Geneva talks key to gas issue

26 June 2014

Whether Iran can solve the Gulf’s gas shortage depends on the outcome of the nuclear discussions scheduled to be completed on 20 July

While the rest of the world will watch the progress of the Geneva talks from an international security viewpoint, the Gulf has another vested interest in the success of the negotiations on Iran’s nuclear programme, which are set to resume on 2 July.

With the exception of Qatar, all the GCC states are struggling to secure gas to fuel power capacity additions made necessary by rapid population and industrial growth. The issue extends further than the GCC. As Iraq attempts to rebuild, its ambitious programme to boost electricity generation will require significant gas imports until it can fully develop its own reserves.

If Tehran is not welcomed back into the international fold, the region will need to look elsewhere for gas

While Qatar has significant liquefied natural gas export infrastructure and feeds the Dolphin gas pipeline linked with the UAE and Oman, the moratorium it placed on additional natural gas developments on the North Field in 2005 has capped how much it can supply neighbours in the short term.

As a result, the Gulf states are increasingly turning to Iran, home to the world’s largest proven gas reserves. Iraq and Oman have already signed long-term agreements with Tehran to import gas, and others such as Kuwait are keen to follow. Bahrain has also considered importing gas from Tehran to service its requirements.

However, while the Islamic Republic has the potential to solve a large part of the region’s supply problems, it will be unable to do so until crippling sanctions are removed.

Iran is the world’s third-biggest gas consumer and demand is growing rapidly as ageing infrastructure in its oil sector requires increasingly large volumes of gas for reinjection.

The 20 July deadline for the conclusion of the Geneva talks may provide a watershed moment for not only Iran’s development ambitions, but also the Gulf’s gas crisis. However, if Tehran is not welcomed back into the international fold, the region will need to look elsewhere for gas.

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