Potential Gas Export from Iran to Europe by Pipeline

Dr. Narsi Ghorban International Institute for Caspian Studies

World Energy Council (German Committee)(DNK Energy Day)

29th of October 2009Berlin, Germany

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

CONTENT Regional Gas Reserves, Supply and

Demand. Does Iran have enough gas for all

planed domestic and Export projects?

What are the Main Issues that will effect Iranian Gas export projects?

The Potential pipeline Routes for Gas Export to Europe

Main Points

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Estimated Gas Reserves and Production in the Caspian Region

Source: BP Statistical Review of World Energy 2009

Reserves at end of 2008 Production ( In Trillion cubic Meters) ( In Billion cubic Meters)

AZERBAIJAN 1.2 14.7 KAZAKHSTAN 1.8 30.2 TURKMENISTAN 7.9 66.1 TOTAL 10.9 111.0 Russia 43.3 601.7 Iran* 29.6 130.3

*Iran’s reserves are estimated by the Government at around 30TCM Iran’s gas production was over 130 billion cubic meters last year. Iran could become the third largest gas producer in the world in 5 years time.

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Gas Reserves % of the World % of the MEGas Reserves % of the World % of the MEMiddle East 75,910 41.0 Middle East 75,910 41.0 Iran 29,6100 16 39.5Iran 29,6100 16 39.5Qatar 25,460 13.8 33.5Qatar 25,460 13.8 33.5Saudi Arabia 7,570 4.1 9.9Saudi Arabia 7,570 4.1 9.9UAE____________ 6,430______ ___ 3.5_____________8.4UAE____________ 6,430______ ___ 3.5_____________8.4 Gas Production % of the World % of the MEGas Production % of the World % of the MEMiddle East 381 12.4Middle East 381 12.4Iran 116 3.8 30.5 Iran 116 3.8 30.5

Qatar 77 2.5 20.0 Qatar 77 2.5 20.0 Saudi Arabia 76 2.5 20.5Saudi Arabia 76 2.5 20.5UAE_____________49 __________ 1.6___________ 13.2__UAE_____________49 __________ 1.6___________ 13.2__ Gas Consumption % of the World %of the MEGas Consumption % of the World %of the MEMiddle East 327 10.8 Middle East 327 10.8 Iran 118 3.9 36.1Iran 118 3.9 36.1Qatar 20 0.7 6.1Qatar 20 0.7 6.1Saudi Arabia 78 2.6 23.8Saudi Arabia 78 2.6 23.8UAE 58 1.9 17.7UAE 58 1.9 17.7

Basic Regional Gas StatisticsBasic Regional Gas StatisticsSource: BP Review of world Energy Statistics 2009Source: BP Review of world Energy Statistics 2009

(Figures in billion cubic meters)(Figures in billion cubic meters)

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Potential Gas Reserves, Production and Export from Caspian Region to Europe

Potential Reserves Potential Production Trillion Cubic Meters Billion Cubic Meters/year

Azerbaijan 1.5-2.5 15-20 Kazakhstan 2.5-3.5 35-50 Turkmenistan 9-10 80 -120 Iran 30-35 400–500

Potential Direct Export to Europe BCM Azerbaijan 10-12 Iran 30 - 90

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Gas Export from IranOptions to Monetize Iran’s Natural Gas Resources

Domestic Use a) Replace demand for Petroleum Products with gasb) Gas injection in the oil fields (enhance oil recovery)c) Electricity generation using Natural Gasd) Development of Gas Based Industries (Petrochemicals Cement, Iron, Aluminum, Gas to Petroleum Products etc. (These are major priorities of the Government)

Natural Gas Export by Pipelinesa) Gas trade by Pipelines to Regional markets (Bahrain, Kuwait, Pakistan, Turkey and UAE) (Priority based on their Strategic and political value as indicated in the long term Energy planning of the Expediency Council)b) Gas Trade by Pipeline to China, Europe and India

Liquid Natural Gas (LNG) Trade

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Is There Enough Gas for all these Projects? YesYes If gas resources are developed quickly

No No if gas resources are developed at current pace

Gas Requirements for all Existing and Planned Projects 2010-2030

SECTORS Trillion Cubic Meters

Total Domestic Consumption 5.5–6.0 (Electricity Generation included)

Total Injection in the Oil Fields 1.8–2.0 (Most of this gas will be recovered)

All types of Gas Based Industries 0.9–1.0 Export (Pipelines & LNG) 1.8–2.0

(Based on current export agreements and MOUs)

TOTAL 10–11 (Less than 40% of the current total reserves)

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

What are the Main Issues Influencing Iran’s Gas Policies and Development?

