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  • May 15th, 2004
  • Comments Off on Iran’s natural gas exports still in doldrums
When Iran shut down its pearl fishing industry in 1997 it knew the shallow waters of the Gulf still concealed two lucrative exports -- shrimps and the world's largest reservoir of natural gas.

Shrimp exports have soared but gas shipments from the Islamic Republic which sits on the world's second largest reserves after Russia, are still in the doldrums.

"We have a long way to go," said an official from the National Iranian Gas Export Company (NIGEC) who preferred not to be named.

"We have 18 percent of world reserves but only three percent of production," he added.

Iran is pinning its hopes on harvesting the giant South Pars field in the Gulf for exports of liquefied natural gas (LNG), gas super-cooled to liquid for loading onto tankers.

LNG is often billed as the fuel of the future, a cleaner alternative to oil.

But asked when Iranian LNG would hit the market, NIGEC managing director Rokneddin Javadi said it would not be exported for another five years.

"I expect it will be early in 2009," he told Reuters.

By contrast Qatar, whose North Field draws its natural gas from the same Gulf reservoir as Iran's South Pars, already exports 15 million tonnes of LNG each year.

Javadi said frosty relations with the United States had delayed LNG projects.

"The truth is we are deprived of certain technologies. Many are American which we cannot take advantage of," he added.

Major foreign companies are also wary of investing in a country where they are uncertain of the depth of technological knowledge.

"We have to prove our technical capabilities in handling the projects. The world does not yet think we have the capability," he admitted.

Iran has signed only one of its four schemes with foreign firms to produce LNG. Oil Minister Bijan Zanganeh has said upstream development of South Pars phases would be integrated with these LNG projects.

This means the development of South Pars phases 11-13 will not get underway until foreign companies have secured downstream LNG projects.

Total and Malaysia's Petronas put pen to paper in February to form Pars LNG, in partnership with the state oil company. This project is linked to the upstream development of phase 11 which Total said it expects to win soon.

Shell and Spain's Repsol are looking to form Persian LNG, in tandem with tapping South Pars phase 13. Britain's BG and BP are seeking roles in two further projects, NIOC LNG and Iran LNG.

Painstaking negotiations grind on. Sources in European companies said 2009 was a realistic date to begin exports as long as Iran moved swiftly to build up a specialist LNG tanker fleet and buy the custom-built steel needed to hold the gas.

Optimistic Iranian officials say their LNG will not only meet booming demand in China and India, but also in the energy-guzzling United States whose needs will forge a diplomatic rapprochement.

One of China's state oil traders said in March it had signed a memorandum of understanding with Iran to import more than 110 million tonnes of LNG over 25 years for $20 billion.

Before LNG gets off the ground, Iran is battling to export natural gas to its neighbours. But few deals have been done and Turkey, which has secured gas exports from Iran, is threatening to take the Islamic Republic to an international court for charging too much.

Zanganeh is expected to sign a gas export agreement with Armenia shortly, a move with as much political significance as commercial.

Iran is looking to strike its energy interests up into the Caucasus where the United States is seeking to exert influence through a $3 billion pipeline from Baku to Turkey's Mediterranean port of Ceyhan.

Senior officials have said Iran has sealed a contract to supply more than 11 million cubic metres (388.5 million cubic feet) per day to the United Arab Emirates.

Other officials said Iran was months from concluding an export agreement with gas-poor Kuwait. Exports to Gulf neighbours require pipelines that will take about two years to lay.

Copyright Reuters, 2004


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