As U.S. Pauses New LNG Project Permits, Iran Moves Full Ahead On Its Own

Since Russia invaded Ukraine on 24 February 2022, liquefied natural gas (LNG) has become the world’s key emergency energy supply. It does not require the years of planning and construction as pipelined gas and oil, and it can either be secured readily through long-term contracts or bought immediately in the spot market if necessary and shipped anywhere quickly. As such, it has been ideally suited to make up the vast energy supply gaps created due to sanctions on Russian gas and oil. Despite its extremely elevated geopolitical importance – especially for Europe – the U.S. decided to pause permits for its new LNG projects, as analysed in full recently by OilPrice.com. By notable contrast, whilst simultaneously attempting to widen out the Israel-Hamas War into a new global energy emergency, Iran has decided to go full ahead on building out its own long-nascent LNG industry into a world-scale operation, according to recent comments from Tehran.

As mentioned by Iran’s Petroleum Ministry at the end of January, the country intends as part of this new drive towards building up its LNG sector, to begin 1.5 million metric tonnes per year (mtpy) of production at a medium-sized plant at Asaluyeh in 2026. As exclusively related to OilPrice.com by a very senior figure who works closely with the Petroleum Ministry, much bigger plans are afoot much earlier. Iran has long been looking at further monetising its huge gas resources – and securing further geopolitical power – by becoming a top global exporter of LNG, as analysed in depth in my new book on the new global oil market order. Its neighbour, Qatar, with which Iran shares the world’s biggest gas reservoir – the North Field (on the Qatar side)/South Pars (on Iran’s side) side – had carved out a dominant position in the global energy market on the strength of those very gas supplies. In the run-up to, during, and since the invasion of Ukraine by Russia, Qatar has even more substantially leveraged its leading LNG exporter status into significant geopolitical influence, becoming a key supplier of China and of the U.S.’s key NATO security allies in Europe as well. Related: IEA: Oil Supply Increase More Than Enough to Meet Demand Growth in 2024

A dramatic expansion of Iran’s gas production from the South Pars field to feed growing LNG production needs could well affect Qatar’s gas take from its North Field side of the entire reservoir over time. One of the reasons why Qatar lifted its self-imposed moratorium on North Field gas production in 2017 were confidential field reports over the previous year from the then-Qatargas detailing how “irresponsible drilling practices” by the Iranians posed risks to the long-term gas take for Qatar from the North Field. Just before the moratorium was lifted, the two sides met in Doha to discuss how they would approach their respective gas production operations so that both sides could maximise their overall gas take over the long-term, according to the Iran source. However, Iran could equally well decide in the current circumstances – in which Qatar is increasingly seen as a key ally of the U.S.’s – to revert to its previous gas production techniques at South Pars in order to disrupt Qatari gas flows. In the ‘zero-sum’ world of LNG exports, decreased supplies of LNG from Qatar to Europe, and increased supplies from Iran to China – inevitably given the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ analysed in depth as well in my new book on the new global oil market order – would be a major win for Beijing, and for Moscow as well.

Although the Asaluyeh LNG project will start with just a 1.5 mtpy plant, the Iran source told OilPrice.com last week that it is to be built on the site of the original much-larger ‘Iran LNG Project’ around Tombak Port, around 30 miles north of Asaluyeh itself, focusing on gas from the North Pars gas field. Located 120 kilometres southeast of the southern Bushehr Province, the North Pars field has around 59 trillion cubic feet of gas in place, with a conservatively estimated recoverable volume of gas of approximately 47 trillion cubic feet. The first deal to operate this field had been approved in 1977 but, after the drilling of 17 wells and the installation of 26 offshore platforms, the development of North Pars was suspended due to the 1979 Islamic Revolution and the subsequent war with Iraq from 1980-1988. However, a study of the state of North Pars by Iran at the end of 2020 determined that the field was still in a highly workable state for a quick push to significant gas output. Specifically, it was established, at least 100 million cubic metres per day (mcm/d) of output could be achieved within less than 12 months of proper development – with all the gas recovered…