Majlis Report Sees Future in Liquefied Natural Gas

With natural gas prices closely associated with movements in global crude oil benchmarks, it is not economically viable to export gas as long as oil is struggling at around $50 a barrel.

According to a report by the Majlis Research Center, using natural gas to produce petrochemicals or as feedstock for industries makes much more economic sense than selling the fuel, Mehr News Agency reported.

The lion's share of Iran's natural gas comes from the giant South Pars Gas Field in the Persian Gulf as well as other fields such as Nar and Kangan in Bushehr Province and Aghar and Dalan in Fars Province.

According to the report, Iran makes a 10-cent profit on each cubic meter of gas it sells to foreign customers, mainly its top importer Turkey.

The report adds that in the best case scenario, if oil prices reach $100 per barrel, which seems highly unlikely in the short-term, selling one cubic meter of natural gas will generate a profit of 35 cents.

The report also calls for investing in natural gas vehicles which in turn can have profound effects on reducing global greenhouse gas emissions.

Nonetheless, as new phases of South Pars go on stream and new discoveries are made, sooner or later gas output level will exceed demand and "the best option to make optimum use of the resource would be to export it," Mehr said, citing the report.

The report suggests that trading energy with other states is of great importance as it makes them dependent on Iran to satisfy their high and rising energy needs. "It boosts political clout and improves our national security," the report said.

In general, the most cost-effective alternatives to transfer gas are either pipelines or in the form of liquefied natural gas (LNG), a clear, odorless and nontoxic liquid that is transported through marine shipments.

According to the report, the oft-mentioned gas export plan to Europe via pipeline is not feasible due to exorbitant costs of laying extended pipelines. Nevertheless, thanks to the  proximity to international waterways, Iran can export gas in the form of LNG once it develops the necessary infrastructure.

The report also quantifies the economic benefits of developing the LNG sector.

Constructing LNG export terminals will create thousands of jobs and have huge economic impact on other sectors due to increased demand for steel, cement, equipment and other products and services.

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Energy experts including Ali Kheirandish, former director of Iran Liquefied Natural Gas Company, which pioneered the country's largest LNG project a decade ago known as "Iran LNG", believes Iran should turn to LNG export as shipment of liquefied gas is less risky compared to piped exports and is more cost-effective for long distances.

According to Kheirandish, with $2.3 billion invested so far, Iran LNG is more than half-built with two storage tanks, a jetty and a power plant. Work on the 10.8 million-tons-per-annum plant hit a wall in 2012 when sanctions stopped Iran from buying special liquefaction technology from German contractor Linde.

According to the US Energy Information Agency (EIA), the world's current LNG liquefaction capacity is insufficient to meet the anticipated 2.2 billion cubic meters per day of global LNG demand by 2040.

Gholamreza Manouchehri, deputy for engineering and development affairs at the National Iranian Oil Company, believes that Iran has the potential to break into the global LNG market, despite years of stalemate in such projects and a significant gap in production compared to rival producers in the region, especially Qatar.

"Early movers in the LNG sector will have the advantage in capturing bigger market share. The sooner LNG facilities are up and running, the better chance Iran will have to claim a stake in the growing market," he says.

Reportedly, Qatar's annual LNG output is close to 80 million tons a year, Australia 40 million tons, Russia 30 million tons, Algeria 20 million tons and Indonesia 15 million tons.