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Iran's natural gas rush will not bring export riches – for now

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According to the latest report by Bloomberg, Iran is on track to out-produce Qatar at the vast natural gas deposit they share in the Persian Gulf. Iranians will not however have much gas to export because they are likely to use most of the new production themselves.

How much natural gas does Iran export?

Almost nothing. Iran has 18.2% of proven gas reserves, ahead of Russia and Qatar. Unlike its competitors, which have built far-flung pipelines and LNG plants to reach foreign buyers, Iran exported 8.4 billion m3 in 2015 while importing 7.5 billion m3 the same year. Until recently, it was a net importer, buying gas from Turkmenistan and Azerbaijan because its domestic distribution network does not supply the entire country.

So where is all Iran’s gas going? 

Half of it goes to warming homes, 21% to generating power and 18% for industrial use. Iran, with about 80 million people, is the fourth-biggest market for natural gas, after the US, Russia and China. New production can barely keep up with demand. Gas consumption almost doubled to 191.2 billion m3 in 2015 from 102.7 billion in 2005, while output rose over the same period to 192.5 billion m3 from 102.3 billion.

Will it export more in the future? 

Iran plans this year to start sending gas by pipeline to Baghdad in neighbouring Iraq, a step that would make it the world’s 15th largest exporter. But Iraq is planning its own pipeline to export gas to Kuwait and may not prove to be a long-term customer. Iran’s development of LNG plants stalled for years due to international sanctions, and such facilities are not a priority given the impending glut of liquefied gas.

The country is considering pipelines to Oman, Pakistan and other countries, though cross-border links are scarce in the turbulent region. Floating LNG plants are also an option.

What about the new volumes from South Pars?

By March 2018, Iran’s output at the giant South Pars gas field in the Gulf will have surpassed Qatar’s production at the connected North Field. Additional development phases at South Pars should give Iran more room for exports in the future. For now, Iran’s motivation for producing more gas is to re-inject it underground into crude reservoirs.

So Iran has to choose between oil and gas exports?

Iran is seeking to attract US$100 billion of foreign investment into its energy industry. To boost crude output, it needs gas. Iran required 93 billion m3 of gas for re-injection in 2014 but could only allocate 32 billion.

Is Qatar worried about rising output from the shared field?

Qatar has placed a moratorium on new drilling in the North Field since 2005, and its international expansion signals a plan to preserve domestic reserves for as long as possible. The North Field-South Pars reservoir has enough gas for both countries to exploit. Even though science shows few risks to the field from shared production, a perception that Qatar has already extracted at least twice as much gas as Iran may cause tensions.

Read the article online at: https://www.lngindustry.com/liquefaction/16032017/irans-natural-gas-rush-will-not-bring-export-riches-for-now/


 

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