Archive for the 'Natural Gas' Category

Iran-Kuwait Gas Talks Underway

Published on January 25, 2010 in Natural Gas. 0 Comments

After tensions we reported in October, there seems to be increasing cooperating between Iran and Kuwait on natural gas.   Payvand reported in November that Iran was in talks with Kuwait and Saudi Arabia for joint development of the Arash/Durra gas field the three countries share.  Today, Press TV reports (excerpt below) that talks with Kuwait are progressing over linking Kuwait’s gas network to Iran’s South Pars field.  -WW

“Iran’s gas transportation network has already expanded to Khorramshahr in southern Iran and it’s possible to further extend the network to Kuwait,” said Reza Almasi in an interview with Mehr News Agency on Monday.

He said that the plan to link the two countries’ gas networks includes building a submarine pipeline to Kuwait’s border, which is possible in a short time considering the infrastructure of the southern Iranian province of Khuzestan.

The issue of annually exporting 3-4 billion cubic meters of natural gas pumped from Iran’s South Pars gas field to Kuwait was the one of major topics raised in a meeting in November, 2009 between Iranian Oil Minister, Masoud Mirkazemi, and his Kuwaiti counterpart, Sheikh Ahmad Al-Abdullah Al-Sabah, in Tehran.

Erdogan's Tehran Visit Yeilds Energy Deals

Published on October 30, 2009 in Energy, Natural Gas, Politics, Security and Trade. 0 Comments

Iran’s Oil and Energy Information Network has a story (Persian) on two energy deals that Turkish Prime Minister Erdogan concluded on his recent visit to Tehran. Under the headline “Conditions for Transfer of Iranian Gas to Europe have been Met,” the piece quotes Ahmadinejad’s Vice President Mohammadreza Rahimi praising “brotherly” relations with Turkey and the signing of trade initiatives that would eventually total $30B.

Rahimi mentions two specific initiatives, one to cooperate towards developing an additional 6,000 MW of power generation capacity in the two countries. Second is an an agreement for Iran to supply gas to Europe via Turkey (presumably through the planned Nabucco pipeline) and also to act as a transhipment route for Turkmen gas en route to Europe.

Using Iranian gas to fill Nabucco has been discussed before, but this marks a step closer towards making it a reality. The deal, and Erdogan’s high profile visit to Tehran, are no doubt ruffling feathers in DC, but there has been little official reaction to the visit so far. This seems like another example of the “’sleeping with your friends’ enemies” argument that Bryan Early advances here. In sum, friends of a sanctioning state are in fact more likely to flout sanctions and trade restrictions because of security afforded by the alliance with the sanctioning state. Turkey’s alliance with the U.S. by virtue of NATO membership means that the U.S. is likely to be less able to compel it to adopt its Iran-isolating agenda.

-WW

Iran’s Arrest of Kuwaiti Fishermen Highlights Gas Dispute, Gulf Sensitivities

Published on October 29, 2009 in Energy, Natural Gas, Politics and Security. 0 Comments

Last week, Iran’s Revolutionary Guard-affiliated Tabnak website ran a commentary (Persian) on Iran’s recent arrest of five Kuwaiti fishermen (along with one Qatari and an Egyptian) who had strayed into Iranian territorial waters. Press accounts state that the fishermen were taken to Abadan for questioning and shortly released. The reports differ, however, on exactly where the stop took place – and understandable ambiguity given the myriad maritime boundary disputes in the region.

The Tabnak piece goes on to connect this incident to a long-running Iranian dispute with Kuwait over a gas field known to Iranians as Arash and Arabs as al-Durra. The piece (a translated snip follows) gives a good sense of an Iranian nationalist point of view in which the Islamic Republic’s territory throughout the Gulf is under Arab assault. This incident and similar ones, like the 2007 arrest of British sailors in the Gulf, show how the combination of undemarcated borders and the not altogether historically unjustified Iran-under-assault worldview can be dangerous indeed. In the absence of a firm settlement, these disputes look set to heat up in coming years as demand for Gulf oil and gas grows.

