Iran works on gas sales to neighbours pending exports further afield

Agence France Presse
April 26, 2004 Monday

Iran works on gas sales to neighbours pending exports further afield


TEHRAN, April 26

Iran, which holds some 15 percent 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 liquefied natural
gas (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 AFP on the sidelines of
a gas export conference here in Tehran.

He said Iran expects to sign within the next two weeks a contract to
supply 15 million cubic metres (500 million cubic feet) 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 billion
cubic metres 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 three
billion cubic metres annually.

And a 25-year contract with Turkey allowed Iran to sell 3.5 billion
cubic metres there in 2003. That figure is expected to rise to five
billion cubic metres in 2004, if a contractual dispute can be worked

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 two billion dollars
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 inked — and

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

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 six billion dollar protocal 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 here said.