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Energy Politics in Iran Iran strategy for natural gas

Prospects for gas export to Europe

Yasaman MirfendereskiMyrto Theofilidi

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Content

Iran strategy for natural gasEnergy overviewGeo-strategic position Gas Export

Prospects for gas export to EuropeNatural gas in Europe - OverviewProspects of gas suppliesExisting and planned gas pipelinesAlternative option - LNG

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Energy overview

Energy sourcesEnergy production and demand

OilNatural Gas

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Energy overview: Energy sources

The world's second biggest proven oil reserves after Saudi Arabia and the second biggest gas reserves after Russia.

Fossil fuels dominate domestic energy use. Oil and gas account for 98%.

• Oil accounted for 49.5% of Iran’s primary energy demand in 2004, down from 84% in 1971. Its share is expected to fall to 41% by 2030.

• Natural gas accounted for 48.6% of Iran’s primary energy demand in 2004, up from only 12% in 1971. The government has promoted gas consumption –partly through subsidies -- to free up oil for export. Gas demand is expected to increase by 3% per year, accounting for 55% of primary energy demand by 2030.

Coal, hydro, nuclear energy and renewable energy: each less than 1% of Iran’s primary energy demand in 2004

http://www.iea.org/Textbase/stats/balancetable.asp?COUNTRY_CODE=IR

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Gas48,6%

Oil49,5%

Hydro0,7%

Comb. renewable. &

waste0,5%

Coal0,7%

145,853 ktoe

Energy overview: Share of total Energy supply

Source:IEA Energy Statistics

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Energy overview:Oil production and demand

Oil reserves: 137.5 billion barrels at end 2005, 11.5% share of total (second largest after Saudi Arabia with 264.2 billion barrels, 22% share of total)

Oil production: 4.04 mb/d at the end 2005 and is projected to increase to 4.5 mb/d in 2010 and 6.8 mb/d by 2030

Oil consumption: 1.66 mb/d at the end 2005, 2.0% share of total

Oil exports are now 2.4 mb/d and are expected to be 2.8 mb/d in 2010 and 4.4mb/d in 2030, accounting for 12% of Middle East exports.

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Energy overview:Gas production and demand

Natural gas reserves: 28 tcm, 14.9 % share of total (second-largest in the world after Russia with 47.82 tcm, 26.6% share of total)

Gas production: 87 bcm at 2005, 3.1% share of totaland is expected to grow to 110 bcm in 2010 and 240 bcm in 2030.

Gas consumption: 88.5 bcm at 2005, 3.2% share of total

Natural gas trade movement 2005 by pipeline:- Import: 5.8 bcm from Turkmenistan - Export: 4.32 bcm to Turkey

Till now, Iran was a net importer of gas but is expected to become a net exporter of 5bcm by 2010, increasing to 30 bcm in 2020 and 57 bcm in 2030.

bcm: billion cubic meter Source:Oil and gas Journal 2005

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Energy overviewEvolution of energy production

Source:IEA Energy Statistics

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Energy overview:Internal issues

Energy crisis: Iran revolution of 1979 followed by Iran-Iraq war and US sanction- The loss of the Iran‘s energy supply.

Energy subsidies: equivalent to 10% of GDP with the average overall subsidy rate of 80.4% - By removing subsidies oil demand would be 6% lower and gas demand would be 13% lower in 2030. - Removing subsidies could give Iran 48% savings in energy and a 49% reduction in CO2 emissions.

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Gas overviewReasons for Iran not becoming a netexporter of gas

strong demand at the domestic marketfor fueldomestic environmental policiespertaining to substitution of fuel oil and gasoil with natural gas gas usage for re-injection into the oil fieldsIncreasing gas exports may lower crudeoil exportsthe inability of some potential buyers in separating politics from businessresolving long festering disputes such as the India-Pakistan dispute over the status of Kashmir.sanctions could make it difficult for any pipeline project involving Iran to obtain financinginsufficient investment resources

Source : International Energy Agency

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Geo-strategic positionIran shares land and sea borders with 15countries

Iran, located strategically in the vicinity of Russia, the CIS countries and the Caucasus, as well as on the eastern border of Europe

Source: www.heartland.it

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Geo-strategic positionIran gas situation

