Doubts continue to loom over Iran’s ambitious oil and gas programmes
By Karen Remo-Listana
Posted: 23 April 2007
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Iran ’s two most talked liquid natural gas projects have long been the subject of delay and nothing is likely to change soon, according to observers.
The projects are Pars LNG in partnership with Total and Petronas and Persian LNG in partnership with Shell and Repsol.
Total signed a $2 billion deal for the first phase of the South Pars project in 1997, snatching the biggest oil deal with Iran since the Islamic Revolution in defiance of US efforts block investment in the country.
 But Total recently announced that sharply rising cost estimates and geopolitical concerns could delay Pars LNG while Shell and Repsol remain at least 12 months away from a final investment decision for the same reasons.
Gholamhossein Nozari, Deputy Petroleum Minister of Iran , speaking in Dubai last month said that National Iranian Oil Company is waiting for Total’s final investment decision in three to four months. “We are discussing to find a way to reduce the high cost of the project,” Nozari, who is also the managing director of the NIOC, said on the sidelines of Middle East Petroleum and Gas Conference.
The Pars LNG project was scheduled to start up in 2011 while Shell had expected Persian LNG exports to begin in 2011-2012.
Iran has repeatedly announced it was near to reaching a decision for Pars LNG but there is considerable industry doubt over Iran ’s ambitious LNG programme, now under increased pressure from lack of outside financing because of high risk assessments and US sanctions.
Total has completed front-end engineering design for Pars LNG and has been undertaking a feasibility study, including project economics, in preparation for a final investment decision.
The Yadavaran oil field deal it inked with China in 2004 is also still under negotiation, said Nozari.
Sinopec agreed to take the lead in developing the Iranian oil field and to buy 10 million metric tonnes of LNG every year for 25 years in a deal worth as much as $100 billion.
“ Iran officials are now in China and they are in negotiation,” he said. “There are still some parts of the contract that are not finished but the main thing is the return on investment.”
Another long signed deal pending is the Iran-Pakistan-India gas pipeline. Nozari said the total contract has been agreed noting that the construction of the Iranian section has started.
“ Pipeline construction will finish by 2009,” he told Pipeline but declined to forecast when the gas might flow. While gas commissioning is still indefinite, Russia has also expressed interest in participating in the project.
Gazprom's deputy chief executive officer Alex ander Ananenkov has said it would decide on participation in the pipeline after examining a feasibility study provided by Pakistan .
Nozari has also promised to resolve the delays that have held up vital gas supplies to the United Arab Emirates .
It came after meeting the deputy ruler of the UAE emirate of Sharjah where the gas will be imported and distributed by Dana Gas, in which the largest shareholder is Crescent Petroleum which has the supply contract with Iran
The deal became controversial last year after some politicians said Iran would not benefit from the exports because prices had risen sharply after the initial contract was signed. Iran later said it would not export to the UAE until it got a higher price.
But Sharjah’s Crescent, which negotiated the deal with Iran , said the delay was down to technical problems on the Iranian side not price.
In a statement carried by UAE state news agency WAM after the meeting in Sharjah last month Nozari said: "We hope all outstanding commercial matters on this contract will be resolved in the very near future to the mutual benefit of both sides." Construction of Iran 's side of the project was in its final stages, Nozari added.
Industry sources say Iran will likely complete its side of the facilities this month after struggling with technical problems and a shortage of labour.
Crescent had expected first deliveries of gas in mid-2006. The initial agreement was for the supply of 600 million cubic feet per day. The pipeline and gas processing plants in UAE waters have long been complete.
Iran is attempting to use LNG and pipelines in a strategy to establish itself as a major supplier to a hungry market. But so far Iran has achieved little success in this endeavour.
Nozari confirmed that Iran is also now eying the Nabucco pipeline project as a potential new supply route to Europe .
“We are in negotiation with OMV (which heads the Nabucco project) and with countries that are going to purchase gas, Nozari said. We have allocated more than 100 million cubic metres of gas for Nabucco.”
The pipeline is seen as a vital part of the European Union's strategy to diversify gas supply routes and to reduce dependence on Russian gas supplies and transit routes.
The EU’s trade significance for Iran is huge, accounting for 40% of Iran ’s imports and a quarter of its exports.
Iran has the world's third-largest oil reserves and second-largest gas reserves. The country’s current crude capacity is four million barrels per day but plans to increase capacity to 5.3 million barrels per day by 2015, says Nozari.
Gas capacity is expected to almost quadruple from 400 million cubic metres per day to 1.4 billion cubic metres by 2015. |
