The export of natural gas to Europe via pipelines is wishful thinking, as neither Russia nor the US will allow Iran to enter such a lucrative market, the former managing director of National Iranian Gas Company said.
“Selling gas to Europe is more lucrative than marketing it in neighboring states, yet tackling its potential challenges requires certain political and financial considerations,” Hamidreza Araqi was also quoted as saying by ILNA.
The ongoing conflict between Russia and Ukraine is to the benefit of the US as it can expand its liquefied natural gas footprint in Europe, he added, stressing that in addition to Russia, Iran has another serious rival, the US, to contend with to enter the European gas market.
Simply put, supplying gas to Europe through pipeline is out of the question and the only way for NIGC to have a say in that market is by exporting LNG and liquefied petroleum gas.
The former NIGC chief said it is regrettable that we are still deprived of the technology to produce LNG although in the last 10 years, more than $5 billion have been invested to complete the country’s largest LNG venture, known as Iran LNG at Tombak Port, 50 km north of Asalouyeh Port in Bushehr Province.
Referring to negotiations between NIGC and Russia's oil and gas giant Gazprom to develop the Iran LNG project, he noted that it is not clear whether Russians can do it, as the equipment in the facility are very old and Russians may want to start the plan from scratch.
According to the official, Turkey is a preferred route to transfer the country's gas to Europe. However, negotiations with Turkish officials have not come to fruition, “as they want to purchase our gas and export it to their intended destinations".
This is while Iran wants to use the neighboring country as a gateway to Europe and it is willing to cover all transit costs.
Commenting on hurdles concerning financial and operational feasibility, Araqi noted that laying thousands of kilometers of gas pipeline to Europe is not economically viable.
"NIGC is enthusiastic about exporting the strategic commodity to far-flung destinations, yet it is neither financially nor politically viable," he said.
Domestic Demand
All of Iran’s gas export of about 50 million cubic meters per day flows through pipelines, mainly to Turkey and Iraq. This is dwarfed by its production that stands at around 980 mcm/d, most of which meet the increasing domestic demand.
Officials have for years promoted the idea of laying and extending a gas pipeline through Azerbaijan or Armenia in the northwest through Europe, but the scheme has not taken off due to financial reasons as well as complications of bringing together several nations to execute a multibillion-dollar venture.
“Despite peak production in South Pars Gas Field off the Persian Gulf, pressure reduction has emerged gradually and could get worse,” he said, adding that the installation of offshore compressor stations in the field is the only long-term option to control gas pressure reduction.
Araqi stressed that contrary to popular belief, the field will not be able to produce 630 million cubic meters of gas per day (the current output) forever and this clean resource should be used as prudently as possible.
Referring to past short-term policy to postpone pressure reduction, he said the company has started to acidize offshore wells and this will delay the process by two years.
"By 2021, the pressure is expected to decline by 28 mcm per year unless special platforms and compressors are installed. To do so, each phase will need at least $1 billion.”
South Pars accounts for 80% of Iran’s gas need and decline in SP output could create problems for consumers.
According to Pars Oil and Gas Company, the new installations are 10 times heavier and domestic firms have undertaken the complex tasks.
“However, relying solely on them could carry sizable risks because they have never performed such a task. Installed gas platforms weigh almost 2,500 tons and are designed to produce 28 mcm of gas per day. However, the new platforms, which will hold the compressors, are estimated to weigh at least 20,000 tons," the company said.
The platforms, which are necessary to maintain gas pressure, will be unrivaled in the region and there are only a few of its kind in the world. One was constructed in Australia with the help of French energy company Total.
