Iran eyes 10% share in global gas trading

SHANA — Some experts argue that gas market parameters have changed drastically over the past decades. First and foremost for them is the change in price.

As a result of normalized prices, new suppliers like the United States have stepped into gas market. Until 2005, the US was a leading importer of gas in the world. Now it is a major gas exporter whose consignments have come even as far as the Persian Gulf region, which is a hub of oil and gas in the world. Other countries like Australia, which used to be insignificant producers, are now among to suppliers of gas.

Australia is set to overtake Qatar which is currently the largest producer of liquefied natural gas (LNG).

The new players have created a new space in the market, and have changed the import-export balance. For example, Japan is currently the largest importer of gas in the world; however, within upcoming years it will become the fourth largest importer behind countries like China and India.

The gas market is currently dominated by tight competition. Gas contracts in Europe have been modified significantly because Europe is winning more customers due to its focus on LNG. Environmental issues and energy supply security concerns are among factors affecting global gas market. Except the US, all countries agreed under the Paris climate agreement – COP21– to shift from a high-carbon society to a low-carbon one. Gas remains the cleanest fossil fuel whose contamination rate is 40% of oil contamination. Gas is introduced as a clean fuel in the world because it is accessible and affordable when compared to other fuels. Last year, Europe granted $106 billion in subsidies to encourage people to use clean fuels like gas.

Iran holds around 485 tcf of gas, which is estimated by BP to be the largest in the world. However, only 191 tcf of Iran’s gas is recoverable. Therefore, investment in this gas fields in Iran could be logical, as Iran is a potentially big player in gas market, as well. The country is following up on gas pipeline projects alongside its LNG projects.

Merely having gas resources could not transform a country into a producer and exporter of gas. Therefore, the volume of gas extracted and produced is a determining factor. In recent years, gas has been recovered from the supergiant offshore South Pars gas field which Iran jointly owns with Qatar in the Persian Gulf. Many projects have been under way for increasing gas recovery from South Pars; however, the country still envisages development of export infrastructure like the Iran Gas Trunkline 6 (IGAT6) and gas pressure booster stations in order to enhance its share of gas trading market, particularly in neighboring countries.

IGAT6 is one of the most strategic gas trunklines in Iran. The trunkline, which is in the final stages of production, is expected to come online in January.

The 1,200-kilometer-long project would carry 110 mcm/d of gas from Assaluyeh to western and northwestern provinces. IGAT6 would facilitate gas exports to Iraq via Shalamcheh and Naftshahr.

Iran is currently exporting 50 mcm/d of gas to neighboring states, up 64% year-on-year. The Ministry of Petroleum plans to raise Iran’s share of global gas trading to 10% by 2021. That would see Iran’s share of gas trade increase seven-fold.

Turkey, Sustainable Gas Market

In the wake of the 1979 victory of the Islamic Revolution, as soon as Iran’s gas export to the Union of Soviet Socialist Republics (USSR) was halted Turkey was considered as the first market for Iran’s gas exports. Therefore, Turkey is the oldest buyer of Iran’s gas. Iran signed an agreement with Turkey in 1996 for selling gas. Under the agreement, Iran can reduce the flow of gas to Turkey in winter when domestic consumption increases.

Gas export to Turkey is carried out through the extension of IGAT-2, which is the main source of supply to Fajr-e Jam gas refinery. This pipeline is extended as far away as Qazvin before going to West Azarbaijan Province to be extended to Turkey via the Bazargan border post.

Iran is currently exporting 30 mcm/d of gas to Turkey. Last year, Iran’s gas exports to Turkey totaled 8 bcm.

According to Petroleum Ministry plans, annual exports to Turkey are to reach 70 bcm by 2021, up from the current 10 bcm. Pipeline would handle 52 bcm and the rest would be in the form of LNG.

Iraq Overtaking Turkey

Iran’s gas exports to Baghdad is set at 7 to 25 mcm/d. Iran started pumping gas to Baghdad via Naftshahr in June and has so far delivered 1.2 bcm of gas to its neighbor. Two border terminals in Naftshahr and Shalamcheh are designed to export natural gas to Iraq. For that purpose, two pipelines which branch out from IGAT6 – one 231 kilometers long and one 141 kilometers long – have been designed and laid out.

Currently, 14 mcm/d of gas is pumped from the Ilam and Kermanshah network to Baghdad power plants. Any possible increase in this amount depends on domestic consumption.

As per Iran-Iraq gas agreement, after the completion of IGAT6, gas export will start from 7 mcm/d and could reach 35 mcm/d.

The Shalamcheh terminal is planned to deliver gas to Basra. Like the Baghdad agreement, it can pump up to 35 mcm/d of gas.

In the first year of agreement, the National Iranian Gas Company (NIGC) would be required to export 7 mcm/d of gas to Iraq. Upon the request of the Iraqi side, this amount would double in hot season.

