Iran special: Could Tehran revive LNG export ambitions?
The lifting of US sanctions would be one obstacle toppled, but the need to produce more gas to feed projects presents another hurdle, writes Antonio Peciccia
Iran has long harboured LNG export ambitions, as the holder of the world's second-largest natural gas reserves, but while the possible removal of US sanctions could lead Tehran to revive those plans, they would still face many challenges.
Previous LNG project plans stalled over the past decade because of the international sanctions related to Tehran's nuclear programme. TotalEnergies and Shell abandoned two projects, the 10mn t/yr Pars LNG and 16.2mn t/yr Persian LNG, respectively, as sanctions escalated at the beginning of the last decade. An attempt to revive these two projects under the management of state-owned oil company NIOC following the 2015 nuclear deal also ran adrift after the US administration of President Donald Trump abandoned the deal and reimposed sanctions in 2018.
Iran had also planned a third liquefaction project, the 10.8mn t/yr Iran LNG, and had agreed with Muscat on construction of a pipeline that would allow some Iranian gas to be used as feedgas for Oman's 10.4mn t/yr Qalhat liquefaction plant, but this project has also made little progress in recent years. Start-up of the Khazzan and Ghazeer tight gas fields off Oman freed up more gas from the country's onshore fields to feed Qalhat, leaving little capacity available to liquefy extra supply.
While Persian LNG and Pars LNG were still at early stages of development, preparations for installing Iran LNG's liquefaction trains had been largely completed by early 2017. But the reintroduction of US sanctions prevented German industrial engineering firm Linde from exporting equipment for the trains to Iran.
And reviving Iran's LNG ambitions would face a more fundamental challenge in the need to free up enough gas to feed a major liquefaction project. The country is the world's third-largest gas producer, but also its fourth-largest gas consumer — from output of 244bn m³ in 2019, 224bn m³ was used domestically, leaving just 20bn m³ available for export by pipeline, mainly to Turkey and Iraq. About 13.5bn m³/yr of extra production would be needed to feed the 10.5mn t/yr Iran LNG.
Long maritime coming
Iran has been striving to accelerate development of key upstream assets in recent months, awarding a number of contracts to domestic firms, including for the offshore Farzad-B gas field that straddles the maritime border with Saudi Arabia, which is expected to add around 10bn m³/yr of output. And in December 2020, NIOC subsidiary Petropars began drilling work at the long-delayed phase 11 of the supergiant offshore South Pars field in the Mideast Gulf, with the aim of producing 1bn ft³/d (10.3bn m³/yr). Oil minister Bijan Namdar Zanganeh said last August that Iran aims to have South Pars gas reaching onshore facilities within a year. Petropars took over the project after TotalEnergies, which led the consortium that won the contract for developing phase 11 in 2017, withdrew in August 2018 after failing to secure a sanctions waiver from the US.
The supergiant reservoir of South Pars is shared with Qatar, where it is known as the North Field — and Qatari state-owned QP this year sanctioned a $28.75bn investment in four new LNG production trains to boost capacity to 110mn t/yr by 2025 from 77mn t/yr. Further developments will add two more trains to hit 126mn t/yr by the end of 2027. Qatar's decision in 2017 to lift its 2005 moratorium on further North Field development made Iran's South Pars development a more pressing issue for Tehran, given concerns over the potential impact that Qatar's huge expansion project will have on South Pars' reservoir pressure. But while QP is already weighing partnership bids from leading international oil firms — including TotalEnergies — to take up to 30pc in the project, Iran will struggle to draw investment interest. Even before sanctions were reimposed in 2018, TotalEnergies' South Pars investment plans steered clear of any LNG project commitment.
