Iran wants to sell its gas to neighbouring countries

Reaching natural gas production of one billion cubic meters per day (bcm/d) has been one of the three core hydrocarbons resource strategies of Iran since the Islamic Republic began to seriously develop the supergiant South Pars non-associated natural gas field in 1990, alongside producing 5.7 million barrels per day (bpd) of oil and building out a world-class petrochemicals sector.

According to Oil Price, over the past week or so, Iran has announced a number of initiatives aimed at increasing gas output from South Pars in order to significantly surpass this 1 bcm/d figure as quickly as possible with the corollary boost in export revenues. 

With an estimated 14.2 trillion cubic meters (tcm) of gas reserves in place plus 18 billion barrels of gas condensate, South Pars already accounts for around 40 percent of Iran’s total estimated 33.8 tcm of gas reserves and about 60 percent of its gas production.

This is set for an immediate boost, with a statement last week from Pars Oil and Gas Company (POGC) Phase 13 director, Payam Motamed, that this Phase of South Pars has just completed the standard stages of commissioning and the start of rich gas recovery from its third platform (‘13C’).

Following the opening of the wells of 13C and the lighting of its flare stack, after stabilizing the production process, 11.4 mcm of gas to the onshore refinery of Phase 13 came in the first instance from the Platform on 21 August, he said. He added that the 13C satellite platform was connected to the ‌13A main platform through an 18-inch pipeline and that, in turn, the gas from the 13A platform facilities is sent to the Phase 13 refinery in Kangan through a 32-inch pipeline that extends for over 100 kilometers. 

Motamed highlighted that the current capacity of rich gas recovery from the offshore Phase 13 platforms alone is 43 million cubic meters per day (mcm/d), with 28.5 mcm/d of this amount provided by the Platforms B and D from the first phase of the project, which came on stream in March 2018, and the remainder coming from Platform C.

At around the same time, the head of POGC’s offshore section of South Pars Phases 22-24, Mehrdad Kazemi, said that three new wells had become operational in Phase 22 alone, adding an immediate 6 mcm/d to its gas output. In addition, despite the highly publicized withdrawal of France’s Total from Phase 11, and the then on and off involvement of China National Petroleum Corporation in the Phase, Iran’s Petroleum Minister, Bijan Zanganeh, added that the recent installation of a US$25 million 11B platform jacket in Phase 11 will make it possible to drill 12 more wells on top of the five currently being drilled. “With the installation of this jacket and the drilling of five wells, it will be possible to recover an extra 14 million cubic meters per day from this Phase within in the next 14 months,” he added.

With most of the work on most of the other original 24 phases close to completion - just a handful do not have a 95+ percent completion rating - another relatively under-developed site, Phase 14, is now in focus. The POGC’s director of Phase 14, Mohammad Tavasolipour, said recently that the third offshore topside of the project was installed in the middle of 2019 and became fully operational at the end of last year. In conjunction with this, plans are being devised to bring Phase 14’s onshore refinery to full production by next June.

According to Tavasolipour, the engineering, procurement, and construction section of the Phase 14 refinery has reached more than 83 percent completion, with the first train of the refinery likely to come on-stream by the end of the current Iranian calendar year on 20 March 2021. This refinery will be the last onshore processing facility of the huge gas reservoir that Iran shares with Qatar. As it stands, said Tavasolipour, the offshore section of Phase 14 is now fully operational with 56.8 mcm/d of production capacity, following the last platform coming online in March, it having 14.2 mcm/d of gas production capacity. Thus augmented the other 3 platforms (2 satellite and two main), each with 14.2 mcm/d of gas production capacity. Overall, then, in addition to this natural gas production, Phase 14 is also fully set to produce 75,000 barrels per day (bpd) of gas condensate and 400 tons per day of sulfur, 1 million tons per year (mtpy) of liquefied petroleum gas (LPG), and 1 mtpy of ethane to be fed to petrochemical plants.

