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Gas Export to Europe Difficult but Feasible

(Saturday, August 12, 2017) 17:34

TEHRAN, (Shana) -- As far as energy is concerned, one cannot limit himself to a single viewpoint. Market developments, methods of cooperation with various countries, innovations and forecasts are among services provided by consulting agencies.

Established in 1961, Atlantic Council offers consulting services on international issues. It organizes annual conferences on different issues. It last held an energy conference in Istanbul this summer. Representatives of major oil and gas companies, senior analysts and energy officials from a variety of countries attended the event. The conference focused on energy market, particularly gas and renewable energies.

Iran was highlighted in this conference. In the post-sanctions era, gas-rich Iran is reentering world energy market.   

Over the past four years, Iran has put a great effort into reshaping its energy policy, tempting foreign investors back and revitalizing its oil and gas industry. Hence, it reconsidered its ambitious project to export gas to Europe. Iran's abundant gas deposits have largely attracted major companies which wish to forge cooperation with Iran. Nonetheless, a long road lies ahead of Iran to become an influential player in the petroleum industry. Iran's standing as a major player in the gas and oil market is undeniable; however, foreign companies keep watching closely ongoing developments in Iran.

The Atlantic Council 2017 in Istanbul was proof of the potential comeback of Iran as an influential producer and exporter of oil and gas, analysts and government officials who attended the event said.

For the time being, one of the most important issues for Iran is to attract severely-needed foreign investment. Since sanctions have been lifted, Iran has signed agreements with big companies on various gas projects. Once again giants like France's Total and Royal Dutch Shell are coming to invest in Iran.

Everything was on track before unprecedented challenges arose. US President Donald Trump, who took office in January, has pursued a different political approach towards Iran. The managing director and global head of RBC capital market, Halima Craft, believes that although Iran is a major player in energy market, further investment in its gas sector depends on the US politics.

 

When you look at how the US sanctions are structured, you can see how they are extraterritorial. The US has not invested in Iran after 1979. Hence, essentially the US says to foreign investors, you can invest in Iran or you can access the US capital market,” she told Iran Petroleum.

Her remarks come true when one takes into account Total's change of position in the wake of the election of Trump as US president.

However, Iran's Minister of Petroleum Bijan Zangeneh said recently that the agreement with Total for the development of Phase 11 of South Pars gas field would be finalized before the current administration of President Hassan Rouhani bows out.

 

Potential for Gas Exports to EU

 

While energy experts like Craft maintain that there is some ambiguity and uncertainty with regard to foreign investment in Iran's oil and gas projects, Europeans are more optimistic.

After removal of the sanctions, European companies were first given the green light for investing in Iran's projects, specifically gas sector.

Since 2015 when Iran and six world powers reached a historic nuclear deal, dozens of MOUs and agreements have been signed. Companies from Germany, France and the UK have been keen to invest in Iran. But the desire of exporting gas to Europe faded very soon due to tough competition in the market. Russia holds a monopoly on gas supply to East Europe. Some other European countries have long been purchasing liquefied natural gas (LNG) from Qatar.

Add to this shipment of gas which needs infrastructure. As a result, Iran preferred to consume its gas domestically.

The chairman of Board of Directors of Ukraine's NAFTOGAZ, Andriy Koboyev, believes that there is a possibility for Iran to have some relationships with the Eastern Europe countries in the gas market.

"The gas market is big, while there is not that much stock constrains from Ukraine, but there are players who make sure that Iranian gas doesn’t arrive to Europe market. So, if these impediments can be resolved, Iranian gas can be exported to Europe; but this is a difficult task," he said.

Meanwhile, Iran is looking for other destinations for its gas.

Ruben Eiras, an advisor in Portugal's Ministry of Sea, said that Iran and Portugal were more than hopeful about future cooperation.

Iran is investing at Sines Port to commercialize LPG shipments, he said, adding that the two countries were focusing on infrastructure to distribute LPG in the African market.

By accomplishing this project, Iran plans to use its flares efficiently.

Eiras speaks on a positive note about gas cooperation between Iran and Europe, saying, “For what I know, if there is a will and investment capacity in both parts, this will lead to other cooperation as well.”

 

Iran great Potential in Renewables

 

It is imperative to know that besides gas, Iran enjoys potential in renewable energies. The country intends to increase the share of renewables in its energy mix up to 5% over the coming three years. Iran also plans to build windfarms.

Mark Jones is the CEO of EWT, a leading company in building localized turbines.

EWT has already installed turbines in the UK, Alaska, and China.

He said an Iranian company has demanded that EWT build turbines in Iran.

This kind of projects is suitable for Iran, Turkey and the Black Sea countries. There are local industries in Iran and Turkey and their sources of energy are not used effectively.

"There are a lot of local industries, and also these countries are poor on cheap energy. Even though there are a lot of resources but they are used somewhere else. So Iran is up to use most of its resources," he said.

However, this sector is faced with challenges. In Iran, most projects are financed by the government while renewable energy pertains to projects which are handled by the private sector. Therefore, operating such projects in Iran would need more time.

Jones said however that "once people believe it works, then it will take off."

"So the hardest part is starting it and make up to 1.2 or 3% of the energy basket purely from renewable energy," he added.

"It will take time for Iran to build the infrastructure for the renewable energy. Iran needs investments, new policies, and people to start the development process," he added.

 

Courtesy of Iran Petroleum