Related news posts
Trump taps Vance as running mate for 2024
Trump taps Vance as running mate for 2024
Washington, 15 July (Argus) — Former president Donald Trump has selected US senator JD Vance (R-Ohio) as his vice presidential pick for his 2024 campaign, elevating a former venture capitalist and close ally to become his running mate in the election. Vance, 39, is best known for his bestselling memoir Hillbilly Elegy that documented his upbringing in Middletown, Ohio, and his Appalachian roots. In the run-up to the presidential elections in 2016, Vance said he was "a never Trump guy" and called Trump "reprehensible." But he has since become one of Trump's top supporters and adopted many of his policies on the economy and immigration. Vance voted against providing more military aid to Ukraine and pushed Europe to spend more on defense. Trump said he chose his running mate after "lengthy deliberation and thought," citing Vance's service in the military, his law degree and his business career, which included launching venture capital firm Narya in 2020. Vance will do "everything he can to help me MAKE AMERICA GREAT AGAIN," Trump said today in a social media post. Like Trump, Vance has pushed to increase domestic oil and gas production and criticized government support for electric vehicles. President Joe Biden's energy policies have been "at war" with workers in states that are struggling because of the importance of low-cost energy to manufacturing, Vance said last month in an interview with Fox News. Trump made the announcement about Vance on the first day of the Republican National Convention in Milwaukee, Wisconsin, and just two days after surviving an assassination attempt during a campaign event in Pennsylvania. Earlier today, federal district court judge Aileen Cannon threw out a felony indictment that alleged Trump had mishandled classified government documents after leaving office. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Polish gas reforms still needed: Energy Traders Europe
Polish gas reforms still needed: Energy Traders Europe
London, 15 July (Argus) — Recent government plans to amend Poland's onerous gas storage legislation are positive, but more serious reforms are necessary to foster increased competition, industry association Energy Traders Europe told Argus . The Polish government last month said it plans to amend the Act on Stocks in November , removing importers' obligation to maintain mandatory gas storage reserves and placing it on state-owned strategic reserves agency Rars instead. Energy Traders Europe welcomed the move but recommended several further steps to bolster competition and liquidity. The Act on Stocks "needs to be revised first and fast" before addressing other issues in the market, the association's gas market manager, Pawel Lont, told Argus . While shifting the obligation to Rars is a positive first step, Poland would still have "state-enforced storage filling with hardly any capacity left for commercial use", which removes an important flexibility source for the market, he said. Ultimately, storage needs to be reformed to a point at which commercial filling becomes not only possible but desired, Lont said. The government needs to ensure that the system provides an incentive for the storage operator to offer products that are attractive to users, Lont said, noting that currently "this incentive simply does not exist, and this set-up can only inflate the costs of gas consumption in Poland". Energy Traders Europe previously suggested that the strategic reserve should be calculated against the demand of vulnerable customers only, as opposed to all consumers, which would significantly reduce the overall burden and free up space for commercial use. It would also be desirable to move the start date of the draft storage legislation to 1 April 2025 and ensure that licence applications declaring the intention to start commercial activity after this date are tested for compliance with these new rules. It can take a year or more for licence applications to be approved, so "the sooner we start, the better", Lont said, adding that the licensing procedure in Poland is "undoubtedly the most problematic in all of Europe". Applications involve a long list of documents that are difficult to complete in a timely manner. There are also issues on the reporting side, with "an impressive list of 20+ positions reported to different bodies at different points in time" on top of standard EU reporting, Lont said. These obligations create exposure and considerable costs for companies, so it would be beneficial to run a critical review on their necessity, he said. And Polish transmission tariffs are high, although this is understandable given Gaz-System's construction of interconnectors with several neighbouring countries over the past few years. Polish tariffs are decided yearly, while entry/exit splits can also be adjusted, which is problematic for trading companies that would like to book longer-term products. The multipliers and seasonal factors "definitely deserve some rethinking as they severely inflate the costs of short-term capacity products, while booking yearly products in Poland can be quite a bet", he said. But even if these other issues are addressed, "We will [still] be looking at a largely monopolised country, with the dominant player having exclusive access to LNG terminals", Lont said. While the gas release programme is positive for the market, it would be beneficial to see whether Orlen's dominance could be challenged at import terminals. Orlen has booked all capacity at the Swinoujscie terminal, as well as at the planned Gdansk terminal, meaning it continues to be the sole beneficiary of the 100pc discount on entry to the grid from LNG terminals. Several measures could be taken to open other companies' access to the terminals, such as secondary capacity trading, use-it-or-lose-it rules or set-aside rules and limits when allocating capacity to a single entity, Lont said. But these measures would be ineffectual without a guarantee that other firms are ready and willing to book this capacity, so the reforms discussed above need to come first so as to ensure that these participants can actively trade in Poland beforehand, Lont said. In general, it is not unusual to have a dominant company in a given country, but "one just needs an environment in which the group cannot abuse its position and its offer can be challenged", he said. Orlen had a 91pc share of the Polish retail market last year, according to regulator URE. Poland has "all the cards" to develop a liquid gas market, but this takes time, so reforms must get going as soon as possible. Since the change of government, it has at least become "much easier to approach the ministries in Poland", which "helps a great deal on the transparency side", Lont said. By Brendan A'Hearn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Singapore LNG bunker sales post fresh highs in June
