Iran switches economy to gas; saves oil for exports

The Gulf Times:

Iran, the site of the world’s second-largest natural-gas reserves, will double gas production over the next five years, shift its domestic economy to gas, and save oil for exports, a gas official said.

Gas will provide 72% of the nation’s energy, up from 55% now, Azizollah Ramezani, the planning director at the National Iranian Gas Company (NIGC), said in an interview.

Iran’s gas output should reach 700mn cu m a day in 2010, compared with 375mn cu m today, he said.

“We’ve got plans to cover all the country’s energy needs with natural gas,’’ Ramezani said in an interview on the 15th floor of NIGC’s headquarters in central Tehran. Out of these 700mn cu m of gas, 50mn will be for exports and “all the rest’’ for domestic use, he said.

Switching to gas could help Iran export more crude oil, as it struggles to meet quotas set by the Organisation of Petroleum Exporting Countries. READ MORE

Gas is the fastest-growing energy source in the world, with consumption projected to double to 176tn cu ft by 2025, according to the US Department of Energy.

For the past four months, Iran, Opec’s second-largest producer, has failed to reach its Opec quota. The country’s crude oil production has declined since January, reaching 3.88mn bpd in April, according to Bloomberg estimates. Its Opec quota stands at 4.04mn bpd.

Iran’s revenue from oil exports will rise $4.5bn to $36bn in 2005, Oil Minister Bijan Namdar Zanganeh said last month. It will get about $900mn from exports of natural gas and gas condensates in 2005, Ramezani said yesterday.

To increase gas output, Iran is relying mainly on South Pars, the world’s largest gas reservoir, which it shares with Qatar. Gas output from the deposit will reach 600mn cu m a day when the project’s 20 phases are completed, Khatami told reporters last month, calling it the “beating heart of Iran’s flourishing economy.’’

Production from the Iranian field, about 100km (62 miles) off Iran’s southern coast, already accounts for more than a third of Iran’s gas output.

The South Pars deposit was discovered in 1966 by the Royal Dutch/Shell Group. Little was done to develop the field until the 1990s. It contains 600tn cu ft of gas, or about a tenth of the world’s gas reserves.

Iran imports about 26mn cu m of gas a day from neighboring Turkmenistan and exports “up to 25mn cu m’’ a day to Turkey, Ramezani said. “We’ll become a net exporter next year,’’ the planning director said, counting on an increase in gas exports to Turkey to 30mn cu m. In addition, Iran has plans to sell gas to Armenia and Kuwait.

Gazprom’s Armenian venture is about to start building a natural-gas pipeline from Iran, which will be finished by 2007, Vremya Novostei reported in March. A $4.2bn, 2,775-km pipeline to India from Iran through Pakistan is also on the agenda to meet growing demand for gas in Asia’s fourth-largest economy.

The pipeline, which the US opposes because of Iran’s alleged support of terrorist groups as well as pursuit of nuclear weapons, would allow Iran to export an additional 70mn cu m a day, Ramezani said.

In addition, Iran plans to acquire six liquefied natural gas carriers by 2010 to deliver gas to Asia. It agreed last year to sell China 250mn metric tonnes of LNG over a 30-year period. At least four phases of the 20-phase South Pars development will be devoted to LNG, producing the equivalent of some 100mn cu m of gas, Ramenzani said.

LNG is natural gas that is cooled to a liquid so it can be carried by tankers rather than pipelines.

Iran’s state-owned gas company will spend $15bn – or $3bn a year – through 2010 to lay new pipes and build gas compressor plants, Ramezani said. The length of the gas pipeline grid will grow 50% to 30,000km, he said.

“Some $7.5bn will be financed internally, and the rest through loans, mainly from Naftiran Intertrade Company,’’ a Switzerland-based subsidiary of state-owned National Iranian Oil Co, the manager said.

It will also increase the number of service stations providing cars with natural gas to make the fuel more attractive, he said.

Both oil and gas is heavily subsidised in Iran, contributing to waste and pollution. A liter of gasoline costs Iranian drivers about 800 Iranian riyals (9 US cents). The parliament earlier this year rejected a plan to gradually remove subsidies.
“This is a parliament decision, and we follow it,’’ Ramezani said. ``Personally, I believe price is a good tool to reduce consumption. We should make use of it.’’