With an estimated 1,187 trillion cubic feet in the ground, Iran has the world’s largest natural gas reserves, however it has not managed to develop them for a variety of reasons. The US sanctions that restrict the Persian states energy sector, and foreign finance from reaching the country have prevented advances in the gas sector, and it now seems that the North American Shale boom may increase the supply to the global market to such an extent that there will no longer be any demand for Iran’s gas.
The US and European sanctions in place due to a disagreement over Iran’s nuclear development programme, have already cut the main source of revenue, crude oil exports, by half since 2011 according to the IEA, whilst at the same time restricting foreign financial institutions from investing in Iran.
Partners that have the money and expertise necessary to develop natural gas reserves, such as Royal Dutch Shell, Repsol, and Total, have all abandoned their plans in Iran, and this has delayed any progress in the sector.
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Iran’s Oil Minister Rostam Qasemi argues that “energy should not be politicized. Energy in Iran should benefit all countries.” But unfortunately for him the West does not seem to agree.
The newly elected president Hassan Rohani has promised to try and find solutions to bring a gradual end to the sanctions, but even if this is the case, LNG projects currently under construction around the world will increase total export capacity by 32% by 2018. It would take around ten years in order to develop the 40 million metric tonnes a year capacity that Iran has planned, meaning that the global market would be incredibly overcrowded, and prices would likely be too low for any profit to be made on Iranian LNG.
Tony Regan, an energy consultant at Tri-Zen International, stated that“Iran has missed the boat. They should have slotted in nicely between Qatar’s projects and the new Australian ones and before anyone was talking about U.S. exports.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com