Facilitating Iran to Join Gas Trade

Given activities carried out over recent years for gas supply to villages of over 20 households, newly built towns and industrial plants, domestic gas market will be saturated within years and then Iran will have to take measures to find new ways for consumption.

Converting gas to products in the petrochemical industries, generating electricity from gas and presence in international gas trade are among plans envisaged for gas consumption. 

Turkey is currently receiving 30 mcm/d of gas and is the only gas buyer of Iran. Under a 25-year deal signed in August 1996, Iran is committed to pumping 10 bcm a year of gas to this country.

Given the activities carried out in recent years with regard to building new gas production capacities, there is now ground for doubling gas exports to Turkey. Increasing gas exports to Turkey requires the signature of a new contract between the two countries. 

Meantime, due to the startup of new phases of the massive offshore South Pars gas field, Iran is looking for new customers mainly from neighboring countries.

Iraq, Next Destination

Gas exports to Iraq are among other plans pursued by the Iranian Ministry of Petroleum for enhancing its share of global gas trade. This plan is set to start with the delivery of 5mcm/d of gas to Iraq before being increased gradually. 

Under an agreement signed with Iraq, Iran will start exporting 25 mcm/d of gas to its western neighbor before raising the volume to 35 mcm/d in hot seasons. 

The infrastructure is currently ready for Iran to export gas to Iraq and the first batch of natural gas will flow towards power plants in Baghdad as soon as Iraq announces its readiness. 

25 mcm/d to Basra

Negotiations have also started for Iran’s gas supply to Basra. Iran has agreed to start with 25 mcm/d of gas, which would reach 35 mcm/d. 

Ali-Reza Kameli, CEO of National Iranian Gas Export Company (NIGEC), gas exports to Basra will start one year after the signature of its agreement planned for next year. It will start with 5 mcm/d to reach finally 35 mcm/d. 

The agreement for gas delivery to Basra will be for six years. Iran has already built a pipeline as far as Khorramshahr. Iran Gas Trunkline 6 (IGAT6) would provide gas to Basra.

30 mcm/d to Oman

The Persian Gulf Arab state of Oman is also a potential buyer of Iran’s gas. Iran and Oman have so far held technical talks for gas delivery. Other Persian Gulf states involved in talks with Iran are the United Arab Emirates (UAE), Kuwait and Bahrain.     

There has also been close interaction between Iran and Turkmenistan, Armenia, Azerbaijan and Turkey for gas exports.

Iranian petroleum ministry officials have said that Iran’s neighbors are prioritized for gas exports. Over recent years, official and unofficial talks have been held for Iran’s gas supply to Europe.

Kameli has reiterated that Iran’s neighbors are prioritized for gas exports, adding: “Iran could export gas to the Persian Gulf littoral states by building maximum 200 kilometers of gas pipeline and naturally these countries are Iran’s top priority for gas exports due to lower costs and time and higher profits.”

Kameli said that Iran would need at least 4,000 kilometers of pipeline for entry into Europe’s gas market, noting that it would cost too much.

“Of course, it does not mean that we will not have an eye on the Europe market; rather, we maintain a long-term look at this market and we hope to win toehold in the Europe markets through LNG (liquefied natural gas),” he noted.

Kameli also referred to the issue of conversion of gas to electricity, saying several agreements have so far been signed to that effect.

“We hope that by constructing these power plants and converting gas to electricity and supplying power to neighboring countries the country will gain value-added created from gas-to-electricity conversion,” he said.

LNG Exports, Best Option for Global Trading

The LNG share of gas trade in the world currently stands at 31%, 70% of which is in Asia and the Middle East. Iran can make great contribution to this business.

Entry into the LNG industry and market would mean access to markets which are inaccessible through pipeline due to large distance.

At present, there are 60 LNG terminals in Asia and 40 more are to be added to them. It means that the world, particularly Asian countries, is preparing to supply a larger share of demand for gas through LNG. Iran must naturally prepare itself for its own contribution.

Iranian Ministry of Petroleum has concentrated its mind on LNG and three projects have been envisaged in this regard: Persian LNG, Iran LNG and Pars LNG.

50% Progress in Iran LNG

Pars LNG and Persian LNG had come to a halt due to international sanctions in recent years, but Iran LNG has progressed some 50% and is awaiting the full removal of sanctions in order to import necessary equipment and items.

In addition to Iran LNG, NIGEC is studying other options for gas exports. Gas export to Oman is one of them. Oman would use Iran gas for conversion into LNG. Engineering studies are set to begin for the construction of Iran-Oman gas pipeline.

Gas Trade Tops 6th Development Plan

Due to its significance, the issue of gas trade has been among the points highlighted in Iran’s 6th Five-Year Economic Development Plan (2015-2020).

In the light of growing demand for gas due to economic growth and changes in the energy mix in the world, the gas share of this mix would increase from the current 22% to 25-26% over 20 years. Iran, which is rich in gas, could become a major player in global gas trading.

In addition to gas delivery to Persian Gulf and neighboring states, Iran could also supply gas to Europe. As Iran’s gas production is expected to rise thanks to the development of South Pars gas field, which the country shares with Qatar, this increase in gas output could be directed to export terminals.

Courtesy of Iran Petroleum