- WW

Under the pretext of Iran’s rightful arrest of Kuwaiti citizens who had illegally entered Iranian maritime territory, Kuwait and its state media have recently asserted their ownership over large parts of Iranian territory in the northern Persian Gulf.

This comes at a time when the Kuwaitis, by highlighting part of our ambassador’s interview with a Kuwaiti newspaper, have [falsely] claimed that Iran was prepared to enter negotiations over the three islands [disputed with the UAE]. Unfortunately, Iran has responded to Kuwait’s aggressive claims with an inexplicable silence.

In light of this report, and based on existing agreements and the [1963] IMINOCO maritime boundary, the Iranian continental shelf in the northern Persian Gulf is Iranian property, just like the Arash gas field [marked in this map as Dorra]. The point that Iranian media have overlooked, is that because of Arab propaganda against Iran’s eternal ownership of the three islands, now Iranian gas fields like Arash and Soroush oil field, both located within Iran’s maritime exploration and production limits, are now subject to territorial claims from Arab sheikhdoms like Kuwait!

It is interesting that, by changing the name of the gas field to al-Durra, Kuwait has claimed its ownership over Iranian maritime territory, and it justifies its claim using the fanciful boundary that the anti-Iranian and anti-Persian Gulf British company Shell has drawn for them, with the Arash field lying just inside Kuwaiti territory.

More background on the Arash/ Durra field follows from the EIA:

Another large non-associated offshore natural gas field, Dorra (Durra), is located offshore near Khafji oil field in the Saudi-Kuwaiti Neutral Zone. Dorra development has been controversial since the late 1960s, however, because 70 percent is also claimed by Iran (called Arash). In addition, the maritime border between Kuwait and Iran remains un-demarcated. Saudi Arabia reached an agreement with Kuwait in July 2000 to share Dorra output equally, although the Kuwaitis are reportedly trying to purchase the Saudi share. According to Saudi Aramco, the field is estimated to contain non-associated gas reserves of between 35 and 60 Tcf of natural gas, and is under seismic study. The Kuwaiti Ministry of Oil has reported that the goal is to produce initially 600 MMcf/d from Dorra. Kuwait and Iran have intermittently discussed jointly developing the field, although production plans remain undisclosed.

Luft on Iran’s Gas Industry

Published on August 25, 2009 in Energy, Natural Gas and Politics. 0 Comments

Building on our recent discussion of the Iran gasoline sanctions debate, I wanted to flag two recent pieces by Gal Luft of the Institute for the Analysis of Global Security. The first is from Foreign Affairs earlier in the month in which Luft makes two arguments:

  1. Sanctions on Iranian gasoline imports will not hit hard because the country has taken steps to beef up refinery capacity and is reducing its gasoline consumption by encouraging substitute fuels. Luft cites a 25% reliance on imported gas, in contrast to the 40% figure that is regularly cited in the press.
  2. The better way to hurt Iran would be to thwart its plans to export gas to Pakistan (then possibly on to India) and Turkmenistan (and then possibly on to Europe).

This article parallels a longer piece Luft published in the Journal of Energy Security in June, in which he fleshes out the potential implications of Iran developing its gas markets to the east. Luft asserts that Russia is keen to get Iran’s gas exports focused eastward so it can continue to dominate Europe’s energy scene, and warns that Iranian gas pipelines to Pakistan could give Tehran energy leverage over the subcontinent similar to that which Russia exercises over Europe.

While Luft’s contrary view on Iran’s gasoline import dependence is interesting and the second piece does a good job of gaming-out geopolitical possibilities of the Iran-Pakistan pipeline (read it all here), my concern is about the underlying sanctions logic:

Across both articles, Luft implies that thwarting Iran’s Pakistan pipeline scheme will force Tehran to rethink its nuclear ambitions. Yet Iran is hardly out of options when it comes to using its gas: It could re-inject gas into its aging oilfields to boost production, explore export options to Europe, make a dash for LNG technology, or continue to orient towards domestic use. So rather than capitulate on the nuclear program — a key security and energy priority (not to mention point of national pride) — Iran is likely to pursue its gas plan B ( and C, D, and E) first.

