Domestic Gas Consumption Overshadowing Exports

EghtesadOnline: The rise in domestic gas consumption has been more noticeable than the increase in exports over the last 12 months.

News ID: ۷۴۸۸۷۱

04 November 2019

According to Oil Ministry data, although gas production has remained unchanged and levelled out at around 600 million cubic meters a day, consumption has shot up in various sectors, ISNA reported.

The report said the household, commercial and agriculture sectors account for 114 mcm/d, 17 mcm/d and 6 mcm/d of the total consumption respectively. The figures are up 23%, 13% and 30% compared to 2018.

Referring to other sectors including petrochemicals, power plants and transportation, the ministry said in 2019 consumption has hovered around 560 mcm/d, 300 mcm/d and 20 mcm/d respectively, Financial Tribune reported.

Natural gas consumption has shot up by 22% in the key petrochemical sector. Power plants and transportation have, however, cut consumption by an impressive 6% compared to a year ago.

The report indicates that exports have risen barely by 5% in the period, reaching 45 mcm/d.

Turkey and Iraq are the main buyers of Iranian gas. The former signed a 25-year contract in 1996 to buy 10 billion cubic meters of the fossil fuel from Iran annually through a pipeline.

Baghdad imports gas via a pipeline. An estimated 27 million cubic meters of gas flows to the western Arab neighbor on a daily basis.

According to BP Statistical Review of World Energy, Iran holds as much as 34 trillion cubic meters of natural gas that is 18% of the world proven reserves, but is not a major player when it comes to exports.

Differing Views

There are differing views on Iran’s marginal share in international markets.

Energy experts like Hamidreza Araqi, a former managing director of National Iranian Gas Company, says so long as the current consumption pattern continues, the bulk of energy generated in the country will have to be used domestically, leaving little if anything for export.

However, Narsi Qorban, a prominent energy analyst from London University, believes that there is a direct link between exporting energy like gas and normal ties with neighbors and the international community.

"Political issues and gas exports are intertwined and the latter cannot be expanded if the former is not well-managed," he said.

It is regrettable that with such massive reserves (34 trillion cubic meters), policymakers have not yet been able to increase exports, he has been quoted as saying, adding that extending gas pipelines from the southern port of Asalouyeh in the Persian Gulf to neighboring states has almost always been marred by political and security issues (economic sanctions and wars).

However, LNG can be exported easier and with much less hurdles simply because it has bigger international markets, the senior oilman says.

Iran should focus on LNG exports, as shipment of liquefied gas is less risky compared to piped export and also cost-effective for faraway destinations. But it seems there is still no consensus among senior officials on this critical subject.

LNG accounts for 31% of the global gas trade, of which 70% is in Asia and the Middle East. There are currently 60 LNG terminals in Asia with 40 others in the pipeline.