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Reroute Of Oman-Iran Gas Pipeline Increases Costs

The Iran-Oman gas pipeline will be more expensive than initially thought after the two countries agreed to alter the original route plan to avoid passing through UAE waters, Reuters reported on Thursday, quoting an industry source in the know.

Iran, which holds the world’s second-largest gas reserves according to EIA, said in March 2014 that it had agreed to export gas to Oman via a pipeline that would cost around US$1 billion. Iranian gas would be then liquefied in Oman and used for both domestic needs and shipped to Asian and European markets.

However, the UAE had not agreed to the initial project in which the pipeline would cross its waters, industry sources say, while no official from the emirates has spoken publicly about the matter.

In August of this year, Omani Minister of Oil and Gas, Mohammed bin Hamad al-Rumhy, said in an interview with Reuters that Oman and Iran had agreed to change the route and design of the pipeline to avoid passing though the waters of the Emirates.

On Thursday, Reuters’ source said that the rerouting of the gas pipeline - now planned to be shorter but deeper - will entail a slight upward revision in budget and could cost now up to US$1.5 billion. The pipeline is projected to have shipment capacity of 1 billion cubic feet of gas per day, which may be increased to 2 billion cubic feet of gas daily to meet the growing gas demand in the region.

Apart from the international sanctions against Iran, the project has been stalled by price disagreements between the two parties and U.S. pressure on Oman to find other providers.

Iran wants to produce 385 billion cubic meters of natural gas daily by 2020, much of which will go to India, China, and Europe. Iran’s current raw gas output is 735 million cubic meters daily, of which 35 million cubic meters are flared, which practically means they are wasted, and 90 million cubic meters are injected back into oil wells to keep the levels of current production.

By Tsvetana Paraskova for Oilprice.com

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