When and How Can Iran Deliver Gas to EU?

For first time since 2009, Iran inaugurated several upstream gas projects in 2014, leading to a 80 million cubic meters of gas production increase, but when and how can Iran export its gas to Europe?

Although a large increase in Iran’s gas production level was achieved during the current year, statistics indicate that the consumption growth runs ahead of output gains.

The natural gas consumption of country’s housing sector has reached around 450 million cubic meters per day (mcm/d) as winter is approaching. According to Iran’s National Gas Company’s statistics, this volume is about 90 mcm/d more than last year, while the temperature is similar. During last year’s November, Iran’s housing sector consumed 365 mcm/d, about 12 percent more than the previous year.

Iran, with 33.6 trillion cubic meters of proved gas reserves, ranks first in the world, but suffers from gas shortage every winter.

The natural gas totals approxiamtely 70 percent of Iran’s total energy consumption, which passed 1.6 billion barrels of oil equivalent (OE) last year. Today, Iran produces about 575 mcm/d of gas without any significant surplus gas to export. Iran exports about 8.4 billion cubic meters of gas per annum (bcma) to Turkey and get a little less than this volume from Turkmenistan.

The country’s gas consumption level experienced a 60 fold growth since 1980, when Iran consumed only 9.7 mcm/d, which shared 11 percent of total primary energy consumption.

Last year, the country’s gas usage in housing sector jumped to about 500 to 520 mcm/d in some weeks on winter and regarding the current growth of gas consumption, it is expected the housing sector will need more than 550 mcm/d of gas.

Iran stored about 2 bcm of gas in two storage facilities, Serajeh and Shourijeh, during summer and started re-extraction of gas during last weeks. Then, Islamic Republic doesn’t have any significant stored gas to meet consumption growth.

Last winter, Iran was forced to cut gas injection into old oil fields, power plants, industrial units, CNG plants as well as petrochemical units to prevent gas shortage in housing sector.

Iran’s petrochemical sector needs 35 mcm/d of gas, while Iran delivered 15 mcm/d in last winter.

Iran’s power plants need 220 mcm/d of gas, but Iran replaced liquid fuels with natural gas as power plant’s fuel, led to burning about 28 billion liters of diesel and fuel oil. The country supplied only 98.6 mcm/d to power plants during last year in average.

Iran also cut gas supply to CNG plants in last winter. Iranian cars consumes about 20 mcm/d of CNG and stopping the supplement of this fuel, raised the country’s average gasoline consumption by 7 percent during last Iranian fiscal year (ended on march 21th).

On the other hand, 80 percent of Iran’s operating oil fields are in their second half-life and face 8 to 13 percent oil production. These fields need 290 mcm/d of gas injection, but Iran injected about 77 mcm/d of gas during last year.

Then Iran needs at least 300 mcm/d of extra gas to inject into old oil fields and stop burning liquid fuels in power plants currently. The share of power plants in Iran’s air pollution is about 40 percent, while Air pollution costs $16 billion for this country annually, according to the World Health Organization (WHO).

How might Iran start gas exports to Europe?

Iran is keen to diversify its energy export, but it seems that all decisions are political. For instance, the efficiency of Iran’s thermal power plants which share 82 percent of Iran’s total power production is about 37 percent and Iran exports about 8 billion GWh of electricity annually and earns 800 million USD. But, in cost of producing power in Iran is very high and exporting gas or fuel oils are more profitable for Iran. But Islamic Republic continues electricity export.

On the other hand, Iran has signed three agreements with Iraq and Oman to export 75 mcm/d of gas to them by 2016, while it is not clear how can Iran realize this amount in winter?.

The lack of enough gas supplement to power plants and old oil fields costs about $50 billion for Iranian government, while exporting 75 mcm/d of gas to Iraq and Oman would make about $12 billion revenues for Tehran.

Iran has focused on the giant South Pars gas field since mid-2013. This field with about 30 trillion cubic meters of natural gas is joint between Iran and Qatar and counts a half of Islamic Republic’s gas production. Iranian side of this field was divided to 24 phases, 10 of them has been operational until 2009. Iran inaugurated the gas production from phases 12, 15 and 16 and is going to produce gas from phases 17 and 18, but in mid-2013, all of these phases were completed more than 82 percent, and yet haven’t completed.

In case Iran complete these five phases until 2016, the country’s total gas output would reach 730 mcm/d and if Iran complete all remained 14 phases by 2020, its gas output would reach 1.1 bcm/d. 

Iran hasn’t complete any upstream oil project since 2007, but in case the country develop oil fields, it would have extra associated gas, which currently shares a half of total gas output in Iran.

With regards to Iran's household gas consumption this summer being three times less than in winter, Iran should not have any problems exporting gas to the EU by 2020. However, Iran should increase gas storage capacities inside or outside of country.

For the realization of such a goal, the elimination of Western sanctions aimed to curb Iran’s sensitive nuclear is is vital. Iran is exporting the gas to Turkey and has already the infrastructures to supply more 15 mcm/d of gas and some with developing some infrastructures the capacity of Iran’s gas delivery to Turkey would reach 100 mcm/d. It’s expected Trans Anatolian Pipeline will be operational in 2018 and with construction of Trans Adriatic Pipeline, the Caspian basin gas would be delivered to Europe by 2019. Then Iran can join to gas suppliers of these pipelines by 2020.

Regarding this fact that Iran’s domestic gas usage growth is projected to stand at 3.5 percent until 2020, Iran would have 400 mcm/d of extra gas (with ignoring the needed gas to stop liquid fuels burning in power plants and gas injection to oil fields) to export abroad.