Iraq plans to take delivery of 20 bcm of gas a year from Iran. Gas exports to Iraq has already begun and construction of infrastructure for gas export via Khorramshahr and Shalamcheh is under way.

By signing two agreements, Iraq would be importing 40 to 70 mcm/d of gas from Iran. Therefore, it would overtake Turkey in gas imports from Iran.

Iran Gas to Europe?

Iran’s priority for gas exports must be its neighboring countries; however, negotiations have been held in recent years for exporting gas to Europe.

By building up to 200 kilometers of pipeline, Iran would be able to pump gas to the Persian Gulf states. Due to lower costs, shorter route and time, these countries must be Iran’s top priority due to profitability. But at the same time, gas exports to Europe would be a factor for Iran to increase its share of global gas trading. Natural gas accounts for 22-23% in the European Union’s energy basket. According to studies conducted by the European Parliament, 12 countries could export gas to Europe. Among them Iran is the best potential supplier of gas.

Iran is able to export 25 bcm to 30 bcm a year of gas to Europe via eight routes. The Iran-Iraq-Syria, Iran-Turkey with several options including Black Sea via Azerbaijan and Georgia, and Armenia-Georgia-Black Sea are among these options. To that effect, gas trunklines for gas delivery in big volumes and under high pressure are among the NIGC plans. So far more than 9 pipelines have been laid out across Iran.

Meantime, in light of the gas industry’s plans to enhance its share of global trading, IGAT9 and IGAT11 are on the agenda to increase the capacity of gas transmission and exports.

1 mcm/d Gas Exports to Nakhichevan

Last year, the Republic of Azerbaijan and Nakhichevan signed a swap agreement, based on which Iran received less than 1 mcm/d of gas from Astara for consumption. In return for the gas, Iran would deliver an equal amount to Nakhichevan. Under such circumstances, in exchange for every time of gas transmission, the parties to the contract are factored. Therefore, this project would be profitable for Iran and would establish a bilateral gas transaction.

If any problem occurred in the Astara area or IGAT1, requiring overhaul, a source from Azerbaijan would supply gas in order to prevent any disruption in the flow.

Saeed Takavoli, CEO of Iran’s Gas Transmission Company, says: “When we receive gas from a country under swap we have no obligation to deliver the same received gas to destination.”

“For example, we receive gas from Turkmenistan and consume it domestically, but we deliver an equivalent amount to another country,” he said.

Iran is currently exporting 1 mcm/d of gas to Nakhichevan. Gas exports to Nakhichevan totaled 250 mcm during the first eight months of the Iranian calendar year which started on March 21, 2017.

250 mcm Gas Exports to Armenia

Iran and Armenia signed a 20-year gas-for-electricity agreement in 2004. Under this agreement, Iran would supply gas to Armenia as feed of its power plants and in return Iran would receive electricity from Armenia. Armenia started importing gas from Iran in mid-2009.

Iran’s Minister of Petroleum Bijan Zangeneh recently said that Iran would raise its gas exports level to Armenia from the current 1 mcm/d to 3 mcm/d by late 2018.

For a short period of time when Armenia had problems with importing gas from Russia, Iran exceptionally supplied 3 mcm/d of gas to Armenia as a neighborly gesture.

In return for each cubic meter of gas, Iran imports 3kwh of electricity from Armenia, which currently stands at 3.2 kwh.

According to Iran’s Ministry of Energy, Iran received 300 MW of electricity from Armenia and 150 MW from the Republic of Azerbaijan last summer.

Based on Iran-Armenia gas-for-electricity deal, 250 mcm of gas was exported to Armenia during the first eight months of the current calendar year.

Iran pumps gas to Armenia via a 110-kilometer pipeline stretching through Tabriz.

The CEO of Iranian Gas Transmission Company has said that Iran exported 365 mcm of gas to Armenia in the calendar year to March 2017. The pipeline can handle up to 2.3 bcm of gas exports a year.

Gas exports, which are among priorities in Iran’s 6th Five-Year Economic Development Plan, have in recent years been on the agenda of the Ministry of Petroleum.

Iran is currently in contract with Turkey, Armenia, Azerbaijan, Turkmenistan and Pakistan in gas exports, imports and swap. Furthermore, negotiations are under way with Afghanistan, Oman, Kuwait and other Persian Gulf Arab states. Iran hopes to partly realize its major objective of exporting gas to neighboring countries. By increasing production from the South Pars gas field, Iran would have a capacity to export 200 mcm/d of gas. Other enhancement projects would raise the figure to 350 mcm/d.

Iran, which currently has around 34 tcm of proven gas reserves, constitutes only 1.5 percent of global gas trade. The figure is expected to change significantly thanks to plans and prioritizations in the gas sector.


Courtesy of Iran Petroleum