In tandem with this, according to a comment just over a week ago from the POGC’s deputy director of Phase 19, Seyed Hossein Azimi, a single point mooring (SPM) loading system with a capacity of 7,000 square meters per hour of loading capacity recently arrived in Assaluyeh that would augment gas condensate loading capacity of the field. This SPM will allow for the handling of liquid cargo, such as petroleum products, for tanker ships. “There will be a few more of these installed in the south, in the Gulf of Oman, in the coming months, as they are very useful in areas where a dedicated facility for loading or unloading liquid cargo is not available,” a senior source who works closely with Iran’s Petroleum Ministry told OilPrice.com. These SPMs will be located many kilometers away from the onshore facilities, connected to them by a series of sub-sea pipelines, and able to handle the biggest of VLCCs.

All of this is aimed, of course, at boosting Iran’s much-pressed finances, with Zanganeh last week stating that currently the country exports around 16 billion cubic meters per year (bcm/y) of natural gas. In addition to the ongoing gas exports to neighboring Iraq, he underlined that Iran currently exports significant quantities of natural gas to Armenia and wants to begin sending gas to Pakistan as well as soon as possible. In addition, according to the chief executive officer of the National Iranian Gas Company (NIGC), Hassan Montazer Torbati, last week, Iran is in the process of considering gas trading in earnest with its neighbors again. “We have witnessed increasing gas production in recent years, notably from South Pars, and the NIGC has built over 5,000 kilometers of pipelines in the last seven years, which has provided a rich infrastructure for gas distribution,” he said. “The issue of gas exports to Armenia, Azerbaijan and Turkey is on the table, we have prepared the ground, and fortunately there is enough capacity for gas swaps...this means that we can receive gas in the northeast and transit and swap it wherever necessary, with the infrastructure now ready,” he underlined.

Given the relatively recent resumption of Iranian gas exports to Turkey following the halt on 31 March, Zanganeh outlined that - despite some predictions to the contrary in light of a recent gas discovery by Turkey – the demand outlook from Turkey for gas will remain significant for the foreseeable future. “What was announced was that this reserve holds 320 billion cubic meters of gas but if this 320 billion cubic meters of gas is in place, its extractable gas will be about 220 to 230 billion cubic meters and if you divide this number by 20 years and 20 years by 365 days then 30 to 35 mcm of gas will be produced per day from the reserve,” he highlighted. “If these figures are accurate then 30 million cubic meters of gas can be produced daily, which is still important for Turkey, but according to the information we have, Turkey’s daily gas demand is 130 million cubic meters, which is mostly imported in the scale of 2.5 to 1 from Russia and Iran, and a small amount from the Republic of Azerbaijan,” he underlined.

Little mention was made by Zanganeh of China, but it should not be forgotten that just after the implementation of the Joint Comprehensive Plan of Action (JCPOA) on 16 January 2016, the National Iranian Oil Company (NIOC) – through its Deputy Director of International Affairs for Marketing and Crude Oil Operation, Safar-Ali Karamati – stated that Iran planned to double its LPG production in the post-sanctions era.

Already one of the biggest and most reliable suppliers of LPG in the world at that time, Iran had lost almost none of its LPG market share under the previous U.S.-led sanctions on its nuclear program and was then producing around eight million tons of LPG annually. Karamati added at that time that when all of the Phases of South Pars came fully online Iran would see at least a doubling of this LPG output figure, allowing it to capture at least 40 percent of the Middle East LPG exports market. Despite U.S.-led sanctions, China was – conservatively – importing half a million tons of LPG from Iran each month in the first quarter of this year, before the COVID-19 outbreak, generating at least US$200 million per month of revenues for Iran from this product alone. Indeed, if the past is any guide, the worse the trade war becomes, the better for Iran’s LPG exports to China. Before China placed tariffs on U.S. LPG, it sourced around 20 percent of its total imports from the U.S. After the tariffs were imposed, Chinese buyers turned to Iran principally to make up the difference, so that by last year China accounted for at least 80 percent of all Iran’s LPG exports.