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

Tired of Waiting, South Africans Demand Change ‘Now’

With chronic poverty and lack of basic services largely fueling recent xenophobic attacks, many in Rainbow Nation say it’s time for government to act More

Challenges Ahead for China's Development Plans in Pakistan

Planned $46 billion in energy and infrastructure investments in Pakistan are aimed at transforming the country into a regional hub for trade and investment More

'Forbidden City' Revisits Little Known Era of Asian-American Entertainment

Little-known chapter of entertainment history captured in 80s documentary is revisited in new digitally remastered format and book More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Cinema That Crosses Borders Showcased at Tribeca Film Festivali
X
April 24, 2015 4:09 AM
Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.
Video

Video Keeping Washington Airspace Safe Is Tall Order

Being the home of all three branches of the U.S. federal government makes Washington, D.C. the prime target for those who want to make their messages and ideas heard. Unfortunately, many of them choose to deliver them in unorthodox ways, including from the air, as a recent incident clearly showed involving a gyrocopter landing on the Capitol’s West Lawn. VOA's George Putic has more.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.
Video

Video Hope, Prayer Enter Fight Against S. Africa Xenophobia

South Africa has been swept by disturbing attacks on foreign nationals. Some blame the attacks on a legacy of colonialism, while others say the economy is to blame. Whatever the cause, ordinary South Africans - and South African residents from around the world - say they're praying for the siege of violence to end. Anita Powell reports from Johannesburg.

VOA Blogs

World Currencies

EUR
USD
0.9238
JPY
USD
119.51
GBP
USD
0.6614
CAD
USD
1.2119
INR
USD
63.562

Rates may not be current.