1- Job Opportunity and Expectation2- The need for Gas Injection for

Enhanced Oil Recovery3- The high Gas Requirement for

Domestic Market (Particularly in Winter)

4- Energy prices and Subsidies.5- Lack of Comprehensive Energy Policy6- Political Tension with the US

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

The Comparison of Natural Gas The Comparison of Natural Gas Transmission Costs – Pipeline & LNG Transmission Costs – Pipeline & LNG

(Slide from Iran’s Petroleum Ministry)

(LNG Investment: 800~1200 US$/Ton Plant Capacity)(Onshore Pipeline Investment: 30,000~40,000 US$/in.Km)

0

1

2

3

4

5

1000 3000 5000 7000 9000

Distance (Km)

Co

sts

(U

S$/

mm

BT

U)

LNG 1 (1,200 US$/Ton Capacity) LNG 2 (1,000 US$/Ton Capacity) LNG 3 (800 US$/Ton Capacity)

Pipeline 1 (40,000 US$/in.Km) Pipeline 2 (30,000 US$/in.Km)

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

NABUCCO Pipeline

Potential Suppliers are;1. Azerbaijan2. Iran3. Turkmenistan via Caspian Sea or Iran The most Economic way for

Turkmenistan to Participate in NABUCCO would be to have gas exchange with Iran. This will save around 3 Billion Dollars

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Persia PipelineThe Superiority of the Persian Pipeline to the Nabucco Pipeline

is that the route of the pipeline is through gas Consumer Countries (Customers) and not through Transit Countries

Turkey

Serbia

Czech

Austria

Switzerland

Greece

Poland

Iraq

Italy

Germany

France

SpainPort

ugal

Iran

Romania

HungaryCroat

ia Bosnia

Bulgaria

Slovakia

England

Norway

Sweden

Finland

Holland

Denmark

Belgium

Macedonia

Albania

Assaluyeh

Mediterranean Sea

Black Sea

Caspian Sea

Persian Gulf

Cyprus

IGAT IX

Slide from Iran’s Petroleum Ministry

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Persian Pipeline Specifications in Iran

The Pipeline is 1818 Kilometre It Can carry 110 million Cubic

Meters of Gas per Day Yearly Export capacity is 35 Billion

Cubic Meters The Required Investment for this

Pipeline is 6-7 Billion Dollars

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Potential Gas Export Pipeline Route to Europe (Eastern Europe Via Turkey)

Length: 5600KM Estimated

Investment;Iran~ $7bnTotal~ $18bn

The pipeline passes through;TurkeyBulgariaRomaniaHungryAustria

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Potential Gas Export Pipeline Route to Europe (Southern Europe Via Turkey)

Length: 6200KM Estimated

Investment;Iran ~ $7bnTotal ~ $20bn

The pipeline passes through;TurkeyGreeceItalySwitzerland

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Potential Gas Export Pipeline Route to Europe (South Europe Via Mediterranean Sea)

Length: 5700KM Estimated

Investment;Iran~ $2bnTotal~ $25bn

The pipeline passes through;IraqSyriaGreeceItaly

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Main Points

Iran is by far the largest producer and consumer of gas and gas based products in the ME and the Region after Russia

The country is strategically located to benefit from regional and international trade. However domestic and international political and economic considerations has slowed down the development of Iranian gas industry and consequently it has deprived Iran from gaining its right place in the world gas business.

If Political and Structural Problems are solved, Iran could become the second largest producer of gas in the coming 15 years after Russia. It would be capable of meeting its domestic gas demand without interruption and have a good share of the world gas business.

There are several Routes for export of gas from Iran to Europe which includes passing through Turkey or via Iraq and Syria to Greece. Greece, as the nearest European country to Iran has a very important role to play in the coming years.

Persian Pipeline and Nabucco are currently the most likely scenarios Nabucco is well Established but without Iranian Gas it may not be as

successful as envisaged. Persian Pipeline may have gas but it lacks the international backing

and the Consortium needed

Berlin, Oct 29th 2009The International Institute for

Caspian Studies

Main Points (cont)• The main challenges for the implementation of these Pipelines are Structural, Financial and Political.• Adequate legislation in Iran as well as the Region is Needed.• Private Sector in Iran and all the Transit Countries must be given a role and encouraged to get involved in the gas business in general and the formation of the Consortium for Gas Export to Europe• Gas Producers must structure a meaningful long term Price Formula for Gas and Long Term Security of Supply• Consumers must give assurances of the Long Term Security for Demand and Security of Investment. • Transit Countries must be Financially involved to give Long Term Security of Transit