• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 2 days The United States produced more crude oil than any nation, at any time.
  • 8 days e-truck insanity
  • 3 days How Far Have We Really Gotten With Alternative Energy
  • 7 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 6 days James Corbett Interviews Irina Slav of OILPRICE.COM - "Burn, Hollywood, Burn!" - The Corbett Report
  • 6 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 8 days Biden's $2 trillion Plan for Insfrastructure and Jobs
  • 8 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 11 days Bankruptcy in the Industry
Gas Glut? Not for Long.

Gas Glut? Not for Long.

Low prices invariably stimulate stronger…

Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

More Info

Premium Content

As U.S. Pauses New LNG Project Permits, Iran Moves Full Ahead On Its Own

  • Iran has decided to go full ahead on building out its own long-nascent LNG industry.
  • The country intends as part of this new drive towards building up its LNG sector, to begin 1.5 million metric tonnes per year.
  • A dramatic expansion of Iran’s gas production from the South Pars field to feed growing LNG production needs could well affect Qatar’s gas take from its North Field side of the entire reservoir over time.

Since Russia invaded Ukraine on 24 February 2022, liquefied natural gas (LNG) has become the world’s key emergency energy supply. It does not require the years of planning and construction as pipelined gas and oil, and it can either be secured readily through long-term contracts or bought immediately in the spot market if necessary and shipped anywhere quickly. As such, it has been ideally suited to make up the vast energy supply gaps created due to sanctions on Russian gas and oil. Despite its extremely elevated geopolitical importance – especially for Europe – the U.S. decided to pause permits for its new LNG projects, as analysed in full recently by OilPrice.com. By notable contrast, whilst simultaneously attempting to widen out the Israel-Hamas War into a new global energy emergency, Iran has decided to go full ahead on building out its own long-nascent LNG industry into a world-scale operation, according to recent comments from Tehran.

As mentioned by Iran’s Petroleum Ministry at the end of January, the country intends as part of this new drive towards building up its LNG sector, to begin 1.5 million metric tonnes per year (mtpy) of production at a medium-sized plant at Asaluyeh in 2026. As exclusively related to OilPrice.com by a very senior figure who works closely with the Petroleum Ministry, much bigger plans are afoot much earlier. Iran has long been looking at further monetising its huge gas resources – and securing further geopolitical power – by becoming a top global exporter of LNG, as analysed in depth in my new book on the new global oil market order. Its neighbour, Qatar, with which Iran shares the world’s biggest gas reservoir – the North Field (on the Qatar side)/South Pars (on Iran’s side) side – had carved out a dominant position in the global energy market on the strength of those very gas supplies. In the run-up to, during, and since the invasion of Ukraine by Russia, Qatar has even more substantially leveraged its leading LNG exporter status into significant geopolitical influence, becoming a key supplier of China and of the U.S.’s key NATO security allies in Europe as well. Related: IEA: Oil Supply Increase More Than Enough to Meet Demand Growth in 2024

A dramatic expansion of Iran’s gas production from the South Pars field to feed growing LNG production needs could well affect Qatar’s gas take from its North Field side of the entire reservoir over time. One of the reasons why Qatar lifted its self-imposed moratorium on North Field gas production in 2017 were confidential field reports over the previous year from the then-Qatargas detailing how “irresponsible drilling practices” by the Iranians posed risks to the long-term gas take for Qatar from the North Field. Just before the moratorium was lifted, the two sides met in Doha to discuss how they would approach their respective gas production operations so that both sides could maximise their overall gas take over the long-term, according to the Iran source. However, Iran could equally well decide in the current circumstances – in which Qatar is increasingly seen as a key ally of the U.S.’s - to revert to its previous gas production techniques at South Pars in order to disrupt Qatari gas flows. In the ‘zero-sum’ world of LNG exports, decreased supplies of LNG from Qatar to Europe, and increased supplies from Iran to China – inevitably given the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ analysed in depth as well in my new book on the new global oil market order – would be a major win for Beijing, and for Moscow as well.

Although the Asaluyeh LNG project will start with just a 1.5 mtpy plant, the Iran source told OilPrice.com last week that it is to be built on the site of the original much-larger ‘Iran LNG Project’ around Tombak Port, around 30 miles north of Asaluyeh itself, focusing on gas from the North Pars gas field. Located 120 kilometres southeast of the southern Bushehr Province, the North Pars field has around 59 trillion cubic feet of gas in place, with a conservatively estimated recoverable volume of gas of approximately 47 trillion cubic feet. The first deal to operate this field had been approved in 1977 but, after the drilling of 17 wells and the installation of 26 offshore platforms, the development of North Pars was suspended due to the 1979 Islamic Revolution and the subsequent war with Iraq from 1980-1988. However, a study of the state of North Pars by Iran at the end of 2020 determined that the field was still in a highly workable state for a quick push to significant gas output. Specifically, it was established, at least 100 million cubic metres per day (mcm/d) of output could be achieved within less than 12 months of proper development – with all the gas recovered to be channeled into LNG production of at least 20 million mtpy.

An early entrant to the original Iran LNG Project was the China National Offshore Oil Corporation (CNOOC), which signed a memorandum of understanding (MoU) in September 2006 with the National Iranian Oil Corporation (NIOC) to develop the North Pars gas field with a view to building out an LNG capability there. This deal was extended in December 2006 to incorporate the development of a four-train (LNG liquefaction and purification facility) complex with a 20 mtpy capacity, before slow progress on CNOOC’s part prompted the NIOC to suspend the deal. At that point, just before the U.S. and European Union (E.U.) ramped up sanctions against Iran in 2011/12, German chemicals giant Linde Group took over the main development of the Iran LNG Project. Within a relatively short time, Linde Group had 60 percent-completed the US$3.3 billion flagship LNG export facility that was set to produce at least 10.5 mtpy of LNG, with expectations that it would take less than a year to finish. Again, though, due to further later sanctions, progress on the Project stalled again. 

With US sanctions firmly back in place in 2018, Russia’s Gazprom which signed two MoUs with the NIOC concerning the rollout of a two-fold joint strategy regarding Iran’s gas, as also analysed in depth in my new book on the new global oil market order. The first part was a gas cooperation roadmap between the two companies, and the second part detailed the construction of Iranian LNG facilities in partnership with Iran’s Oil Industry Pension Fund. Initially, this would allow Gazprom to, in effect, take over from Linde on the existing 60 percent-complete LNG complex and later to be integral in the construction of the mini-LNG complexes. Iran and Russia reasoned that mini-LNG complexes – with production capacities ranging from 2,000 to 500,000 tons of LNG per year, compared to a typical large scale plant capacity of between 2.5 and 7.5 million tons per year – would be less vulnerable to U.S. or Israeli attacks. Gazprom would take payment for its work from the sale of gas both from this complex and from part of the output from fields feeding gas into it.

At that time it was envisaged that the North Pars LNG development would need around US$16 billion in investment – comprising US$5 billion in the upstream sector and US$11 billion in the downstream sector (mainly LNG plants) – to achieve at the first phase LNG output of at minimum 100 mcm/d and the drilling of the 46 wells that this would entail. This is still the ballpark figure that Iran is working with. As it stands, according to the Iran source, the North Pars field development will be the focus of LNG development efforts at this point, coordinated out of Asaluyeh, by Chinese and Russian companies predominantly, working with Iranian counterparts. This will allow for the joining up of resources across other oil and gas projects in Iran being run by firms from both countries.  

By Simon Watkins for Oilprice.com


More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News