-WW

On the Iran Refined Petroleum Sanctions Act

Published on August 21, 2009 in Natural Gas, Politics and Trade. 0 Comments

I have a piece in this week’s Review section of The National arguing against the Refined Petroleum Sanctions Act of 2009 that we’ve been discussing on this blog quite a bit lately. The first few paragraphs are below, but click through to The National for the full article. -WW

Built to Spill

Americans like to think of sanctions as a targeted measure, but restricting Iran’s oil imports would distort trade in the whole region, argues Will Ward.

Iran’s Achilles heel, goes the mantra of many Washington hawks, is its dependence on imported petrol – the result of underinvestment in its energy industry during three decades of sanctions. While the country is a net oil exporter, Iran’s domestic refining capacity lags, forcing the Islamic Republic to import roughly a third of its daily petrol needs from abroad and ration consumer fuel purchases.

The US Congress is currently considering a bill, the Iran Refined Petroleum Sanctions Act, which would exploit this weakness by penalising companies and individuals that import petrol into Iran or invest in its domestic oil and gas infrastructure. The rosy logic behind the sanctions bill, which currently enjoys majority support in both houses of Congress, is not new: the hope is that ordinary Iranians, squeezed at the petrol pump, will pressure their recalcitrant leaders to halt uranium enrichment, embrace Israel and stop their unpalatable activities in Iraq, Lebanon and elsewhere in the region. That, or Tehran will lash out frantically in response, which will lead to an international consensus for even tougher sanctions – or worse.

Opponents of the bill have already pointed out many of its flaws: for starters, Iran could seek investments from Russia and China to build new refineries. Beyond that logistical loophole, it is also the case that Iranians generally support the country’s nuclear programme – and even if they didn’t, forcing Iran’s increasingly authoritarian government to reverse course would require months, if not years, of struggle and bloodshed. Sanctions against oil-producing nations often starve business and civil society, while the continuing flow of oil profits to the state leaves the targeted regimes more, rather than less, powerful – Saddam Hussein’s reign in Iraq being the best example.

But even this litany of concerns about the efficacy of sanctions leaves aside a critical issue: the potentially disruptive consequences for the wider region. America, the world’s most prolific user of economic sanctions, conceives of them as narrowly directed measures against the target state – the impact on neighbouring states rarely registers in Washington. But sanctions, particularly on consumer products with mass demand like petrol, tend to produce distortions in regional trade dynamics that can have political repercussions. Powerful incentives are generated to meet demand for the sanctioned products, inside and outside of the targeted state, creating economic imbalances in the region and political tensions with the state that has imposed the sanctions. And in the case of petrol sanctions on Iran these consequences are likely to be acute, given the long and storied history of trade relations across the Gulf.

Click here to continue reading

Will Europe be Buying Gas from Tehran in 2020?

Published on August 11, 2009 in Energy and Natural Gas. 0 Comments
nabucco plan

Planned Nabucco Route (Wikipedia)

Yesterday’s Iran Economist featured an interview with Seyyed Reza Kasaizadeh, director of the National Iranian Gas Export Company, discussing Iran’s desire to export natural gas to Europe, both through the planned “Persian Pipe” project and to supply feedstock to the Nabucco Pipeline. A few translated excerpts:

Compared with other gas export projects, Iran prefers to deliver its gas to the Greek, then European markets once the “Persian Pipe” project is completed.

Iran’s position in international affairs is sacrosanct because the planned route of the Nabucco Pipeline requires Iranian participation. Iran will not lose its international position because it is one of the most important gas suppliers and has the second largest gas reserves in the region.

Plans for the Nabucco pipeline and other similar projects will not be executed without Iranian participation….If European countries want to pipe Asian gas to Europe, they will need to include Iran in their plans because the countries party to pipeline agreements like Nabucco do not have the necessary feedstock to fill the pipelines.

The parties to the Nabucco pipeline have only reached an agreement over the path of the pipe, not the volume of gas to fill it. The question is whether or not countries can ensure the necessary gas for their pipeline – this question will decide if the project is economically viable or not, and this is where talks with Iran become necessary.

