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    Iranian Gas to Europe: Years Down the Road



At the Atlantic Council panels discussion on the future of Iranian energy it was said that the prospect of Iranian gas supplying Europe might take “years and years.”

by: Drew Leifheit

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Liquefied Natural Gas (LNG), Top Stories, Pipelines, News By Country, , Iran

Iranian Gas to Europe: Years Down the Road

Iranian gas reserves are the second largest in the world, but thus far they have not made an impact in international markets. Now that the nuclear deal with Iran looks to be implemented and international sanctions likely lifted (barring any unforeseen circumstances), there has been much talk of Europe capitalizing upon this potential new source to diversify its sources of natural gas. 

But, on Tuesday, at an Atlantic Council panel discussion on the future of Iranian energy, "Post Agreement: The Role of Natural Gas in Iran's Energy Future," Dr. Brenda Shaffer, Visiting Researcher and Adjunct Professor at Georgetown University, said the prospect of Iranian gas supplying Europe might take “years and years.”

She observed, “We're seeing a lot of hype, seeing Iran as an alternative to Russian gas, in the form of Europe's new LNG strategy.”

Reiterating that Iranian gas going to Europe could take a long time, if anyone might block impede that process it that would be Russia. She explained, “Iran's normalization of relations creates policy challenges for Russia who's on the opposing side of Iran on various challenges.” 

Dr. Shaffer predicted that while much energy diplomacy is likely to be seen between Europe and Iran, there is no doubt that the country becoming a major supplier to the old continent is a long way down the road.

Asked what other export markets Iran may be interested in, she offered that countries in the Persian Gulf that are moving towards using more gas could be potential customers; however, she cited Qatar's difficulties in being able to send its LNG to some of its neighbors. “Such issues will definitely limit Iran's exports,” she explained, adding that new gas flows could unleash underlying tensions in a gas deprived region like the Gulf.

Reuters' Yeganeh Torbati pointed out that once sanctions are lifted on Iran, domestic demand for gas could very likely go up. 

Dr. Sara Vakhshouri, President of SVB Energy International, opined that the production of Iran's South Pars gas field is very likely to double by 2018. While she says most of the country's focus will be on developing gas, production of gas condensate is also likely to increase significantly.

Concerning gas, she explains that one of Iran's objectives is to increase the added value of its resources inside of the country, exporting final products rather than raw materials. “This way, Iran could not only create jobs and a better economy, but also get more resistance toward any sanctions or further political problems,” said Dr. Vakshouri, who adds that one objective is to produce electricity for export. 

She says that, for example, Turkish consumers of electricity would be more affected by a shut-off in the wake of sanctions than they would from a gas shut-off. “However, the exporting of natural gas, which creates longer strategic gas with between the suppliers and receivers of natural gas, is also important for Iran.”

She said that Iran exporting natural gas to Europe has traditionally been part of the discussion. Dr. Vakshouri reported that Spain has recently said it is interested in developing an LNG in Iran in order to deliver the gas to Europe, or exporting to Oman and then exporting via that country's LNG facilities, as well as using existing pipelines like from Azerbaijan.

However, she adds that Iranian gas is not likely to be able to compete with Russian sources of gas according to price, despite Europe's keenness on a new source of supply.

She explained that this was contingent upon two factors: price and trust. In connection with price, she said, “At the current moment, Iran doesn't have the export capacity, but by 2019-2020 the country should have greater capacity.”

According to Barbara Slavin, Washington Correspondent for Al-Monitor, as part of the JCPOA agreement Iran will once again be able to access international banks, get insurance, attract investment, sell petroleum and have access to US currency. She said, “I don't foresee the US congress being to reimpose the sanctions. Only a massive violation by Iran would cause sanctions to return, but the country needs to sell oil and gas and get reentry onto the markets.”

-Drew Leifheit