This Rogue Nation Solves a Petro-Mystery

I've been particularly surprised lately at one segment of the resource markets. The natural gas liquids sector, and the surging export trade that's been developing out of the U.S.

There's been a ravenous appetite from Europe and Asia for supplies of American propane, butane and even ethane. Leading to big new supply deal--some being struck years in advance of end-user facilities actually being built.

Some of the increased trade is simply due to buyers trying to capitalize on low prices for these commodities in the U.S. But the scale of global appetite has made me wonder if there was something else at play.

New this week suggests there is. The implosion of a major natgas-producing nation.

That's Iran. Where officials from the country's Ministry of Petroleum Research Center said over the weekend that the domestic natgas sector is hurting badly.

The Ministry in fact made a shocking prediction. Saying that unless current patterns change, Iran will become the largest natural gas importer in the world by 2025.

That would be an incredible shift for this petro-power. Especially given that Iran is estimated to hold the largest natural gas reserves on the planet.

But that's been steadily changing. Political isolation and years of underinvestment have been taking their toll on output from natgas fields here. At the same time as the country's gas-fired power sector has been growing--requiring a lot of supply in order to keep the lights on.

The result is that production is falling while demand is rising. Pinching off exports--and raising the possibility of en masse imports.

This may explain some of the changes afoot in the liquids markets. In addition to holding large natgas reserves, Iran is also a significant producer and exporter of liquids. So a change in the import-export balance here could be what's driving buyers globally to look to U.S. supply.

Hard numbers are difficult to come by on Iran's output. But the pattern does broadly fit with many of the recent events in the sector. If so, the realignment of the liquids market will continue--as this natgas superpower continues its decline.

Here's to critical changes,

By Dave Forest