Iran, as holder of the world’s second largest gas reserves, must organize its future projects such that it raises its share of world gas exports from one to sixteen percent

In the near term, it is unlikely that Iranian gas will be included in Nabucco due to the harsh and potentially tightening sanctions environment. Yet Iran has been aggressively trying to expand its gas export business, beginning exports to Armenia in May, and recently announcing a deal to build an export pipeline to Pakistan. It has also explored deals with UAE’s Dana Gas, although negotiations are currently deadlocked over price. The planned Persian Pipeline will use Turkey and Arab countries as intermediaries in the hopes of allaying sanctions risk to European energy companies of doing business with Iran directly.q

Looking at the 10 year and beyond horizon, it becomes harder to see how the sanctions regime against Iran can withstand the tide of growing energy demand and rising oil prices, which make gas comparatively more attractive. Kasaizadeh has a point about Iran’s huge (and easily produced) gas reserves. In the absence of a US-Iran deal, a point is coming where the profits to be made from Iranian gas transport will exceed the costs of American sanctions. How soon depends on your outlook for world growth and energy prices.

-WW

The Iran Refined Petroleum Sanctions Act: Prudence or Prelude?

Published on August 9, 2009 in Natural Gas, Politics and Trade. 0 Comments

“He’s the elected leader.” Those were the words of White House Spokesperson Robert Gibbs (later retracted) one day ahead of Ahmadinejad’s inauguration in Tehran this past Wednesday. Concurrently, American media circles reawakened to the unlikelihood of Iran meeting the Obama-imposed September deadline. What should be done when, months after a fraudulent election and weeks after struggling to put together a cabinet, a disordered Iran fails to respond to American diplomatic overtures?

For many, two words suffice: tougher sanctions, shorthand for the Iran Refined Petroleum Sanctions Act. Consider recent comments made by R. Nicholas Burns, former Undersecretary of State and leader of Bush’s Iran strategy, “Draconian sanctions did not make sense in 2005 and 2006 but given the new weakness and vulnerability of the Ahmadinejad government, much tougher sanctions make sense now.” The assertion that regime instability somehow additionally opens Iran to the intended consequences of sanctions is problematic enough. But Burns further advocates that Obama be given complete autonomy when threatening, imposing or waiving the economic penalties and it is this condition that reveals much about its policy prospects.

Firstly, the condition is there to attract multilateral participation– if the US succeeds in winning allies for the imposition of a gas embargo, Obama’s promise of flexibility is meant to keep the coalition together. Continued loopholes are implicit and economic interests in diverse, participating countries are less threatened than might first meet the eye. Between February 1999 and June 2006, an estimated $80 billion + worth of foreign investment went into Iran’s energy sector despite the existence of the Iran Sanctions Act (ISA, originally ILSA), passed into law in 1996.

A quandry: For sanctions to stand a chance at being effective the targeted country must perceive that the costs of defiance are greater than the costs of compliance. Without the participation of China, Russia, Germany, the UAE et al. this calculation is unlikely (and even more so because Iran’s hardliners can be expected to use foreign pressure toward consolidating power). Yet gathering an effective coalition will require flexibility– if not in letter then in lax enforcement. So in both instances the sanctions stand to be neutralized.

More ominously, studies on sanctions (check out the Peterson Institute website if you haven’t already) demonstrate that their efficacy toward authoritarian and semi-authoritarian regimes is lost unless backed by a willingness to progress toward the military option. Far from a prudent substitute for the rush to war, sanctions can become a prelude– in this case we may be seeing a slow but sadly predictable march. -SW

The GCC Gas Gap

Published on May 26, 2009 in Energy and Natural Gas. 0 Comments

Andrew England has an article in the FT today on the widening gas shortfall expected in the GCC countries, felt most acutely in the UAE. Essentially, heavy industry and the desalinization plants necessary to serve the region’s growing populations are creating a boom in demand for gas. Yet the two most logical gas sellers Iran and Qatar (who have the world’s second and third largest gas reserves respectively ) are not in a selling mood. Qatar has a moratorium on expanding its North Field until 2013 at the earliest while it completes a geological survey and Iran is playing hardball in its lengthy pricing negotiations over gas sales to the UAE’s Crescent Petroleum.

