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Iran Expects Gas Exports To Soar Along With Oil

So far, the news from Iran has been that it can quickly return oil exports to their old levels once international sanctions are lifted, but there’s been little talk about its plans for gas. Now a leading Iranian energy official says his country can more than triple gas production as well.

On Aug. 1, less than three weeks after Iran reached a deal on its nuclear program with six world powers, Oil Minister Bijan Zanganeh said his country could increase production of crude oil by 500,000 barrels per day within a week of the lifting of the sanctions, and by 1 million barrels per day within a month.

Now Hamid-Reza Araqi, the managing director of the National Iranian Gas Co., says it can increase daily gas exports from its current level of 80 million cubic meters per day to 300 million cubic meters per day. He didn’t say how quickly that could happen, however.

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Araqi broached the subject with reporters on Oct. 20 on the sidelines of the 2015 Congress and Exhibition of the Iranian Petroleum and Energy Club (IPEC) in Tehran. He also said an end to the sanctions would enable Iran to expand its energy initiatives, including extending the Trans-Afghanistan Pipeline, a gas conduit known as TAPI, to Iran.

TAPI now stretches from neighboring Turkmenistan and transits Afghanistan and Pakistan and into India. Araqi said Pakistan is prepared to begin work on the Iran leg of the pipeline once sanctions are lifted, most likely in early 2016.

The question is whether European countries will be among customers for Iranian gas. Araqi didn’t mention the continent, perhaps because some believe that serving it might not be cost-effective. One such skeptic is Matthew Bryza, a former U.S. ambassador to Azerbaijan and now director of the International Center for Defense Studies in Tallinn, Estonia.

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“There is not enough infrastructure now to get [gas] to Turkey, and down to Europe, so there has to be a lot of investment in that infrastructure,” Bryza said Oct. 19 in an interview with the Azeri news agency Trend.

Instead, Bryza said, Iran would be better off selling its gas to nearer customers, including Kuwait, Oman and the United Arab Emirates, all of them gas importers. “[I]t is a lot cheaper, a lot easier, [for Iran to sell to neighboring countries],” he said, “and you don’t need to build that infrastructure, you just send it to your neighbors.”

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Only if European demand for gas increases, and if Iran produces more gas than it can sell to its nearby customers, would it make economic sense for Iran to sell gas to Europe, Bryza said.

Zanganeh, who also appeared at the IPEC meeting, disagreed. He said Iran will serve customers farther away with liquid natural gas (LNG), which is condensed to make it easier to store and transport. In September he said Spain had proposed making its LNG facilities available to Iran for exporting its gas to the rest of Europe.

“LNG is Iran’s policy for the far-reaching markets,” he told the Tehran meeting, because of the expense of building a pipeline. “Gas-line export has a number of problems and in addition to [laying pipe for] long distances, huge sums of money will be spent on the transit.”

By Andy Tully of Oilprice.com

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