Singapore LNG bunker sales post fresh highs in June
Singapore, 15 July (Argus) — Demand for alternative marine fuels rose further in June at the port of Singapore, with LNG demand for bunkering touching fresh highs. Total bunker sales in June rose by 8.7pc from a year earlier to 4.27mn t, according to preliminary data from the Maritime and Port Authority of Singapore (MPA), lifted by a 2.7pc increase in vessel throughput in Singapore to around 10.11mn in June. But sales slipped by 11pc from a strong May. "It is [lower] LNG prices versus fuel oil prices, along with higher fuel demand, due to the longer passage through the Cape, [and] that is playing an important role," said a key Singapore-based LNG bunker supplier, referring to the increased demand from the rerouting of vessels because of attacks on shipping in the Red Sea region. Demand for bunkering LNG has increased this year, with Singapore recording 175,030t of LNG used to fuel ships in the first half of this year. This is more than a threefold increase from the same period last year when 36,900t of LNG was bunkered in Singapore. Demand for biofuel blends in the first half increased by 46.7pc versus the same period last year. January-June sales were 280,160t compared with 191,000t a year earlier. The blend of 76pc very-low sulphur fuel oil (VLSFO) and 24pc used cooking oil methyl ester, also known as B24, has been the first choice of alternative fuel among shipowners in Singapore, partly because of its drop-in character. Increased enquiries emerged for B24 in Singapore since April-May this year, with short-term tenders going to key shipowners planning voyages to Europe. "There are customers taking more volumes in H2 2024. Volumes wise [for the year, this] might not see a huge increase [but we] will just see more customers," said an international trader. Consumption of conventional bunker fuels has remained largely steady in Singapore, with the exception of high-sulphur fuel oil (HSFO) where sales for June rose by 26pc compared with a year earlier to 1.56mn t. There was a 29pc increase for January-June this year against the 2023 equivalent. Firmer demand has continued for lower priced HSFO, particularly for vessel owners hoping to maximise the use of installed exhaust scrubber systems in handling alternative marine fuels. VLSFO consumption was down by 2pc in the first six months of 2024 versus the same period in 2023, with overall demand largely unchanged. Supplies have been higher in Singapore from this year's second quarter, which is expected to remain in the short term, said industry participants. Red Sea diversions Singapore has absorbed 40pc of the increased demand created by the Red Sea disruptions, data from the International Bunker Industry Association show. Demand in Singapore rose to 4.62mn t/month in this year's first quarter from 4.23mn t/month in 2023. Container terminals in Singapore were congested in the first half of the year because of Red Sea voyage rerouting. Container throughput at the city-state grew by 6.4pc from a year earlier in the first half of 2024 to 20.25mn 20ft equivalent units (TEUs) by June, according to the MPA. Singapore in May recorded a 7.7pc year-on-year increase to 16.9mn TEUs, said Singapore's transport minister Chee Hong Tat. Tonne-mile demand for tanker vessels is expected to grow this year. Greek crude tanker owner Okeanis Eco Tankers forecasts tonne-mile demand to grow by 5.6pc in 2024 and by a further 5.5pc in 2025. By Cassia Teo, Sean Zhuang and Mahua Chakravarty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Snowy, Lochard ink Iona gas storage deal
Australia’s Snowy, Lochard ink Iona gas storage deal
Sydney, 15 July (Argus) — Australian state-owned utility Snowy Hydro has signed a 25-year deal to store gas at the country's largest domestic gas storage in Victoria state to support its gas-fired power stations. The agreement with the 26PJ (694mn m³) Iona site, owned by domestic gas storage firm Lochard Energy, will commence in January 2028. This will be ahead of the permanent closure of the 1,480MW Yallourn brown coal plant, operated by Hong Kong-owned utility EnergyAustralia, in mid-2028. "The gas storage agreement with Lochard Energy will support the operation of our gas-fired power stations in Victoria," Snowy Hydro chief executive Dennis Barnes said on 15 July. Snowy Hydro, which owns and operates three gas-fired power stations totalling 1,290MW at present, is building the 750MW Kurri Kurri gas-fired plant , of which the initial 660MW stage is scheduled to come on line in late 2024. Snowy's 320MW Laverton North and 300MW Valley Power generators are located in Victoria. The deal is expected to underwrite the Heytesbury underground gas storage project , Lochard's chief executive Tim Jessen said, which will expand the capacity of Iona by approximately 3PJ. Australia's southeastern states are expected to face significant shortfalls of gas later this decade as fields supplying Victoria's 1,150 TJ/d (30.7mn m³/d) Longford gas plant deplete. A mixture of pipeline expansions to bring more gas south from Queensland state, LNG import terminals, and reducing demand have been floated to bridge this gap. Two LNG import terminals are proposed for Victoria but both require environmental approvals from the state government. Snowy Hydro is facing significant pressure from the federal government over its delayed Snowy 2.0 pumped hydroelectric project, which has suffered significant cost overruns and delays. Snowy last year said the scheme's costs had doubled to A$12bn ($8.1bn) from a previous A$5.9bn estimate , which was itself higher than the original guidance. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more