Betrayal or Service
Iran gas export to the Indian Subcontinent that was on the agenda during the last 15 years has turned into a hot topic in Iran’s economic and political circles these days.
In fact it’s the 30 percent discount on the gas price stated by the Deputy Foreign Ministry on International Affairs that has once again triggered discussion about merits and demerits of gas export and the export price.
But the thing that has been totally forgotten is the LNG export treaty that according to the reports has a value much more than the tripartite pact between India, Iran and Pakistan. Also are the price of gas sold to Shell and Total for LNG production and the recent agreement to transfer Turkmenistan gas to Turkey that are at odds with Iran’s economic and strategic interests.
With regard to the current circumstances and with a realistic view on the future, LNG pacts with this substantial volume are not the best option to use the vast reserves of gas.
For Turkmenistan gas Iran must purchase higher volume of gas and sell it to customers such as Turkey based on a different treaty. In fact, Iran must be a purchaser and a seller, not a transit country which has got limited economic and strategic interests.
Turkey as an example doesn’t have gas reservoirs but it has placed itself in a position to be able to be both a purchaser and a customer. Therefore it can earn high revenue and meanwhile strengthen its strategic situation. So what economic or strategic rationale have the Petroleum Ministry officials had in mind to turn the biggest producer and consumer of oil and gas of the region into a “transit country”?
About gas export we must answer this question that can Iran be a major gas exporter and at the same time provide internal needs that include home, industrial and commercial needs, fuel needed for power plants and for injection inside oil fields.
Currently, the key document of the country is the 20-Year Prospect Document. In the document it has been stressed up to the end of March 2025 Iran will become the third gas producer of the world and it will possess a %8-10 share of the global trade of gas products.
According to the statistics published by BP, in 2006 Russia has produced 612 billion cubic meters of gas and United States 524 Canada with 187 billion cubic meters and Iran with 105, are the third and fourth main gas producers of the world. With regard to the existing reserves, Iran can easily become the third producer of gas in the world by developing its gas fields.
United States’ reserves are a little more than that of Iran and at the same time their gas production is 5 times more than Iran. Therefore with deliberate planning and full development of the existing gas reserves, in its prospect Iran can vision the second rank in gas producers and replace United States by the end of 2025. But attaining a %8-10 share of the global trade of gas and its product needs more thinking, especially if the first goal which is increasing gas production fails.
Trading gas through pipelines or as LNG has risen from 581 billion cubic meters in 2002 to 748 billion cubic meters in 2006 which shows an annual growth of 6.5 percent. If this procedure continues up to 2020 the global gas trade will reach 1800 billion cubic meters per annum. 8 to 10 percent of this quantity will be 144 to 188 billion cubic meters per annum which is much more than the current production of Iran and 12 to 15 times as the current total gas exchange of Iran.
According to the latest statistics released by Petroleum Ministry for March 2006 to March 2007, Iran’s gas export shows an amount of 5.63 billion cubic meters and its import has been 6.15 billion cubic meters in the same period. That means the aggregate gas exchange of the country in this period has been about 12 billion cubic meters.
Hence, the only way to attain its Prospect goal of %8-10 share in the global gas trade is to increase the gas production 5 times as the current production. But up to now the priority for gas allowance in Iran is domestic consumption or injection of gas to oil fields. But if the process of gas production quickens and Iran achieves the second rank of production by 600 billion cubic meters, then there’s a chance to attain the goal of the Prospect Document.
For March 2006 to March 2007 the Ministry of Petroleum has estimated the amount of extractable natural gas as 28.3 trillion and the domestic consumption of gas as 321 million cubic meters per day (117 billion cubic meters for the year). If Iran’s consumption increases by an average of 8 percent every year, then up to 1404 the total consumption of these years will be around 6 trillion cubic meters.
Injection of gas to oil fields is currently 30 billion cubic meters per annum that according to the plan devised by Ministry of Petroleum is going to reach 80 to 100 billion cubic meters in the coming years.
The total injected gas in oil fields will reach the amount of 1.6 to 1.9 trillion cubic meters up to 1404. More than 70 percent of the injected gas is re-obtained with oil production that can be used for further injection or domestic consumption.
The total volume of gas needed for domestic consumption and injection will be 8 trillion cubic meters or in other words 29 percent of the existing reserves up to 1404.
40 billion cubic meters of gas will be exported to the Indian Subcontinent annually if all the plans become operational. That is less than one-third of the gas exchange predicted in the Prospect schedule.
Generally, if up to 2020 we manage to increase our import from Turkmenistan to 30 billion cubic meters and our export to Indian Subcontinent, Europe, Turkey and Armenia to 80 billion cubic meters and have an LNG export of 20 thousand tons per year, we have achieved the main goals of the 20-Year Prospect Document. Also we can’t be sure of a welcoming market in the future if we don’t start now.
Some challenge these discussions and claim that it’s against Iran’s interests to export gas when shortage for domestic consumption, power plants, industries and field injection is evident and due to Iran’s special circumstance, it is unlikely to increase gas production.
They believe that today, exporting gas means exporting development since other countries develop economically using the cheap energy provided by Iran and that is in occasions against Iran’s economic interest. They also believe that when the produced gas can be used in gas-consuming industries –that have highly value added products- export doesn’t sound reasonable
From these discussions we conclude that with the rise in the current production and regarding future needs, gas export especially LNG doesn’t enjoy any strategic benefits and it’s against our prosperity.
On the other hand if Iran manages to boost its gas production and make 5 or 6 times more than the current production, in case of providing domestic need, injection and gas-consuming industries, export will be beneficial for us.
The 8-10 percent share of global gas trade that has been mentioned in the Prospect is also probably with supposition of a rise in gas production that makes all the options available for Iran. Meanwhile, gas-consuming industries have an added value that is much more than that gas export
Beside job creation that is a problem of our country, gas-consuming industries result in absorption of a huge load of capital inside the country and access to hi-tech. This is another issue that must be contemplated apart from the domestic consumption and injection.