Race for gas in Gulf waters

Mar 13, 1997 01:00 AM

Iran is moving quickly to exploit huge offshore gas reserves in Gulf waters it shares with oil-rich Arab neighbours. Faced with the need to meet surging domestic gas demand and lured by the potential of lucrative export deals, a regional race to develop previously neglected gas deposits has heated up.
"From Tehran's point of view, Qatar and Abu Dhabi are ahead because they have projects already onstream," an industry executive based in Tehran said.
Qatar began exports from a $ 7 bn LNG project in December and will use its North Field, which extends into Iranian waters where it is known as South Pars, as the backbone for more LNG and petrochemical projects. Abu Dhabi, capital of the seven-emirate UAE, has announced it will expand gas output at its shared Abu Al Bukhoosh (ABK) field, known as Salman field on the Iran side of the offshore border. A broad engineering design contract to boost ABK is expected to be awarded by Abu Dhabi later this month as part of an $ 800 mm plan to meet risingUAE power demand. Tehran had plans to develop Salman gas deposits before its decision in 1995 to offer the field for development by foreign investors but the project has been delayed by US sanctions. Iran, which estimates that about 70 % of the ABK-Salman reservoir is in Iranian territory, has put aside some $ 50 mm in its 1997-1998 budget specifically to drill for gas at Salman in the second half of this year, analysts said. "The timing of this decision was no doubt influenced by recently mooted plans on the part of Abu Dhabi to double gas production capacity at Abu Al Bukhoosh,'' MEES reported earlier this month.
At stake are gas reserves which have been estimated by an official at the National Iranian Oil Company (NIOC) at nearly 6 bncf (170 mmcm) and 105 mmb of liquefied oil which would be mainly used to fire local industrial projects.
Iranian workers on the existing Salman oil platform, which is in sight of the facing Abu Dhabi rigs on the border line, faced the prospect of other rigs draining moreof the shared "Khuff" gas reservoir 12,000 feet (3,600 metres) below the ocean seabed. NIOC is also in advanced stages of bringing onstream its South Pars field, the extension of Qatar's North Field. The state oil company is expected to award a $ 1 bn-plus contract to an international consortium later this year to develop the second phase of the enormous field which stretches over 3,700 square km (1,430 square miles) of Iranian territory. Total and Shell are front-runners to lead the project.
A NIOC subsidiary has been working at South Pars since 1993 and is planning to bring first-phase gas and condensate production onstream in late 1999 while construction of a gas refinery to handle South Pars output began this month.
South Pars, which holds around 40 % of Iran's gas reserves, is critical to its plans to keep pace with growing local demand and to realise export projects to Pakistan, India, Europe and for LNG plants of its own. Iran is also negotiating with Oman to jointly develop the Henjam-Bukha field further and officials from the two countries are expected to meet to advance an agreement in principle that sees a 80-20 output split in favour of Iran.

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