The Iranian Ministry of Petroleum envisages increasing the country's share of global gas trading to around 10% under Iran's Vision Plan 2025.
Natural gas exports for Iran, which is rich in this source of hydrocarbon, have always been significant and prioritized. The significance of natural gas exports is on the rise in light of political, economic and security issues. During the first five decades following the establishment of National Iranian Gas Company (NIGC), the focus was on domestic development; therefore, gas delivery to neighboring countries was overshadowed.
The startup of Phase 11 of South Pars gas field during the tenure of the 11th administration helped bring Iran's gas output to 800 mcm/d. As a result, 92% of Iran's 80-million population is currently connected to national gas network. Now that the domestic gas supply network has been developed Iran plans to raise its low share of global gas trading to 10% by 2025.
Sitting atop the largest gas reserves in place in the world and taking into consideration environmental concerns have pushed neighboring countries to envisage receiving gas from Iran. Over recent years, negotiations have been held with neighboring countries for gas supply to them. Iran is planning to raise its share of global gas trade and increasing gas exports to regional countries lies within this framework.
Gas Price Dispute Settled
Iran finalized an agreement with Turkey in 1995 to start exporting 10 bcm a year of gas to its neighbor. The Iran-Turkey gas agreement has been through ups and downs in recent years due to a price dispute. Turkey has taken the issue of gas price to international arbitration twice.
Iran was obligated twice to reconsider the price of gas delivery to Turkey; once in 2012 when Iran had to cut the price by 12.5% and a second time in 2016 when the price was cut by 13.3%.
Iran had charged Turkey $14.2 billion for gas exports during the 2012-2016 period, but after a ruling was issued by international arbitration body for Iran to cut prices at the aforesaid rates, Iran had to pay back the required sum to Turkey.
Hamid Reza Araqi, CEO of NIGC, said recently Iran had settled its debt with Turkey.
According to NIGC officials, there is potential for Iran to increase its gas export rate to Turkey. That requires negotiations between the two countries with a view to reaching agreement.
Gas Exports to Iraq
Iran signed two separate agreements for exporting gas to Iraq. One of them signed in 2015 involved a 6-year agreement for delivering up to 35 mcm/d of gas to Basra. Under this agreement, Iran would supply 20 mcm/d of gas in cold seasons and 35 mcm/d in hot seasons to Basra. Another agreement was finalized in 2013 for export of Iran gas to Baghdad's power plant via the Iran Gas Trunkline 1 (IGAT1). Last July, Iran started delivering 7 mcm/d of gas to Baghdad, which currently varies between 8 mcm/d and 10 mcm/d.
Araqi said Iran had prepared the necessary infrastructure for gas delivery to Basra.
Talks with Georgia
The agreement for Iran's gas exports to Georgia was signed in August 2016 with the Georgian International Energy Corporation for the delivery of 40 mcm over a four-month period. The reason for the short duration of the agreement was that Iran was for the first time stepping into markets beyond its neighbors. Therefore, it had to assess different aspects of work.
"Georgia must receive its gas from Armenia and Russia. The gas delivered to Armenia is to be transformed into electricity and sold to Georgia," Araqi said.
Europe Gas Supply
Europe's 730-million-strong market may not be a priority for Iran when it comes to efforts by Tehran to increase its share of global gas trading as neighboring countries would be more effective. However, the Iranian Ministry of Petroleum has the option of gas exports to Europe on the table. The only route for Iran to supply gas to Europe would be via Turkey. Iran and Turkey have for years been in talks over gas exports to Europe. Turkey intends to purchase gas from Iran and Russia to re-export it to Europe. But Iran does not favor such option.
"We prefer to export gas ourselves and pay for transit to deliver gas to Europe. The transit costs are high for us; however, we are interested in exporting gas to Europe," Araqi said.
Amir-Hossein Zamani-Nia, Iran's deputy minister of petroleum for international affairs and commerce, said: "Since Europe is receiving gas more than it needs gas exports to this continent is not a priority for us."
Azerbaijan Gas Swap
The NIGC and Azerbaijan's state-run gas company signed a deal in August 2004, under which Azerbaijan supply gas to the autonomous Republic of Nakhichevan via Iran for a period of 22 years. The agreement took effect in 2005.
Iran is currently receiving gas from Azerbaijan via Astara before supplying it to Nakhichevan. Azerbaijan delivered 400 mcm a year of gas to Nakhichevan through this swap mechanism in 2013 and the same amount the following year.
Gas-for-Electricity Deal
The ceiling for Iran's gas exports to Armenia in return for electricity is below 1 mcm/d. Of course, the Armenian side has filed a request for increasing its gas imports from Iran to 2.5 mcm/d, which is under consideration by the NIGC.
The NIGC prefers to strike a direct agreement with Armenia for gas exports in order to receive money for gas.
Cooperation with Turkmenistan
Iran was importing gas from Turkmenistan until a year ago in order to feed its northern provinces. But Turkmenistan stopped supplying gas to Iran under the pretext of price modifications and it finally took the case to international arbitration.
But due to the inauguration of Damghan-Neka pipeline, Iran was no longer dependent on Turkmenistan's gas to feed its northern provinces.
Araqi said Iran did not need Turkmenistan's gas; however it continued with negotiations with its neighbor.
"Maybe in the future we would have trade ties with our northern neighbor, i.e. Turkmenistan. However, we would no longer rely on their gas because we are not faced with urgent conditions. One day we may go towards exchanges, which would not be a matter of urgency," he said.
Araqi said cooperation with Turkmenistan was continuing in other sectors including gas swap.
Readiness for Pakistan Gas Delivery
Iran envisaged a plan in early 1990s to supply gas to Central Asia with a view to delivering gas to Pakistan, India and even China. India and Pakistan initially showed high interest in receiving Iran's gas; however, due to a variety of political factors and the interference of big powers, the project, which was initially dubbed Peace Pipeline, was abandoned. Iran has been proceeding with this project separately with India and Pakistan because of the strategic importance of such pipeline. During a specific period when India cast heavy doubt on the project, Iran went alone with Pakistan by signing an agreement in 2009 for the start of gas exports in 2014. However, it did not materialize as Pakistan presented pretexts like tough sanctions which were still in place on Iran.
Hassan Montazer Torbati, CEO of Gas Engineering and Development Company, said the infrastructure was ready for Iran to deliver gas to Pakistan.
"We have extended the Iran Gas Trunkline 7 (IGAT7) as far as eastern Iran, and gas supply to Makran and Chabahar is under way. We are also completing a distribution network in the east in order to supply domestic needs," he said.
As soon as Pakistan expresses its readiness to receive Iran's gas, the project would become operational six months after.
Iran's rich gas resources along with its extended gas distribution network have empowered the country to increase its share of global gas trading and become a leading player in this market.
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