The article below appeared in the Analyst column in the 12 July 2017 edition of Natural Gas Daily, an Interfax newsletter focussed on the global gas and LNG markets. http://www.interfaxenergy.com/
Iran’s deputy oil minister, Amir Hossein Zamaninia, said at the World Petroleum Congress in Istanbul this week that his country planned to ramp up gas production to nearly 1.37 billion cubic metres per day and oil production to around 5 million barrels per day (MMb/d) by 2021.
Zamaninia said Iran currently produces more than 800 million cubic metres per day (MMcm/d) of gas, equivalent to over 292 bcm/y, although output in 2016 was estimated at 202 bcm/y by the BP Statistical Review of World Energy. Iran’s oil production is currently around 3.7 MMb/d.
The planned ramp-up in production capacity suggests Iran aims to become a major player in the global oil and gas market now the United States and Europe have eased sanctions on the country. Tehran is particularly bullish on its gas plans because it believes the fuel will supersede oil in the global energy mix “in a few years”, Zamaninia told Turkey’s Anadolu news agency. Iran holds the world’s second-largest gas reserves after Russia and the world’s fourth-largest oil reserves.
However, Iran’s ambitious plans could put it at odds with rival oil and gas producers in the Middle East that also aim to boost production. Iran signed up to OPEC’s agreement with non-OPEC producers to cut oil production, which came into effect at the start of this year and is due to expire in March 2018. Geopolitical tensions between Iran and Saudi Arabia, the world’s largest oil exporter, have escalated since the 2011 Arab Spring. The Saudis and a number of allies recently broke ties with Qatar – the world’s largest LNG exporter, which shares the world’s largest gas field with Iran. Riyadh accused Doha of being too cosy with its regional arch-enemy. Tehran subsequently upped the ante by sending food aid to Qatar.
Iran is negotiating with a number of IOCs about developing the country’s production potential, and Zamaninia said his country aims to sign 10 contracts over the next 10 months. Discussions are being held on 27 projects that are collectively worth $200 billion, and the country expects to sign deals with Russian firms within the next 5-6 months, Zamaninia added. Iran has been discussing upstream projects with Gazprom and Lukoil.
The plans suggest Tehran has not been thwarted by the threat of renewed US sanctions. Zamaninia said the recent deal with French major Total suggested a return to the era of sanctions is “very unlikely, if not impossible”.
South Pars contract
Iran signed its first memorandum of understanding since the sanctions were ended with Total in 2016, and earlier this month signed a $4.8 billion Iran Petroleum Contract with the French major and China National Petroleum Corp. (CNPC) to develop Phase 11 of the South Pars gas field. Total will be operator of the project, with a 50.1% share, while CNPC holds a 30% stake. Petropars, a subsidiary of state-owned National Iranian Oil Co., holds a 19.9% stake. The contract will be carried out in two phases over 20 years.
Iran said it expects to produce 56 MMcm/d (equating to 20.4 bcm/y) of gas from Phase 11 once it is in full production. South Pars holds gas reserves estimated at 51 trillion cubic metres as well as 50 billion barrels of condensate and NGLs.
Zamaninia said Tehran is also considering the viability of a pipeline to send Iranian gas to Europe via Turkey. The project has been mooted in the past but is unlikely to be developed anytime soon as it would put Iranian gas into competition with Russian exports in a market that has seen little growth in demand in recent years.
Russia is the largest supplier of gas to Europe and is a key regional ally of Turkey and Syria, which has long-standing ties with Iran. Meanwhile, Turkey plays a large role in the region’s geopolitics because it borders Syria, Iraq and Iran.
Peter Stewart