Iran last week announced plans to revive its mothballed liquefied natural gas (LNG) projects, in hopes of taking advantage of Europe’s desire to make itself less dependent on Russian gas.
The projects were mothballed because sanctions made it impossible to get the technology required to liquefy natural gas by cooling it to minus-162 degrees Celsius so it can be shipped in tankers. Instead, Iran decided to focus on building pipelines and selling gas that way to geographic neighbors.
Since making that decision, Iran’s gas sales by pipelines have remained unchanged.
But it isn’t clear Iran can sell LNG either. Australia and Canada are both pushing LNG exports. But Fereidun Fesharaki, chairman of FACTS Global Energy and an Iranian-born market analyst and consultant, says those projects are going nowhere because they have been unable to find buyers.
Fesharaki told Fairfax Media of Australia most gas export projects will have to wait years, as he does not expect markets to need new supplies until 2025 or even later.
“There is no buyer,” he said. “I don’t see who is going to buy at any price…. There is no demand.”
Fesharaki’s views were echoed by JPMorgan, which warned last month that the global LNG market would soon be “shifting to a multi-year surplus” due to large blocks of new supply coming onto the market from Australia and the United States as well as softening demand in China and South Korea.
A decade ago, the United States had a half-dozen mega-projects building port facilities to land LNG and convert it back in gaseous form for sale in the United States. Now, with the US producing a surplus of gas, those port facilities are being reversed to take gas and liquefy it for export.
In Tehran last week, the head of the National Iranian Gas Export Company (NIGEC), Alireza Kameli, said there are plans for the “near future” to put Iran’s LNG schemes back on track with the aim of exporting to Europe. Europe gets much of its gas piped from Russia and the EU is anxious to reduce that dependency as Russia is viewed as untrustworthy.
Before the sanctions bit Iran, Iran had contracts with the Anglo-Dutch Royal Dutch Shell, Spain’s Repsol and France’s Total to build two LNG plants. Both were put on hold in 2010.
The revived plan is to build a capacity for exporting 40 million metric tons a year of LNG. But Fesharaki’s company says American firms have already contracted for 60 million tons a year of exports and are aiming to sell 70 to 75 million.
Liquefied fuel projects in Iran include Persian LNG with an annual capacity to produce 16.2 million metric tons of gas. The project had been awarded to Shell and Repsol but they abandoned it in 2010.
Total had won another project, Pars LNG, with a capacity of 10 million tons—but the company pulled out of it.
Iran, however, is officially carrying on with the construction of Iran LNG, the furthest-advanced of the planned projects to produce 10.5 million tons of liquefied gas per year, after dropping a Chinese partner.
Kameli said the project is half complete. But it seems to have stopped there. “We are waiting for the removal of sanctions in order to import necessary equipment and structures for the project,” Kameli said, without addressing whether any work on the project is underway now. The project is based on German technology.
