When will Iran be able to increase gas exports?

Sitting on the world’s biggest natural gas reserves, the Iranian government requested last week from Turkmenistan to increase gas delivery to Iran by 6 million cubic meters per day (mcmpd) to 30 mcmpd to avoid gas shortage in upcoming winter.

It's while, the Iran's Oil Ministry stated that it is preparing the gas export to Iraq, Oman and have planned delivering gas to Europe Union.

Currently, Iran exports about 8.5 bcm of gas to Turkey and imports approximately the same volume the Turkmen gas.

Iran has several giant upstream projects, including the development of the worlds biggest gas field, South Pars, increasing production of associated gas and cutting a 20-mcm volume of flared gas.

Iran's associated gas production level increased by 27 mcmpd and the natural gas output of South pars rose by 25 mcmpd during 2014, but the consumption level increased by 100 mcm during the past weeks compared to the last year's same period.

Majid Boujarzadeh, a spokesman with the National Iranian Gas Company said Nov.25 that Iran’s households’ gas consumption is expected to surpass 450 million cubic meters per day in the next several days.

Iran was producing 485 mcmpd of gas in 2013 and regarding a 52 mcmpd increase in gas production during 2014, Iran would face gas shortage in coming winter again.

Iran hasn't able to commission any new gas field (even a phase of gas field) completely since 2009 and the progress in the country's biggest gas field - South Pars) had been very slow during 2009 to 2013.

However, in last winter, Iran started early production of gas from the phase 12 of South Pars and increased the volume to 25 mcmpd in June. Now, Iran is preparing to produce 40 mcmpd of gas production from phases 15 and 16 in coming weeks.

Iran's gas production from South Pars from 2002 to early 2014 (mcmpd)

If Iran is able to produce this volume, the country's total gas output would reach 577 mcmpd, which the housing sector's share is at least 450 mcmpd. But Iran has other sectors that need gas.

The gas usage capacity of Iran's petrochemical plants is about 35 mcmpd, while the figure for power plants is 220 mcmpd and Iran's old oil fields needs about 290 mcmpd of gas injection.

Iran announced on Nov.25 that Iran planned to deliver 100 mcmpd of gas to the power plants in the winter.

Iran injects about 77 mcmpd of gas to old oil fields that are in their second half- life. Almost, 80 percent of Iran's active oil fields are in their second half -life and lose 8 to 13 percent of output annually, while Iran's industry sector, CNG plants (with 20 mcmpd capacity) and other sectors need gas.

In total, Iran's gas need is more than one billion cubic meters per day in winter or about two times more than the current production capacity.

Let’s have a glance at Iran's giant gas field, the South Pars. This field, divided into 24 phases, (10 phases of which have commenced with 267 mcmpd output capacity so far), is located in the Persian Gulf and straddles the common border between Iran and Qatar. It is estimated that Iranian part of the field contains 14 trillion cubic meters of gas and 18 billion barrels of condensate.

The first 10 phases commenced in 2009.

Progress in developing South Pars phases 11 to 24
Phase	Progress Until 2012	Progress until Oct 2013	Progress until Oct 2014	Final capacity
11	0 per cent	0 percent	0 per cent	56 mcmpd
12	78 percent	92 percent	95 percent	84 mcmpd
13	46 percent	64 percent	67 percent	56.6 mcmpd
14	40 percent	50 percent	54 percent	56.6 mcmpd
15,16	86 percent	92 percent	93 percent	56.6 mcmpd
17, 18	67 percent	82 percent	82 percent	56.6 mcmpd
19	40 percent	60 percent	75 percent	56.6 mcmpd
20, 21	38 percent	51 percent	61 percent	56.6 mcmpd
22, 23,24	50 percent	63 percent	68 percent	56.6 mcmpd

The total amount of gas production from 24 phases of South Pars would be 826 mcmpd, but only phases 12, 15, 16, 17 and 18 are projected to be operational in the next two years.

The U.S. Energy Information Administration projected that the South Pars project would be full completed after 2020.

