Gas Export to Europe Needs €10b of Infrastructure

Gas Export to Europe Needs €10b of InfrastructureGas Export to Europe Needs €10b of Infrastructure

A total of €10 billion should be invested to build the infrastructure required for exporting Iranian gas to Europe, deputy oil minister for international affairs said.

 Azizollah Ramezani also said the two sides should assess the project through negotiations backed by a new determination, amid the recent positive atmosphere, Shana reported.

The project necessitates a comprehensive plan. The high cost and complexity of infrastructure mean significant export volumes would take some years to materialize. It may take at least five years for Iran to ramp up production and build the pipelines needed to become a large gas exporter.

"Iran can create a huge potential for gas exports to Europe once new phases of the giant South Pars Gas Field become operational," Ramezani said.

The EU is increasing the urgency of a plan to import natural gas from Iran, as relations with Tehran thaw while those with top gas supplier Russia grow chillier due to the Ukraine crisis.

Russia meets a third of Europe's gas demand worth $80 billion a year. The EU has imposed sanctions on Moscow over the conflict in Ukraine, increasing the need for gas from elsewhere.

Iran has the potential to become one of the world's top gas producers, thanks to its 34 trillion cubic meters of natural gas reserves—the world's largest—accounting for around 18% of the world's total.

"Natural gas could be transferred to Europe through eight different routes," the official said without elaboration.

Iran has focused for many years on local production and consumption, but now plans to expand activities outside Iran when sanctions are lifted. Currently, Iran has nearly 100 million cubic meters per day of gas ready for export, Ramezani said in June.

  Exports to Iraq

An Iraqi delegation will visit Iran in the next 10 days to sign a final contract for exporting Iranian gas to the western neighbor, the official said.

The delegation will concurrently hold meetings with the International Department of the National Iranian Gas Company and the National Iranian Gas Export Company to finalize contract terms.

Tehran and Baghdad signed a draft deal in 2013 to transfer Iran’s gas to two Iraqi power plants. About 30-50 mcm/d of gas will be exported to Iraq, which are estimated at $4 billion to $6 billion.

Gas will be exported from Naftshahr region in Kermanshah Province in the first phase, by extending the Sixth Iran National Gas Trunkline.

  Gas Export to Turkey

Turkey has not yet declared a force-majeure on natural gas import from Iran, which was halted pursuant to an attack by saboteurs on the pipeline in Turkey's eastern province of Agri last Monday.

Ramezani said application of force-majeure is based on the buyer's official declaration stipulating the exact causes giving rise to the nonperformance of each party's obligation, as per the contract signed between the two countries in 1996.

"Turkey has not officially declared the cause of accident as of yet. The authorities eligible to verify a force-majeure are the two countries' chambers of commerce," he said.

Iranian officials said gas flows would resume once Turkey's Botas, the country's gas importing company, is ready to receive gas.

Turkey buys around a quarter of its 40 billion cubic meters of piped natural gas imports from Iran, making its eastern neighbor its second-biggest supplier after Russia.

According to data released by Turkish energy regulator EPDK in 2014, Turkey imported 8.932 bcm from Iran, which constituted 18.1% of the total of 49.3 bcm imported.

Despite the abundant reserves, Iran is currently a relatively minor and strictly regional exporter of natural gas via pipelines to three neighboring countries, namely Turkey, Armenia and Azerbaijan. Turkey receives more than 90% of Iran’s natural gas exports under a long-term contract.