New SP Phases Will Help Carry the Economy

New SP Phases Will Help Carry the EconomyNew SP Phases Will Help Carry the Economy

Phases 15 and 16 of South Pars Gas Field in the Persian Gulf were officially inaugurated on Monday in a ceremony attended by President Hassan Rouhani, Oil Minister Bijan Namdar Zanganeh and high-ranking oil and provincial officials.

"The launch of phases 15 and 16 is a clear indication that sanctions cannot undermine our will against world powers," Rouhani said. "Phase 12 was inaugurated [last March] under a strict sanctions regime. We have now launched phases 15 and 16 under a similar condition."

Over 70% of phases 15 and 16 have been implemented by Iranian contractors. They will generate an estimated $6 billion in annual revenues once fully operational, Shana reported.

"Iran can generate $100 billion a year from South Pars," he said, pointing to slumping crude prices that have fallen by nearly 70% from a $115-per-barrel high in mid-2014.

Hailed as "the most Iranian phases" of South Pars, phases 15 and 16 are aimed at producing more than 50 million cubic meters of gas and 80,000 barrels of gas condensates per day as well as 400 tons of sulfur, 1 million tons of ethane as feedstock and more than 1 million tons of liquefied natural gas annually.

Phase 17 and 18 are also scheduled to go on stream in 2016, while all South Pars phases are due for completion in 2017.

The last major launch of a South Pars phase goes back to March 2015, when Rouhani inaugurated Phase 12, the biggest Iranian gas project in history.

South Pars is the world’s largest gas field shared by Iran and Qatar, covering an area of 3,700 square kilometers of Iran’s territorial waters in the Persian Gulf. It adjoins Qatar’s North Field, which measures 6,000 square kilometers.

"Raising gas production capacity will enable Iran to start exports to neighbors and non-bordering countries," Rouhani said.

He added that natural gas can help bolster intergovernmental relations, pointing to the Third Summit of Gas Exporting Countries Forum that brought together eight heads of state in Tehran in November.

South Pars holds an estimated 40 trillion cubic meters of natural gas, or roughly 8% of the world’s reserves and approximately 18 billion barrels of condensate.

The president also took a swipe at the government's economic critics.

"Some speak of recession; bear in mind that we are running the country by $30 oil, not $147-per-barrel oil," he said.

Rouhani stressed that oil revenues make up around 25% of the government's draft budget for next year, while it caters for more than 90% of the country's revenues.

"Some countries wanted to hurt us, but [their strategy] backfired … Reports suggest that one of them is facing a $100 billion budget deficit," Rouhani said in a thinly-veiled barb against Saudi Arabia.

Iraq's 2016 budget will also run with a deficit of around $20.5 billion.

***** $10 billion Investment

Iran needs around $10 billion in investment to complete the remaining South Pars phases, Iran's oil minister declared on Monday.

"Daily gas production stands at 420 million cubic meters per day, while Qatar is extracting 700 mcm/d," Zanganeh said.

A lack of modern technology and budget has hampered the development of joint hydrocarbon fields, allowing neighbors to draw the lion's share of underground reserves. Iran is particularly lagging behind Qatar in exploiting South Pars reserves, as the tiny Arab neighbor is reportedly drawing 1.6 times more from the joint field.

But officials say Iran can top Qatar's rate of extraction once all 28 phases of South Pars become operational. South Pars output accounts for more than 50% of Iran's total gas production capacity, but it is expected to rise to 75% next year.

Zanganeh added that gas export to regional countries is a priority after meeting the domestic demand.

He also referred to the Baku–Tbilisi–Ceyhan Pipeline as an option for oil export but said there is no plan to embark on crude supply through the 1,768-kilometer-long pipeline any time soon despite negotiations with Azerbaijan.

The BTC pipeline stretches from the Azeri-Chirag-Guneshli oilfield in the Caspian Sea to the Mediterranean Sea.

"Iran and Azerbaijan are interested in oil and gas cooperation … We have expressed interest in conducting oil swap with Baku," he noted.

***** Political Tensions

Zanganeh said on Monday Iran is not a threat to any country and wants to reduce tensions in the region.

"Iran's nuclear deal is based on easing the tensions," he said, describing the accord as the country's biggest political accomplishment in a century.

The minister's remarks come in the wake of concerns the recent fallout between Tehran and Riyadh over the Saudi execution of prominent Shia cleric Sheikh Nimr al-Nimr will further aggravate the sluggish crude market.

Zanganeh slammed the unrest at the Saudi Embassy in Tehran and said it was an orchestrated plot by an outside force that "will soon be exposed by the Foreign Ministry".

The prospect of more Iranian oil in the already oversupplied market is also weighing on other oil producers fighting for market share.

Tehran has announced plans to boost crude production capacity by 500,000 barrels within a week after the removal of sanctions and raise the volume by 1 million bpd within the following six months.

"None of the oil producing countries is happy with current oil prices and it would be to the detriment of all suppliers in the long run," he said

Zanganeh noted that the imbalance in oil supply and demand is partly a result of OPEC's inability to settle on a production quota.

***** Curbing Consumption

Consumption of liquid fuel, including diesel and mazut in power plants nationwide is expected to decrease to 20% from the current 46%, Zanganeh told IRNA ahead of Monday's ceremony.

During the past two and a half years, gas production capacity has risen by 150 million cubic meters.

The minister added that phases 17 and 18 are already operational, but are yet to be officially inaugurated because of not hitting optimal production capacity.

Zanganeh announced the government's intention to exploit some "sections" of phases 19, 20 and 21 of the gas field.

Ten South Pars phases were launched during former president Mahmoud Ahmadinejad's two terms in office, and so far, phases 12 and 15-18 have come on stream since Rouhani took office in August 2013.

"If South Pars projects are financed, all of the joint field's phases, except parts of Phase 14, will become operational by August 2017," Zanganeh said.

The oil minister added that gas condensate production will rise by 1 million barrels upon the launch of Persian Gulf Star Refinery, Siraf Refining Park and the second refinery of Shiraz in Fars Province by August 2017.

A huge volume of SP's ethane and LPG will be delivered to petrochemical units as feedstock.

Stressing the need to lower gas consumption, the official said that due to the sanctions, the cost of each cubic meter of gas for the government would be 10-15 cents.

"We hope the implementation of Iran's nuclear deal in the coming days will help cut production costs," he said.

On the Oil Ministry's plan to develop oil layers of South Pars, Zanganeh said a floating rig has been purchased and in the near future, the first phase of production will go underway in the oil layers.      

Iran is the fourth biggest producer and the fourth biggest consumer of natural gas in the world. It produced 173 billion cubic meters of gas in 2014, the most after the United States, Russia and neighboring Qatar.

It exports natural gas via pipelines to three neighboring countries, namely Turkey, Armenia and Azerbaijan. Ankara receives more than 90% of Iran’s gas exports under a long-term contract, and Yerevan and Baku receive around 6% and 3% of Iran’s natural gas exports, respectively, under swap agreements.