Oil export tops the National Iranian Oil Company’s priority, as its profit margin is not comparable with that of gas,
Oil Minister Bijan Namdar Zanganeh made the statement in a televised interview Monday night while elaborating on the achievements of the Third Summit of Gas Exporting Countries Forum held earlier in the day, Shana reported.
Referring to the maximum production cost of each barrel of oil amounting to roughly $7, Zanganeh said, “Selling each barrel means reaping a $39 profit, which is definitely not true for gas.”
Zanganeh noted that the most important advantage of having access to natural gas is to replace oil products with it to develop domestic industries.
In other words as long as new oilfields can be discovered, there is need neither to extract gas nor to export it. However, injecting gas to oil reserves seems to be economically viable.
On whether GECF members compete or cooperate, the oil minister said, “Concerning untapped potentials which differ in different states, the competition cannot be helped. Nonetheless, presence in international arena has taught us that competition cannot be an impediment to cooperation.”
“OPEC members have always done their best to increase their market share to guarantee their national interest, yet when it comes to regulating prices, they usually get together and try to address the issue effectively,” he said.
Asked about competition with Russia to supply Europe with gas, the official added that producers normally do not like to have any rivals so that they can dominate the market. On the other hand, end users like to choose the providers whose prices are more reasonable.
Maximizing Market Share
According to Zanganeh, the most vital concern for Iran is to maximize its oil market share. Moreover, reaching out to neighboring states is Iran’s major priority. As the target destination gets farther, laying pipeline is less economically viable, yet liquefied natural gas export will always be an option.
Underscoring the new gas price formulation being devised by the GECF secretariat, he noted, “Due to various influential factors, the members have not agreed on a certain price yet. Natural gas does not have an international price as it is exchanged locally because of astronomic costs incurred while transferring it via pipelines, and interestingly they should all be covered by exporters.”
“There are no long-term oil contracts between Iran and other countries and even in one-year contracts, prices are set by oil stock exchange transactions. Nonetheless, it is not possible to apply such a strategy to formulate the gas price because gas contracts are usually long-term. Besides, gas single consignment market is not big enough to overshadow the market, “he said.
Zanganeh believes that the profit margin of exporting natural gas via pipeline is decreasing day in day out, whereas thanks to technology development, LNG production and transit are getting more and more financially viable, which explains why extending a 3000-kilometer pipeline to India does seem to be feasible.
Pointing to the 35-month plan to implement the South Pars 17 phases, he noted that even the contractors were well aware of the fact that it was impossible to complete such a mega project in the said period. Still, we are determined to make them operational although it has put a heavy financial burden on the 11th administration’s shoulder.
Energy consumption in Iran has turned out to be a formidable challenge and if the current trend continues, the total amount of gas produced in the country will have to be used domestically by 2035 and there will be no room to maneuver on export.
According to the official, plans have been made to raise gas production capacity as much as 1000 million cubic meters per day in two years, yet such an ambition seem to be too big to be fulfilled given the current energy consumption which has witnessed a drastic rise recently.
