Gas, Key to Iran-Iraq Alliance
Iran will start exporting natural gas to its western neighbor Iraq next year as the two Middle Eastern countries seek to strengthen ties. Iran’s gas will first go to Iraq and later on it will go to Syria, Lebanon and the Mediterranean in the coming years.
Iran has sought, in recent years, to play an active role in the regional energy exchanges as well as global gas trade.
Sitting atop the world’s largest gas reserves in the world, Iran has been pursuing long-term strategies like purchase, imports, transit and swap of gas in order to strike a balance into its energy mix and boost its presence in the gas market.
Iran’s unique geographical position and its third largest producer slot with a daily capacity of 700 mcm/d as well as infrastructure and pipelines carrying 750 mcm/d enable the country to provide numerous opportunities to its neighbors.
With the development of the remaining phases of the giant offshore South Pars gas field – the largest in the world – Iran’s gas production capacity will dramatically rise. Iran will be able to export 250 mcm/d of gas in four years; therefore the country will be a top supplier of gas.
Iran is currently producing around 650 mcm/d of gas, which will soar to 1.4 bcm/d by March 2015. Phases 12, 15 and 16 of South Pars are to fully come on-stream by March 2014.
Iran widely counts on South Pars gas field, shared with neighboring Qatar, for its gas exports. The volume of recoverable gas along with gas condensate in South Pars equals 230 billion barrels of crude oil. The Iranian section of the gas field holds 14 tcm of gas in place, 10 tcm of which recoverable, and 17 billion barrels of gas condensate, 9 billion barrels recoverable. South Pars makes up 50 percent of Iran’s gas reserves and eight percent of the world’s gas reserves.
In summer 2011, Syria, Iraq and Iran signed a breakthrough energy deal which required Iran to deliver gas from South Pars to Iraq, Syria and Lebanon before being supplied to the European Union. The total project is estimated to cost 10 to 15 billion dollars.
Iran’s planned gas pipeline to Europe would be 5,600 kilometers long and would cut through Iraq, Syria and Lebanon. The project will be financed in the form of build-operate-transfer (BOT) or build-own-operate (BOO). So far, 15 European companies have volunteered to market South Pars gas.
Countries located on Iran’s gas supply route to Europe will get gas to meet their demands so that the rest would reach Europe. In 2020, Iraq is estimated to need 10 to 15 mcm/d, Syria would need 15 to 20 mcm/d and Lebanon would need 5 to 7 mcm/d of gas.
But Iraq cannot wait until Iran-Europe pipeline has been constructed. Iran agreed to supply 25 mcm/d of gas to its western neighbor through a branch off national gas pipeline.
The Iraqi section of the pipeline is being built by Iranian companies. Experts say providing technical and engineering services to other countries would create jobs and improve economic, political and cultural relations.
Senior Iranian officials are reiterating the need for industrial plants to supply products for exports. For that purpose, the quality of products must be seriously taken into account so that they would be able to compete with products supplied by other countries.
Exporting Technical Services to Iraq
Iranian contractors are currently building a pipeline in Iraq for the delivery of gas to that country in the near future. After the construction of this pipeline, cities and villages located on the route of the pipeline will also receive gas.
The agreement signed between Iran and Iraq requires Iranian engineers to build the 270-kilometer pipeline.
Iraqi energy expert Hossein al-Javaheri says Iranian companies involved in oil and gas projects are faring as well as international companies operating projects in Iraq.
“Numerous international private companies have offered to invest in Iraq’s oil sector, but Iraqi Oil Ministry prefers Iranian contractors due to the quality of their work,” he said.
Another sector Iran’s private sector is expected to invest in Iraq is compressed natural gas (CNG) production and distribution.
Javaheri said: “During my visit to Iran, I saw that Iranian contractors and petroleum engineers are as experienced as European experts. The Iraqi Oil Ministry officials are expected to finalize their agreement with Iranian officials about joint cooperation.”
Based on preliminary agreements, Iran is expected to start delivering 7 mcm/d of gas to Iraq in the first phase. Iran has accepted the price proposed by the Iraqi side.
Managing director of Iran Gas Engineering and Development Company Alireza Gharibi has said that the construction of a pipeline that will carry natural gas from Iran to Iraq will be completed by the end of the current Iranian calendar year in March 2015.
He said that based on an agreement between the two countries, the pipeline will finally carry 40 mcm/d of Iran's natural gas to Iraq.
The Iranian official stated that the 100-kilometer pipeline will stretch from the village of Charmaleh, located in Iran’s western province of Kermanshah, into the town of Naft Shahr on the border with Iraq.
The Iran-Iraq gas pipeline project will be finished by the end of the current Iranian calendar year, after which tests will be conducted on the pipeline and necessary infrastructure will be prepared to increase the volume of gas export from the initial 7 mcm/d to 10 mcm/d, he said.
Nabucco Founders Eye Iraq Gas
Iraq's proven gas reserves are estimated at 3.17 tcm, or two percent of the world’s gas reserves. But the point is that nearly 70 percent of Iraq’s natural gas is associated gas and it is mainly flared due to lack of infrastructure and marketing. Despite these huge reserves, Iraq still needs Iran’s gas to power its factories, petrochemical plants and power plants. Iraq was recently elected an observer at the Gas Exporting Countries Forum (GECF).
Turkmenistan and Azerbaijan are short of gas to feed the Nabucco pipeline; therefore the founders of this pipeline are now looking at Iraq’s gas reserves. Iraq, which cannot even meet its own domestic gas demand, is unlikely to be able to feed gas into Nabucco.
The Nabucco-West pipeline (also referred to as the Turkey–Austria gas pipeline) is a proposed natural gas pipeline from the Turkish-Bulgarian border to Austria. It is a modification of the original Nabucco Pipeline project, which was to run from Erzurum in Turkey to Baumgarten an der March in Austria. The aim of the Nabucco pipeline is to diversify the natural gas suppliers and delivery routes for Europe, thus reducing European dependence on Russian energy. The original project was backed by several European Union member states and by the United States, and was seen as a rival to the South Stream pipeline project. The main supplier was expected to be Iraq, with potential supplies from Azerbaijan, Turkmenistan, and Egypt.
Official figures released by international agencies indicate that the gas market is expanding in the current century and some energy experts refer to the 21st century as the Century of Gas. Less pollution, diversity in energy mix, relatively low price, disablement of nuclear reactors generating electricity, the failure of oil fields to meet world’s energy needs and the extent of gas reserves in the world have concentrated attention on gas.
Adoption of proper gas trading strategies by Iran, a major gas holder, would be an important step for an effective presence in the regional markets.
Iran is determined to raise its share of the world gas trade to 10 percent. Iran’s gas production will double from the current 700 mcm/d once all phases of South Pars gas field have come on-stream.
Besides revenues, Iran’s gas exports to Iraq will also contribute to stronger ties between the two Muslim neighboring states. Following the removal of Saddam Hussein in 2003, the Iranian government has taken steps for promoting diplomatic ties with Iraq. Iran’s exports to Iraq have jumped from 300 million dollars in 2004 to six billion dollars.