A view of Iran's South Pars Gas and Oil Field[/caption]Iran will lead a club of the worlds biggest natural gas exporters as its own shipments abroad are hampered by U.S. and European Union sanctions that force the country to burn off billions of dollars worth of the fuel.
Mohammad Hossein Adeli, the countrys former deputy foreign minister, was elected secretary-general of theGas Exporting Countries Forum, whose 13 member countries hold 60 percent of the worlds reserves, the group said yesterday in a statement. Adeli, who will replaceLeonid Bokhanovskyof Russia next year, vowed to turn the Persian nation into a major player among the gas exporting countries, he told reporters after a group meeting in Tehran.
U.S. and EU trade sanctions over Irans nuclear program have cut the Persian nations crude exports, its largest revenue source, by half since 2011 and are stifling projects to export some of its gas reserves, the worlds largest. Iran is one of three GECF members that are net importers as the group faces increased competition from liquefied natural gas projects from the U.S. to Australia.
The vote is a signal that attitudes toward Iran perhaps are thawing, and tension easing, since they were elected to represent this group on the international stage,Tom James, a Dubai-based managing director of Navitas Resources Ltd., an energy and commodity markets adviser, said yesterday by e-mail.
Bank Governor
Adeli was fired as deputy foreign minister in 2005 by then PresidentMahmoud Ahmadinejad. Prior to that, he served as ambassador to Canada and the U.K. and was Irans central bank governor. He holds a Ph.D. in business administration from California Coast University, according to thewebsiteof the Global Policy Journal. He is founder of theRavand Institutefor Economic and International Studies, which promotes global dialog and consensus-building, according to its website.
The country nominated Adeli because he is accustomed to moving in high places to accelerate Irans development of Irans most abundant export resource, one that will generate significant foreign exchange for them,Zach Allen, president of PanEurasian Enterprises Ltd., a Raleigh, North Carolina-based tracker of LNG shipments, said Oct. 30 by e-mail.
Iran burned off 11.4 billion cubic meters (400 billion cubic feet) of gas in 2011, the last year for whichdatais available, according to the World Banks Global Gas Flaring Reduction Public-Private Partnership. That would meet about a quarter of demand in South Korea, the worlds biggest buyer of LNG after Japan. The gas is worth about $7.3 billion on Asian spot LNG markets, according to Bloomberg calculations using World Gas Intelligenceprices. Iran burns off the gas produced alongside oil because it lacks the infrastructure to process and transport it to markets.
LNG Prices
LNG prices in northeast Asia rose to $17.50 per million British thermal units in the week ended Oct. 28, the highest since Feb. 25, according to World Gas Intelligence assessments of cargoes for delivery in four to eight weeks.
Irans reserves must give them an interest in what happens with the price of gas longer term, saidNeil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein. They have the most at stake here after Russia in terms of what happens to the industry.
Iran is scheduled to hold talks over its nuclear program with the U.S., U.K., France, Germany, Russia and China on Nov. 7-8 in Geneva in hopes of reaching an agreement that loosens sanctions. Iran is willing to assent to more stringent inspections as part of confidence-building measures intended to defuse a decade-long standoff over its nuclear program, Deputy Foreign MinisterAbbas Araghchisaid last month.
Essentially Absent
The country, the worlds third-largest gas producer, is a net importer of the fuel, according to BP Plcs Statistical Review, which last year rated its reserves above Russias in a move denounced by Gazprom, the worlds biggest exporter.
Iran is essentially absent from the regional and global markets, NavitasJamessaid Oct. 30 by e-mail. Iran could easily aim for a 10 percent share of global gas trade.
The sanctions have hampered development of Irans South Pars, an extension of Qatars North Field that make it the worlds largest gas reservoir, and drove away international energy companies.
Royal Dutch Shell Plc, Repsol SA and Total SA abandoned plans for LNG in Iran, depriving it of the buyers, money and expertise needed to make and sell the fuel, which is chilled to minus 162 degrees Celsius (minus 260 Fahrenheit) to shrink it to 1/600th of its original size for transport by tankers.
Iran LNG
The Persian LNG project, from which Shell and Repsol withdrew in 2010, had an annual capacity of 16.2 million metric tons, or about 5 percent of the worlds current capacity. The Pars LNG site abandoned by Total in 2009 had a planned capacity of 10 million tons. That compares with 61.2 million tons under construction in Australia and 39.55 million tons of U.S. projects that have signed off-take agreements or are being built, Bloomberg Industries data show.
We will try to cooperate with other exporters that are not a member of this forum as it is beneficial for all of us, Adeli said. Im hopeful that.
Of the four LNG projects Iran originally envisioned, its pushing ahead with one, a 10.5 million-ton-a-year facility known as Iran LNG, at Tombak near the Gulf port of Assaluyeh. The government is working alone on the $3.3 billion project after suspending a contract with its Chinese partner, Mehr news agency reported in September last year.
The relaxation of sanctions would encourage international oil companies to reactivate Iranian LNG projects,Robin Mills, head of consulting at Manaar Energy Consulting and Project Management in Dubai, said in an Oct. 29 phone interview.
Improve Access
Adeli may improve Irans access to governments and global industry leaders, Allen said. The opportunities there are enormous for both Iran and foreign investors.
Iran and Oman may form a joint company to market the Persian nations gas in the region, Oil MinisterBijan Namdar Zanganehtold reporters in Tehran yesterday. The country will finalize a deal to supply gas to Iraq soon, Press TV reported, citingHamid Reza Araqi, managing director of National Iranian Gas Co.
Shell complies with sanctions on Iran, Sarah Bradley, a company spokeswoman in London, said by e-mail. Kristian Rix, a Repsol spokesman in Madrid, declined to comment. Total didnt return an e-mail seeking comment.
Nationalization History
Attracting companies to invest in Irans gas industry would be a challenge even without sanctions, Beveridge said. The country has a history of nationalizing oil and gas assets and would need to offer attractive terms to secure long-term foreign investment, he said.
I would be skeptical you would see anything big occur in the near term, Beveridge said.
Other nominees to replace Bokhanovsky included RussiasSergey Pankratov, a Gazprom deputy head of department, while Libya put forwardAbdul-Rahman Ben Yezza, a former oil minister.
The GECF member states are Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Oman, Qatar, Russia, Trinidad and Tobago, United Arab Emirates and Venezuela. The groups next ministerial meeting will be in Doha in 2014.
By Bloomberg
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