Second largest natural gas reserves of the world (28.2 trillion cubic meters of proven natural gas reserves of the world)Around 62% of Iranian natural-gas reserves have not been developed. Iran’s major gas deposits: in the southern part of the countryThe major recognized natural gas deposit of the offshore portion: The South Pars field in Persian Gulf (500tcf, or 8% of the entire world’s or 40% of Iran’s total natural gas reserves)Potential customers for Iran's gas: Turkey, Ukraine, Europe, Pakistan, Armenia, Azerbaijan, India, Taiwan, South Korea, and coastal China (both EU markets in the west and the growing energy markets of South Asia and beyond)

Possible export ways: either via pipeline or by LNG tanker

Source: www.stainless-steel-world.net/

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Gas ExportIran Gas Export policy in general

policy of peaceful engagement with its neighbors and trade partners

plan to become a major natural gas producer and exporter for the world market within the next decade (increase the gas production from current 260 bcm/y to 400 bcm/y in the next ten years and to, at least, 600 bcm/y in the next 20 years)

interested to have 10% of gas trade of the world in form of export through pipeline, LNG or others.

Statement by: M.A. Sarmadi-Rad, Director of Regional Economic Cooperation, MFA of Islamic Republic of Iran

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Gas exportPipeline network

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Gas exportGas network

Source: www.heartland.it

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Gas exportGas Pipeline-Domestic

Source: www.heartland.it

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To start 2002; then shelved BHP

Billiton(Iran ? Pakistan ? India)

Started 1996 (extended to Greece, 2002); operational 2000

Iran- Turkey? Greece (? W. Europe?)

Started 2001Khoi (NW Iran) - Azerbaijan

Under discussionIran-Armenia-Georgia-

Crimea-Ukraine (? Europe?)

Started 2001Iran-Armenia

Started 1999Hyundai Heavy IndustriesTotalSouth Pars ? Asaluyeh; twin

undersea pipelines

in discussion stageIGAT 4

Currently being constructed by Russian and local

contractorsIGAT 3

Snamprogetti, SaipemIGAT 2

IGAT 1 (First Iran Gas Trunkline)

Dates Main (sub)contractors;

main suppliers Main

operatorsName and route

Gas exportGas Pipeline Projects

Source: www.stainless-steel-world.net/

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Gas exportGas Export situation via pipeline

Presently, Iran is exporting gas to Turkey.

Export of natural gas to Armenia and Azerbaijan is imminent.

The natural gas pipeline to Pakistan and India, “Peace Project” is being seriously followed up.

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Gas exportExport prospects

Russia may not be able to meet the increasing demand of Europe (growing demand for natural gas in FSU countries and in its domestic market.)A viable swap arrangement can be reached between Iran and Russia (Russia‘s fear of Iran becoming a gas monopole) Azerbaijan tendency to buy Iran’s gas from 2007 (because of price increase of Russian gas)Fast-growing population of Pakistan and its growing demand for gas over the next two decades India's gas demand will almost double by 2015 Gas pipeline from Iran to the Armenia and the possibility of expanding the project to export more natural gas to pass through Armenia for other countries

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Gas exportIran-Pakistan-India pipeline

IRANAfghanistan

Pakistan

India

Dehli

Source:

Iran to India Natural Gas Pipeline, TED

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Gas exportIran-Pakistan-India pipeline

India- A broader market for Iran’s gas - Iran hopes to gain political support fromIndia

Pakistan - Strategically important for Iran (check USinfluence in the region)

- The Pakistan as a transit route to exportnatural gas to India. (a source of income for also increase its stability in the region)

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Gas exportLNG Projects

Four LNG plants on the Persian Gulf coast with a total capacity of nearly 37mt/y.

The LNG projects are:1- Persian LNG with a capacity of 10.6 mt/y targeting European

countries,2- Iran LNG with a capacity of 8.8 mt/y targeting European and

Indian markets,3- Pars LNG with a capacity of 8.8 mt/y targeting Far East market,

and4- NIOC LNG with a capacity of 10 mt/y targeting variety of world

markets.

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Gas ExportLNG Map

Source: www.heartland.it

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Gas exportProblems concerning LNG

Lack of experts in field of LNG.

high development, storage and transportation costs

stiff competition, particularly since many other regional LNG suppliers (Oman, Qatar and the UAE) have already locked up much of the Far East market.

Most LNG plants use technology developed by U.S. companies.

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Conclusion

Despite having the second biggest reserves, being a net importer

Plan of increasing the gas production to become a major exporter in coming decades

The unique geo-srtategic position

Interested in extendeing and builiding the pipelines to Central Asia and Europe

Further extension of the exisiting pipeline network to the East (Pakistan and India) and in the west (a new line from Turkey to Europe) would complete the link between Asia and Europe

LNG – A possible alternative