This story is hardly new; GCC states have been seeking to make up for lost time on gas infrastructure — largely a consequence of focusing on oil production — for years with initiatives like the Dolphin Project (PDF). The problem now is that the credit crunch has made it harder to for states to make the investments in domestic gas production needed to make up the shortfall. This could end up giving Tehran the upper hand in gas price negotiations. But it also provides powerful incentives to put political squabbles aside and explore more cooperative ways to develop the huge fields straddling Gulf maritime boundaries. -WW

Iran and Oman: Shared Interests Fuel Increased Cooperation

Published on May 15, 2009 in Energy, Natural Gas, Natural Resources, Ports and Uncategorized. 0 Comments

Pan Arab Asharq Al Awsat on May 14 carried an interesting a piece entitled “Larijani in Mascat: Iran’s power is for the benefit of the all of the countries in the region…and we do not pose either a threat or intend to create an empire.” The comments, made by Iran’s Leader of Parliament, came on an official visit to the Sultanate this past week.

During the visit, Larijani and senior Omani officials praised expanded Omani-Iranian political, cultural and economic cooperation, in particular the Iran-Omani “Kish field” gas deal. The agreement, signed in December of 2008, would in its first phase deliver 1 b. cubic feet of natural gas per day to Oman, through a pipeline linking the underwater field to Oman’s Musandam Peninsula. An extension would carry gas on to the city of Sohar, on Oman’s Batinah coast, West of Muscat. In its final phase, the pipeline is expected to deliver 3 b. cubic feet per day. If Iranian gas were to be re-exported, neighboring countries experiencing severe energy shortages would stand to benefit.

Oman agreed to cover the entire 12 billion US development cost, but has been having some difficulties raising the required capital. An anonymous source told Reuters last week that the global economic crisis would delay completion by a year, to 2013. Larijani’s trip coincided with an official visit to the Sultanate by the head of Hamas’ political directorate Khaled Mishal.The ex-“Enriched Iranium” blog detailed Oman’s growing ties with Iran 2007-2008, including agreements to trade Omani investment in newly-privatized Iranian companies for technical assistance and investment in Omani ports. –EDC

In Protest At 'Violation of Sovereignty', Bahrain Halts Discussion on Iranian Gas Imports

Published on February 19, 2009 in Energy, Natural Gas, Natural Resources and Uncategorized. 0 Comments

“Manama ceases its discussions on Iranian gas imports, and rejects Tehran’s ‘agression’,” is the headline of today’s print edition of Pan Arab Asharq Al Awsat. Bahrain’s action comes after yet another senior Iranian official allegedly reiterated Iran’s claim to Bahrain as its 14th province. The remarks, attributed elsewhere to Ali Akbar Nateq Nouri, a member of Iran’s Expediency Council and former Speaker of Parliament, constitute third time in as many years that an Iranian official has provoked Arab Gulf ire by perpetuating Iran’s long-standing, intermittent claim to ownership of the neighboring island nation. Previous remarks were attributed to the Editor of State-run Kayhan, Hussain Shariatmadari, and Dariush Qanbari, an Iranian member of parliament.

Sheikh Jasim Saidi, a Salafist member of Bahrain’s parliament, called for the expulsion of the Iranian ambassador and a break in formal relations. The National Association for Oil and Gas would look to other neighboring countries, and increased local exploration to fulfil its incrasing natural gas needs,” as Bahrain could “not continue to negotiate with an ‘entity’ that denied its existence. ” The London-based Al Hayat leads with Saudi condemnation of Nateq Nouri’s remarks, which the Kingdom refers to as a “violation of Bahrain’s Arab identity.” Interviewed on Al-Jazeera radio, an unnamed Arab official was quoted as saying the incident was most unproductive, as Iran has much to gain from better relations with its Arab Gulf neighbors.