Friday, November 05, 2004

The role of I.R. of Iran on Natural Gas Trade on

The role of I.R. of Iran on Natural Gas Trade on
the Region


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The role of I.R. of Iran on Natural Gas Trade on
the Region
Ladies and Gentlemen:
I am very pleased to have the opportunity of gathering together in this conference for discussing and exchanging view and ideas in this lecture, I intend to demonstrate the role of Iran, as a very important country, at the beginning of the third millennium for the development of Natural Gas Project in the region.

We are now entering a century, called by many energy experts, as the century of Natural Gas, an important and clean energy.

The special situation of Iran, especially in view of probable and proven reserves of natural gas, is in itself a cause to play an important role in this century and I have in mind to explain this in the following chapters:
• Comparison between Iran and the world natural gas reserves
• Natural Gas Domestic Policy
• Natural Gas International Policy
• Natural Gas Production Policy
Comparison between Iran and the world Natural Gas Reserves Iran, having more than 800 TCF proven reserves of natural gas of world, is the world's second largest country in gas reserves after the Russian Federate Republic. This fact has created a strong and powerful situation in view of a safe and secures supply of natural gas
in the region Iranian share of the proven reserves of natural gas Middle East 58% (fifty eight percent) and after Iran stands Qatar, Abu Dhabi and Saudi Arabia.
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Natural gas Domestic Policy
The general goals of the energy sector in the 25-year development plan of the Islamic Republic of Iran include many varieties. The goal of energy sector, in the first stage, considering the important of the role of energy as a main infrastructure factor of the country's economy, is to provide the required energy for continuing social economical pace of development, anticipated within the framework of the country's macro development plan in different time schedules.

The most important goal of the energy sector policy in the 25 year development plan, i.e. until the beginning of the year 2021 A.D (1400 solar calendar) is to replace petroleum products with natural gas, through developing gas distribution network of the country. The main reasons for this program are as follows:
A-The low marginal cost of natural gas as compared with other fuels
B-To reduce the domestic consumption of oil products, in other words, the recent changes in the world oil markets and the fall down reduction of oil price will cause Iran to replace domestic consumption of oil products with natural gas for the purpose of increasing oil exports.
C- The environmental effects and the reduction of CO2 emission.

Iran's primary energies are crude oil and condensates, natural gas, hydropower generators, coal and non- commercial energies. In 1998 the largest share of primary energies belonged to crude oil and condensate (57%) and after that, the natural gas had the biggest share. (40%)

In other words, with the constant consumption trend of crude oil and
condensate and the increasing in the trend of consumption of natural gas in Iran's energy basket. (Primary energies) will increase considerably. The largest share of natural gas consumption is related to power generation.
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Power generator and industry sectors in Iran have allotted about 60% share of natural gas consumption to themselves domestic consumption of natural gas in Iran shall reach from 170 MMCM/d in 1998 to 334 MMCM/din the year 2006 Iran also badly needs the injection of natural gas into oil reserves for enhancement of oil reserves. It is anticipated that the amount of natural gas injection to oil reserves shall reach from 80 MMCM/d in 1998 to 202 MMCM/d in 2006. The country's total demand for natural gas, excluding the export, shall reach from 250 MMCM/d in 1998 to 530 MMCM/d.

It should be noted that the injected natural gas could be utilized again after a period of 20 to 25 years.
Natural Gas Export Policy
Considering Iran's large gas reserves, the efforts made towards exporting of natural gas seem reasonable. Our country, having 1% of the world population, owns 16% of the
world's natural gas reserves. The record of Iranian of natural gas exports returns back to the period before Iran's Islamic Revolution i.e. 1980 but after the revolution, great efforts have been made for entering into the field of natural gas international trade.

In international trade, Iran is considering two different policies:
A-Policies for Export of Natural Gas
It would be advisable to begin with the August 1996 contract between Iran and Turkey as the starting point for accomplishing the natural gas policies. It should be noted that Iran's geological situation in the center of the important gas consuming countries.

Turkey in West of Iran is one of the most important consuming markets of natural gas. Turkey may be considered as the gate for Iran's natural gas enters Europe in future. However, the fact of being a highly potential with rapid, demand growth at the beginning of the twenty first century in this market, caused the Republic of Turkmenistan to start activities 4 for entering to this market. We believe that if Turkmenistan wants to begin it's gas export to Turkey, the best route is Iran .The availability of market and the strong infrastructure facilities create very
exceptional conditions for transit of natural gas through Iran.
Iran signed a contract in May 1995 with a volume of 1 BCM/T for export of gas to Armenia, which will be executed in the year 2000.
Discussions have also been made for concluding a contract for selling gas to Azari gas in Azerbaijan Republic for export of gas to autonomous Republic of Nakhjevan
Other important markets of Iran in the East are Pakistan and India;
Iran has signed Memorandum of Understandings (MOU) with the above-mentioned countries. India is amongst the very important markets of natural gas in the world and its importance will increase as from the year 2000 onwards.

At present, National Iranian gas Company is studying the export of natural gas to this country through pipeline or LNG. According to studies made, in case of settlement of political disputes between Pakistan and India the onshore pipeline will be more economically advantageous. Presently, Iran is studying different LNG projects and
NIGC has already started the preparation to feasibility studies for
exporting gas to Far East and Europe.
In this regards Iran has signed MOU's with China and India.
National Iranian Gas Company has also made feasibility studies for
export of natural gas to Europe through the European consortium
called Iran Gas Europe (ELG)

B-Natural Gas Import Policy Iran has signed a contract for gas import from Turkmenistan in July 1995 and the import from Turkmenistan has started .The average volume of import in the year 1998 was 5 MMCM/d. The aim of executing this policy is the distribution of consuming areas of North of the country.

National Iranian Gas Company has been able to avoid a large part of unnecessary investment thought the execution of this policy, which would have been created, with domestic distribution of gas in this 5 region. This policy also reveals the strong relatio with the owners of gas reserves in the region, i.e. Turkmenistan that is a beginning for closer cooperation later on.

Natural Gas Production Policy
Iran needs more than 300 MMCM/d of natural gas for the execution of domestic and international projects. Considering the domestic and export natural gas, Iran intent to meet there demand by expanding it's up stream natural gas projects with help of freight investments.
As you know these are the series of buy back projects that Iran has already included some of them has gained good experience in these contracts.

The source of pay back of these buy back project are:
∙ Condensate sales
∙ Sail of oil products coming from the saving in local market.
∙ Extra production of oil due to gas injection in to oil reserves.
Conclusion
Considering the above mentions, we understand that Iran shall have a very great and important role in the regional trade of natural gas in the area at the beginning of 21 century. The availability of the abundant gas reserves in Iran will make the buyers confident and secure.

The economically suitable location of Iran is a good reason for regional markets to benefit from this situation. We sincerely hope that the new role of Iran in the international trade of natural gas at the beginning of the next century, will pave way to the expansion of peaceful relationship between countries in the region.
Thank you all very much

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