Eye Contact Secures Dog's Place in Human Heart

Dogs serve in the military, work with police and assist the disabled, and have been by our side for thousands of years serving as companions and loyal friends. We love them. They love us in return. VOA’s Rosanne Skirble reports on a new study that looks at the bio-chemical bond that cements that human-canine connection.
Video

Video Ukrainian Volunteers Search for Bodies of Missing Soldiers

As the cease-fire becomes more fragile in eastern Ukraine, a team of volunteer body collectors travels to the small village of Savur Mohyla in the what pro-Russian separatists call the Donetsk Peoples Republic - to retrieve bodies of fallen Ukrainian servicemen from rebel-held territories. Adam Bailes traveled with the team and has this report.
Video

Video Xenophobic Violence Sweeps South Africa

South Africa, long a haven for African immigrants, has been experiencing the worst xenophobic violence in years, with at least five people killed and hundreds displaced in recent weeks. From Johannesburg, VOA’s Anita Powell brings us this report.
Video

Video Sierra Leone President Koroma Bemoans Ebola Impact on Economy

In an interview with VOA's Shaka Ssali on Wednesday, President Ernest Koroma said the outbreak undermined his government’s efforts to boost and restructure the economy after years of civil war.
Video

Video Protester Lands Gyrocopter on Capitol Lawn

A 61-year-old mailman from Florida landed a small aircraft on the Capitol lawn in Washington to bring attention to campaign finance reform and what he says is government corruption. Wednesday's incident was one in a string of security breaches on U.S. government property. Zlatica Hoke reports the gyrocopter landing violated a no-fly zone.
Video

Video Apollo 13, NASA's 'Successful Failure,' Remembered

The Apollo 13 mission in 1970 was supposed to be NASA's third manned trip to the moon, but it became much more. On the flight's 45th anniversary, astronauts and flight directors gathered at Chicago's Adler Planetarium to talk about how the aborted mission changed manned spaceflight and continues to influence space exploration today. VOA’s Kane Farabaugh reports.
Video

Video Badly Burned Ukrainian Boy Bravely Fights Back

A 9-year-old Ukrainian boy has returned to his native country after intensive treatment in the United States for life-threatening burns. Volodia Bubela, burned in a house fire almost a year ago, battled back at a Boston hospital, impressing doctors with his bravery. Faith Lapidus narrates this report from VOA's Tetiana Kharchenko.
Video

Video US Maternity Leave Benefits Much Less Than Many Countries

It was almost 20 years ago that representatives of 189 countries met at a UN conference in Beijing and adopted a plan of action to achieve gender equality around the world. Now, two decades later, the University of California Los Angeles World Policy Analysis Center has issued a report examining what the Beijing Platform for Action has achieved. From Los Angeles, Elizabeth Lee has more.
Video

Video Endangered Hawaiian Birds Get Second Chance

Of the world's nearly 9,900 bird species, 13 percent are threatened with extinction, according to BirdLife International. Among them are two Hawaiian honeycreepers - tiny birds that live in the forest canopy, and, as the name implies, survive on nectar from tropical flowers. Scientists at the San Diego Zoo report they have managed to hatch half a dozen of their chicks in captivity, raising hopes that the birds will flutter back from the brink of extinction. VOA’s George Putic reports.
Video

Video Exhibit Brings Renaissance Master Out of the Shadows

The National Gallery of Art in Washington has raised the curtain on one of the most intriguing painters of the High Renaissance. Mostly ignored after his death in the early 1500s, Italian master Piero di Cosimo is now claiming his place alongside the best-known artists of the period. VOA’s Ardita Dunellari reports.
Video

Video Sidemen to Famous Blues Artists Record Their Own CD

Legendary blues singer BB King was briefly hospitalized last week and the 87-year-old “King of the Blues” may not be touring much anymore. But some of the musicians who have played with him and other blues legends have now released their own CD in an attempt to pass the torch to younger fans... and put their own talents out front as well. VOA’s Greg Flakus has followed this project over the past year and filed this report from Houston.
Video

Video Iran-Saudi Rivalry Is Stoking Conflict in Yemen

Iran has proposed a peace plan to end the conflict in Yemen, but the idea has received little support from regional rivals like Saudi Arabia. They accuse Tehran of backing the Houthi rebels, who have forced Yemen’s president to flee to Riyadh, and have taken over swaths of Yemen. As Henry Ridgwell reports for VOA, analysts say the conflict is being fueled by the Sunni-Shia rivalry between the two regional powers.

VOA Blogs

World Currencies

EUR
USD
0.9247
JPY
USD
118.78
GBP
USD
0.6657
CAD
USD
1.2190
INR
USD
62.395

Rates may not be current.