Despite holding the world’s second largest natural gas reserves and having Russia as a new partner, Iran faces challenges to revive one of its three LNG export projects.
Iran, the world’s third largest gas producer, shares the giant North Dome/South Pars field with Qatar, but it has fallen far behind in developing its reserves to meet domestic and international gas demand.
“If you compare Iran with neighboring Qatar, a top LNG exporter, sharing the same huge gas reserve, you question why Iran is so far behind in developing its gas assets,” said Alex Vatanka, director of the Iran program at the Washington-based Middle East Institute.
The government made a decision in the 1990s that pipelines were the future for gas exports and determined liquefied natural gas projects were considered too expensive, Vatanka told NGI. Iran thought the geography of the country lent itself to pipelines and exported gas to nearby countries like Armenia, Azerbaijan, Iraq, Turkey and Turkmenistan, setting back its potential for LNG operations.
Although Iran remains under international sanctions, work on the 10.5 million metric tons/year (mmty) Iran LNG facility has resumed. The country is aiming to have the facility operational by mid-2025. The project was abandoned by the government more than eight years ago.
The two-train facility at Assaluyeh in Iran’s southern Bushehr province was completed and reportedly ready for liquefaction trains to be installed when U.S. sanctions were imposed in 2018, forcing the Dublin-based engineering company Linde plc to withdraw from the project.
Two other LNG export facilities are also on hold due to sanctions. The 16.2 mmty Persian LNG terminal and the 10 mmty Pars LNG plan, on Iran’s Mideast Gulf coast. Those projects were in early stages of development when partners TotalEnergies SE and Shell plc withdrew from them.
Russia’s Gazprom PJSC and the National Iranian Oil Co. signed a Memorandum of Understanding (MOU) last year worth roughly $40 billion to revive the gas sector. Under the MOU, investments would go toward LNG exports, the construction of gas export pipelines and increasing production from South Pars and Kish fields.
Vatanka said the MOU between Tehran and Moscow is unusual, considering the two countries are energy competitors and both are under international sanctions. Since Russia’s invasion of Ukraine, Russia has pushed to undermine Iran’s role in the crude oil market by offering more competitive discounts.
Moreover, Russia and Iran both lack the international technical expertise, materials and LNG liquefaction technology to complete LNG projects.
The United States imposed a new round of sanctions on Iran this month, targeting the country’s oil and petrochemical sales.
“The United States is committed to significantly reducing Iranian energy exports and will sanction those facilitating Iran’s petroleum and petrochemical trade,” the U.S. State Department said in a statement this month.
Not Enough Gas
Vatanka also questioned how Iran could find the additional gas needed to feed Iran LNG.
“For the last 25 years little has changed. There may be a desire to export gas, but little has changed with Iran’s excessive domestic gas consumption to free up more gas for export.”
Vatanaka said. “Gas is so heavily subsidized in Iran and so much is wasted. Households and industries consume excessive amounts of gas, but Iran has yet to reform their domestic gas market.”
Iran plans to boost its natural gas production significantly by 2030, but progress has been slow.
Of the nearly 257 billion cubic meters (Bcm) of gas produced in Iran in 2021, around 241 Bcm was used to meet domestic demand, according to the BP Statistical Review of World Energy. About 13.5 Bcm/year of additional production would be needed to feed Iran LNG.
“Iran needs the political will to become an LNG exporter, which requires making significant changes to your standing internationally, so companies can come and work with you,” Vatanka said. “I don’t think Iran is there yet. The Iran regime has not been very convincing in showing to investors that they are serious about developing their energy sector because if the regime was, nuclear talks would have been resolved and sanctions lifted.”
Source » naturalgasintel