Regarding the current huge gas demands, as well as the rapid gas growth rate, it seems Iran will face serious problems in having enough surplus gas to export abroad in the near future.

Iran obligated itself to export 30 mcmpd of gas to Oman and about 45 mcmpd of gas to Iraq during the next few years, while it hasn't been able to deliver 30 mcmpd of gas to Turkey based on 1996 agreement due to gas shortage.

The country's gas consumption has increased by almost 50 times during last 25 years and the share of gas in Iran's primary energy basket is about 70 percent.

Iran would be able to export surplus gas during the spring and summer in coming years, but it wouldn’t be able to export gas in the cold seasons until 2020.

As I mentioned above, Iran's old oil fields need an immediate 290-mcmpd gas injection, 213 mcmpd more than the current level.

Below is Iran's fossil energy carriers consumption according to the data derived from National Iranian Oil Refining and Distribution Company (NIORDC) annual reports. (Iran's fiscal year begins on March 20)

Fiscal year	Total energy consumption Kb of OE*	Gas consumption mcmpd	Gas consumption Kb of OE	Liquid fuels** MLD***
1979/80	565	9.7	63	79.1
1989/90	1062	38.4	248	127.2
1999/2000	2084	158.4	1025	164.3
2004/2005	2931	261	1689	194.7
2009/2010	3918	387	2504	222.6
2010/2011	4027	413.3	2673	210.6
2011/2012	4070	418.4	2707	213.1
2012/2013	4120	415.4	2688	224.7

* 1000 barrels of oil equivalent

** including gasoline, oil-gas, kerosene and fuel oil

*** million liters per day

How can Iran make surplus gas to export until 2020?

Undoubtedly, without elimination of Western sanctions on Iran, the country with 33.6 trillion cubic meters of gas reserves hasn't a chance to export gas to Europe or even to neighboring countries. However, regardless of the sanctions, Iran should carry out some plans to have extra gas to export as well as to participate in current pipeline projects like the Southern Gas Corridor or construct its own gas export routs.

1- Currently the associated gas extracted from Iran's oil fields share about a half of the country's total gas output. The biggest problem in this sphere is flaring 20 mcmpd of gas and slow development of oil fields. For instance, Iran hasn’t commissioned any new oil field since 2007, but Iran can gather the flared gas and should accelerate developing oil fields.

2 - On the other hand, Iran's housing sector consumes about 150 mcmpd of gas in the warm season, 300 mcmpd less than winter and can store the surplus gas in storage facilities.

The country has two gas storage facilities, Shourijeh and Serajeh, where about 2 bcm of gas has been injected into during summer to be re-extracted during the cold season.

The country should increase the storage capacity.

3- Iran also should raise the gas price for domestic consumers; for instance the Iranian government sells 1000 cubic meters of gas to internal consumers at $32, while its exported gas price is about $490.

The availability of cheap gas offers little motivation for citizens to conserve and now much gas is wasted in the household sphere.

4- Iran should increase the energy consumption efficiency of the industrial sector. For instance, Iran's thermal power plant's efficiency is about 37 percent on average.

Implementation of any or all of the above mentioned steps would help put Iran on the path to resumption of lucrative oil export.

Iran's gas consumption during 11 months of last fiscal year (mcmpd)

The beginning day of months in Iran's calendar year	Housing and small industrial sector	Changes Y/Y	Total gas consumption*	Changes Y/Y
March 20	253	- 26.5%	344	-21%
April 20	119	15.8%	348	-4.8%
May 21	161	19.1%	375	-1.4%
June 21	126	-6.5%	316	-4.3%
July 23	118	- 8.3%	374	- 6.7%
August 23	130	6.9%	370	-4.9
September 23	131	7.3%	384	0.02%
October 23	215	7.5%	434	3%
November 23	367	12.2%	494	4.3%
December 23	463	14.7%	531	8.5%
January 20	431	3.3%	525	6.2%
February 17	393	12.2%	528	6.7%

* including housing, industrial, power plants. The statistics doesn't include gas re-injections to oil fields or gas flaring.