Iran boosts gas export to its neighbours

Iran, which holds some 15 % of the world's natural gas reserves, is boosting exports of gas to its neighbours in the hope of picking up sales to Asia and Europe in the future.
"In the short term, we are looking to export our gas to neighbouring countries, but we are also working on exports of LNG to Asia and Europe," said Rokneddin Javadi, director of Iran's National Gas Export Company. "The issue is that the projects to export to neighbours, such as those across the Persian Gulf, can be completed in two years. But an LNG export project needs five years," he told.

He said Iran expects to sign a contract to supply 15 mm cm (500 mm cf) a day by pipeline to the United Arab Emirates. And he said the Islamic republic was also in talks with Kuwait and the UAE for two other similar contracts, hoping to export 1.5 bn cm to the two countries each year. Also expected later this year are contracts with Armenia and the Russian Caucasus republic of Nakhchavan, covering the sale of 3 bn cm annually.
And a 25-year contract with Turkey allowed Iran to sell 3.5 bn cm there in 2003. That figure is expected to rise to 5 bn cm in 2004, if a contractual dispute can be worked out.

Turkey, complaining the gas is of poor quality, has demanded a price cut and has threatened to turn to Russia instead.
"You have to ask the Turks what is going on. If they abandon the contract, they will have to pay a heavy fine," an Iranian industry official said. Mehmet Bigic, head of Turkey's Botas company, hinted that the deal was still valid: "It is not possible to quit a 25-year contract. But you can renegotiate."
Despite the ongoing difficulties with Turkey, Javadi nevertheless said he hoped Iranian gas sales would total $ 2 bn annually in 2010. But Iran is also counting on this figure jumping dramatically if it can get LNG exports by tanker moving further afield, notably to the potentially huge markets of the Indian subcontinent, China with whom a memorandum on future sales has already been signed -- and Europe.

The country currently has three LNG production projects underway, NIOC-LNG of the National Iranian Oil Company, the Pars-LNG consortium of NIOC, Total and Petronas, and Persian-LNG of NIOC, Shell and Repsol. But such sales are pending the completion of LNG production facilities, as well as the costly laying of pipelines that need to cross sensitive areas such as the Pakistani-Indian border.
Furthermore, there is tough competition from Russia, holder of the world's largest reserves and geographically better placed to tap the European and Chinese markets. Competition from Algeria and Qatar is also tough, and Iran has found itself lagging due to the late development of its gas sector.

In the case of Qatar, the world's number-three for gas reserves has been quicker than Iran to tap its off-shore resources and is now pushing to become the world's top exporter. In March, Qatar signed a $ 6 bn protocol accord with the South African-US Sasol-Chevron consortium for three LNG production projects. It has also already got a foot in the Indian market. Political pressure on Iran, including United States sanctions that target foreign companies investing here, are also a major hurdle.
"These kind of investments represent billions of dollars, and it is not certain that international companies will accept to finance them," one Western industry expert said.