TEHRAN (FNA)- Cost issues and sanctions that limit access to Western technology make it more beneficial for Iran to export natural gas via pipeline than by tanker after cooling it to liquid, an Iranian official said on Sunday.
Akbar Torkan, head of planning at the Oil Ministry, also said France’s Total and Royal Dutch Shell were behind schedule in carrying out multi-billion-dollar liquefied natural gas (LNG) export projects in Iran.
“They are very slow in the execution of their projects and we are not satisfied,” Torkan told Reuters. “We hope that we will be able to find … some solution.”
“If not … we cannot wait for ever,” he said on the sidelines of a natural gas exporting conference in Tehran.
Total said in July its Phase 11 project of Iran’s giant South Pars gas field was effectively frozen, although it would not abandon the project. Shell said in June it would pull out of South Pars Phase 13, but was not abandoning Iran altogether.
Iran, which sits on the world’s second largest reserves of both oil and gas, is facing US sanctions over its civilian nuclear program.
Iranian officials have dismissed US sanctions as inefficient, saying that they are finding Asian partners instead. Several Chinese and other Asian firms are negotiating or signing up to oil and gas deals.
Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in Iran, which is rich in oil and gas, but not getting into big deals that could endanger their interests in the US.
Yet, after oil giants in the West witnessed that their absence in big deals has provided Chinese, Indian and Russian companies with excellent opportunities to signing up to an increasing number of energy projects and earn billions of dollars, many western firms are slowly losing reluctance to invest or expand work in Iran.
Some European countries have also recently voiced interest in investment in Iran’s energy sector after a gas deal was signed between Iran and Switzerland regardless of US sanctions.
The National Iranian Gas Export Company and Switzerland’s Elektrizitaetsgesellschaft Laufenburg signed a 25-year deal in March for the delivery of 5.5 billion cubic meters of gas per year.
The biggest recent deal, worth â‚¬100m ($147m, Â£80m), was signed by Steiner Prematechnik Gastec, the German engineering company, this month to build equipment for three gas conversion plants in Iran. This is at a time when France’s Total, Royal/Dutch Shell and Norway’s Statoil have put on hold their shares in multi-billion dollar contracts.
Iran has not yet exported any LNG but has previously said it will be able to produce 77 million tons a year by 2014.
Torkan, however, suggested Iran’s focus was shifting to pipelines. He said they did not face the same sanctions “limitations” as LNG investments. Construction of Iran’s first LNG plant began at Tombak in the Persian Gulf over a year ago.
“We will not halt the LNG projects. But for expansion we prefer to expand the capacity of pipelines,” Torkan said. “One of the reasons is sanctions.”
Torkan further pointed to lower costs of pipeline delivery compared with LNG.
“The cost of transferring gas in pipelines is lower than exporting it with the LNG system,” the Oil Ministry website Shana quoted him as saying.
Torkan listed Germany, Austria, Switzerland and Italy as target markets for Iranian gas and said supplying them via pipeline was more in Iran’s ‘benefit’ than LNG shipments.
Washington, which bars its own firms from doing business in Iran’s energy sector, accuses Tehran of trying to develop nuclear weapons and has spearheaded a drive for sanctions.
Iran says its work is for purely peaceful purposes. Despite the rules enshrined in the Non-Proliferation Treaty (NPT) entitling every member state, including Iran, to the right of uranium enrichment, Tehran is now under three rounds of UN Security Council sanctions for turning down West’s illegitimate calls to give up its right of uranium enrichment.
Tehran has dismissed West’s demands as politically tainted and illogical, stressing that sanctions and pressures merely consolidate Iranians’ national resolve to continue the path.
The UN sanctions address individuals and companies involved in nuclear- and arms-related activities without banning daily trade and non-nuclear investment.
But the US has imposed unilateral restrictions in particular on financial transactions and big investments.
Equipment needed for LNG projects is mostly made in the United States or Europe.
Without LNG plants to export gas by tanker to the highest bidder, Iran could pump some gas by pipeline to neighbors, analysts say.
The Iranian oil ministry is working on some large-scale pipeline projects, including the one which would pump gas across Pakistan to India.
Iran and Pakistan initiated a Gas Sales Purchase Agreement earlier this year. India and Pakistan have also resolved all bilateral issues including transit fee which saw New Delhi boycotting IPI pipeline talks for about a year.
India has more or less agreed to give Pakistan a transit fee of $200 million per year, which is equivalent to $0.60 per million British thermal unit for allowing passage of the pipeline through that country.
India and Pakistan finally agreed in February 2007 to pay Iran $4.93 per million British thermal units ($4.67/GJ) but some details relating to price adjustment remained open to further negotiation. There was a breakthrough in the talks in April 2008 when Iranian President Mahmoud Ahmadinejad visited Pakistan and India.
According to the project proposal, the pipeline will begin from Iran’s Assalouyeh Energy Zone in the south and stretch over 1,100 km through Iran. In Pakistan, it will pass through Baluchistan and Sindh but officials now say the route may be changed if China agrees to the project.
The gas will be supplied from the South Pars field. The initial capacity of the pipeline will be 22 billion cubic meter of natural gas per annum, which is expected to be later raised to 55 billion cubic meter. It is expected to cost $7.4 billion.
According to Indian ministry sources, the IPI gas pipeline is quite crucial for New Delhi as after signing of the agreement, 60 million standard cubic meters per day (mmscmd) of gas is expected to be supplied in phase-I, which will be shared equally between India and Pakistan.
In phase-II, 90 mmscmd of gas will be supplied to India and Pakistan. So far six meetings of the trilateral joint working group (JWG) of the participating countries have been held with the last meeting being held in New Delhi on June 28-29, 2007.
India, Asia’s third-largest economy, can produce only half the gas it needs to generate electricity, causing blackouts and curbing economic growth. Demand may more than double to 400 million cubic meters a day by 2025 if the economy grows at the projected rate of 7 to 8 percent a year, according to the Indian oil ministry.
Iran plans to start exporting gas to Pakistan in 2011. Iran has completed half the pipeline, which can carry 110 million cubic meters of gas a day, National Iranian Gas Company (NIOC) said in April. India uses about 108 million cubic meters of gas a day, according to a BP Plc report.
Tehran has also suggested that it could hook up to the planned Nabucco pipeline to bring Central Asian gas to Europe.