According to Oil and Gas Journal
, Iran has an estimated 974 trillion cubic feet (Tcf) in proven natural gas reserves. Iran holds the world's second largest reserves after Russia. Around 62 percent of Iranian natural gas reserves are located in non-associated fields, and have not been developed. Major natural gas fields include: South and North Pars, Tabnak, and Kangan-Nar. In 2005, Iran produced and consumed 3.6 Tcf of natural gas. Natural gas consumption is expected to grow around 7 percent annually for the next decade.
Both production and consumption have grown rapidly over the past 20 years, and natural gas is often used for re-injection into mature oilfields in Iran. According to FACTS Global Energy, Iran’s natural gas exports will be minimal due to rising domestic demand even with future expansion and production from the massive South Pars project. In 2005, 65 percent of Iranian natural gas was marketed production, while 18 percent was for EOR gas re-injection, and 17 percent was lost due to flaring and the reduction of wet natural gas from hydrocarbon extraction. Like the oil industry, natural gas prices in Iran are heavily subsidized by the government.
The National Iranian Gas Company (NIGC) is responsible for natural gas infrastructure, transportation, and distribution. Due to the poor investment climate, some foreign companies including British Petroleum (BP) and Chile’s Sipetrol have chosen to divest in Iran’s natural gas sector. Total, Eni, and Shell are the largest remaining foreign investors. In response, Iran has looked toward eastern firms, like state-owned Indian Oil Corp. and China Petroleum & Chemical Corporation, or Sinopec, to take an increased role in Iranian natural gas upstream development. Under Iran's buy-back scheme, foreign firms hand over operations of fields to NIOC, and after development they receive payment from natural gas production to cover their investment.
Liquefied Natural Gas (LNG)
According to FACTS, Global Energy, Iran may only be able to reach peak LNG exports of around 1,462 Bcf as a lifetime ceiling. LNG projects in Iran lag behind neighboring Qatar, the world’s largest LNG exporter. A $500-million contract for Iran LNG is part of the South Pars Phase 12 development. Pars Oil and Gas Company (PAGC) is responsible for upstream LNG development, and downstream development is divided amongst various companies including the National Iranian Gas Export Company (NIGEC).
South Pars Field
The most significant energy development project in Iran is the offshore South Pars field, which is estimated to have 450 Tcf of natural gas reserves, or around 47 percent of Iran’s total natural gas reserves. Discovered in 1990, and located 62 miles offshore in the Persian Gulf, South Pars
has a 25 phase development scheme spanning 20 years. The Iranian government expects each phase to yield 1 Bcf/d, and is developing the South Pars field primarily to meet its domestic market demand. The first five phases are completed, while the next five are due by the end of 2007. The Iranian government plans for the first 16 phases to be online by 2010, keeping pace with Qatar’s connected North Field. The majority of South Pars natural gas development will be allocated to the domestic market for consumption and gas re-injection, with the remainder exported to South Asia or Europe, LNG production, and gas to liquids (GTL).
Exploration and Production
Iranian natural gas field exploration occurs in the Fars province including the Varavi, Shanol, and Homa fields, and in the Persian Gulf Salman gas field. Former Oil Minister Kazem Vaziri-Hamaneh announced in August 2007, that a natural gas discovery in the Fars province should produce up to 30 million cubic feet per day (Mcf/d) from 17 new wells. Iran also announced new agreements with IOCs associated with the South Pars project, and SKS, a private Malaysian company to develop non-associated Golshan and Ferdos fields for LNG exports. Their investment will amount to $16 billion, but is in early stages. Iran and Kuwait have recently settled a dispute over the Arash (Al Dorra) offshore natural gas field in the Persian Gulf which they will jointly develop and explore. The field lies on the continental shelf between Iran, Kuwait, and Saudi Arabia.
Iran’s domestic natural gas pipelines increased over recent years, and future projects are planned for the IGAT (1-8) pipeline series. The 745 mile Iran-Turkey pipeline completed in 2001 can move 1.4 Bcf/d. Iran imports 800 Mcf/d from Turkmenistan via pipeline from the bordering Korpedze field to Iran’s Kurt Kul town for consumption in northern Iran. This $195-million pipeline is the first in the Caspian region to bypass Russia. In March 2007, the 87-mile long Iran-Armenia pipeline was completed in Agarak, and will transport 200 Mcf/d to Armenia in exchange for electricity. The Nabucco pipeline is an another proposed project which will run 2050 miles from Iran and other Caspian states through Turkey to Austria and the European Union. Construction is slated to start in 2009, and the project will cost an estimated $6.8 billion with a capacity to transport 300 Mcf/d.
Iran-Pakistan-India (IPI) Pipeline
The most controversial pipeline proposal is the $7.4-billion Iran-Pakistan-India (IPI) line which would transport Iranian natural gas south to the Asian subcontinent. With a proposed 1724 miles and a 5.4 Bcf/d capacity, the pipeline has been stalled in the past due in part to disputes over the cost of the shipments. NIOC’s Director of International Affairs Hojjatollah Ghanimifard invited President Musharraf of Pakistan and Prime Minister Singh of India to discuss the pipeline in July 2007, but the final arrangement has not been announced. Pakistan and India still need to settle transportation tariffs. Iran would probably extend its domestic IGAT-7 pipeline into Pakistan, and not create a new parallel pipeline. The 545-mile IGAT-7 has a total capacity of 5.4 Bcf/d and runs from Assaluyeh to Iranshahr. The IGAT-7 should be completed by 2011.