Iran Natural Gas Report

Executive Summary of the CEDIGAZ report on the Iranian Gas Chain under US sanctions by Dr Sara Vakhshouri founder and president of SVB Energy International and specialist of the Iranian energy sector

Iran has one of the largest proven natural gas reserves in the world, hosts about 17% of the world’s proven natural gas reserves. Iran is also the world’s third–largest dry natural gas producer after the United States and Russia. About 80% of Iran’s gas reserves are from non-associated gas fields.

Based on Iran’s 6th Five Year Economic Plan (2016-2021), Iran’s rich gas production should reach 474.5 bcm a year or 1300 mcm a day by March 2021. This is almost twice its production of 250.7 bcm in 2016. Despite the upward natural gas output trend, due to sanctions, Iran will not hit its planned production target.

In March 2019, Iran’s processed about 889 mcm/d of rich gas that was produced from independent gas and form oil fields. Rich gas in Iran is processed by NGL factories, gas refineries and dehydration units. The largest share of refined gas production capacity belongs to gas refineries in South Pars.

Despite the fact that Iran is the world’s third largest producer of natural gas, its exports only constitute less than 1% of global gas trade. This is primarily due to its large domestic demand and then because of sanctions on its exports, and lack of investment and access to required technologies.

Iran’s condensate and gas liquid output has soared over the past decade. Most gas liquids are produced in the previously described NGL plants. Nevertheless, the actual production of these units has been less than 50% of their nominal capacity. This was significantly low during the nuclear sanctions and newest round of US sanctions. As a result, Iran has had to offset its oil production and adjust its ability to export. Lower crude oil production had additionally limited overall NGL production volumes, which is the byproduct of crude oil production in Iran.

Tighter US sanctions on Iran energy industry have had a significant and undeniable impact upon Iran’s gas development projects. If US sanctions against Iran continue in the long term, and Iran does not succeed in accessing international capital and technology, it will not increase its natural gas production. In, fact its production levels may start to decrease due to natural decline in South Pars production.

Unlike President Obama’s nuclear sanctions, the current sanctions include condensate export alongside the crude oil export in order to put “maximum pressure” on Iran. As a result of limitations on its condensate export, Iran is struggling to maintain its gas production particularly from South Pars.

Dr Sara Vakhshouri for CEDIGAZ

Complete report available to CEDIGAZ members https://private.cedigaz.org

Get the report (non-members)

Cedigaz LNG Brief – July 2019 edition

The CEDIGAZ LNG brief is based on CEDIGAZ’ monthly LNG trade database. It is published on the blog 3 months after its disclosure to CEDIGAZ members. 

LNG in H1 2019

Global Imports (net of re-exports) grew by 12% in H1 2019 to reach 169 Mt (+18.5 Mt Y-o-Y) driven by the surge of European imports. Asian demand was insufficient to absorb the sharp supply rise. Overall demand in Asia remained almost flat as strong growth in China (+4.7 Mt) and Bangladesh (+1.6 Mt) was offset by declines in Japan (3.3 Mt) and South Korea (3 Mt).
Imports growth in China declined from nearly 50% in 2018 (H1) to 20% on account of increased domestic gas production (+10%), higher pipeline imports and weaker demand growth due to a mild winter (vs H1 2018) and policy easing on enforcement of coal-to-gas conversions.
In Japan, nuclear output has increased and, inventories were high after a mild winter. Nuclear output in Korea grew by 36%, affecting gas demand as gas-fired electricity generation dropped by 11%.
In the absence of a strong North Asian demand growth, Europe acted as the market of last resort. Net imports in the region almost doubled to 41 Mt (+19 Mt Y-O-Y). Growth was particularly strong in the UK (+4.2 Mt) and France (+4.4 Mt). In Latin America, imports were up by +17% (+0.8 Mt), conversely they declined in North America and MENA.
Global supply growth was driven by Australia, the US and Russia where exports increased by almost 5.6 Mt, 5.1 Mt and 3.7 Mt respectively, boosted by the ramp up of Train 1&2 of Ichthys LNG and Train 2 of Wheatstone in Australia, Train 1 of Cove Point and Corpus Christi in the US and Train 2&3 of Yamal in Russia. Strong global supply growth and weak NEA LNG demand contributed to the rapid decline in spot prices. NEA spot prices, almost halved since January, stimulating European imports. Average monthly spot prices for June were $3.5 mmbtu (TTF) in Europe and $4.4/mmbtu in North East Asia, putting pressure on the US LNG off takers (the estimated short run marginal cost of US LNG in June was around $3.3/mmbtu to Europe and $4.5/mmbtu to Asia).
The spreads between European gas hubs and the Asian spot market remained low this year, reducing Europe’s re-exports by 21% (0.3 Mt Y-o-Y) to 1.2 Mt. The lower prices have not yet triggered additional demand in Asia and with further new supply scheduled to come online in the months ahead, the pressure on global gas prices should contin-ue to mount.

A new era for CCUS driven by contrasted policies and business models: US and European approaches

According to a new report by CEDIGAZ, CCUS is coming back into the limelight, especially in the US and in Europe, in the wake of the Paris agreement, boosted by a growing interest in hydrogen, rising carbon prices, new supporting policies and new business models.

There are currently 20 new, large-scale, CCUS projects planned around the world, nine of them in Europe. While projects developed in the middle of the 2000s mainly targeted coal-fired power plants and stored the captured carbon, the focus of the new projects is different as they tend to concentrate on industrial and manufacturing processes and on carbon utilization rather than just storage. Several projects involve production of clean hydrogen from natural gas, a cheaper option than hydrolysis using renewable power. New business models aim at reducing costs by dis-integrating the CCUS value chain into its three components of capture, transport and storage, and by addressing clusters of industrial facilities to achieve economies of scale.