Major Iranian gas exports to take at Least five years

Iran has the long-term potential to become one of the world’s top gas producers, thanks to its 34 trillion cubic meters of natural gas reserves, or around 18% of the world’s total, Fitch Ratings said in a report on July 10.

However, Fitch believes that even if international sanctions on the country are lifted, it will take at least five years to ramp up production and build the pipelines necessary to become a large gas exporter.

The higher cost and complexity of liquefied natural gas (LNG) projects means significant LNG exports would take a decade or longer to materialize, Fitch said.

It noted Iran is planning a number of gas export pipelines pending the removal of international sanctions.

One example is IGAT-9, a 35 bcm per year pipeline that Iran plans to use to send gas from South Pars to Europe via Turkey.

There are currently no transit pipelines in Turkey to deliver gas to the European markets, Fitch said. The only pipeline which is currently under construction is the 16 bcm Trans-Anatolian Natural Gas Pipeline (TANAP), which will bring 10 bcm of Azerbaijani gas via Turkey and Greece to Italy via another yet-to-be-constructed Trans Adriatic Pipeline (TAP).

Fitch believes that while it may be possible to increase the throughput of TANAP and TAP to accommodate Iranian gas by building one or several gas compression stations, such construction as well as gas production ramp-up in Iran could take several years.

“Therefore, Iran could become a large gas exporter by the end of this decade at the earliest. Developing LNG capabilities is more costly and would probably take longer, and we do not expect Iran to export large volumes of LNG before mid-2020s,” Fitch said.

Earlier Mohsen Pak Ayeen, Iran’s ambassador to Azerbaijan said that the Islamic Republic may join TANAP, which will carry Azerbaijan’s gas to European markets.

“We are looking into the possibility of buying equity in TANAP, Pak Ayeen said, adding Iran may buy equity in the pipeline, if reaches its production targets by 2018.

Currently Iran and the group P5+1 (the US, UK, France, Russia, China, and Germany) are holding negotiations to reach a comprehensive agreement on the Islamic Republic’s nuclear program.

The sides failed a deadline of July 10 to strike the deal and they have given their talks another extension.

A deal would limit Iran’s nuclear program and in return lift economic sanctions on the country.