Iraq exports essential for Iran gas development

28 May 2014

Tehran aims to start 270-kilometre Iran-Iraq gas pipeline in 2015

Iran’s plan to start exporting gas to Iraq next year is the latest in the Islamic Republic’s strategy to monetise its vast gas resources in the face of international trade sanctions.

Ali Majedi, deputy oil minister for international affairs and trading, recently said that “gas exports to Iraq will start early next year and upon the completion of the pipeline”, referencing the next Iranian year starting 21 March 2015, according to a report on Press TV.

In 2013, Iranian and Iraqi officials agreed a contract for 25 million cubic metres a day (cm/d) of gas through a 270-kilometre pipeline from the gas processing hub of Assaluyeh in southern Iran into the Iraqi gas network.

Assaluyeh is located next to Iran’s giant offshore South Pars gas field, which the government has been developing in 28 phases, some of which have been hit by major contracting delays.

Iran has long-held plans to start exporting surplus gas to Europe, Pakistan and India, and the Gulf, but exports are currently limited to pipeline exports to Turkey and swap arrangements with Armenia and Azerbaijan.

Construction works on the Iran-Iraq pipeline are 75 per cent complete, according to official reports. Iraq, which has far less gas assets than its neighbour, is expected to use Iranian gas imports to fuel three power plants.

The original scheme was to export gas through an Iran-Iraq-Syria pipeline exporting gas to Europe through the Mediterranean Sea, but this is reported to have been put on hold due to a lack of security in Syria.

Unlike Qatar, with which Iran shares the South Pars/North Field, Iran does not have liquefied natural gas (LNG) facilities and its project to build them appears to have stalled.

Meanwhile, the Pakistan export pipeline has also hit a roadblock with Pakistan unwilling to put up the investment to finish its side of the project and the new Oman pipeline project is still in the early stages.

Majedi said in April that Iran faces a challenge to find export routes for surplus gas production as it approaches the completion of major capacity expansions on its giant South Pars gas field.

“Iran faces a surplus of domestic gas and there is [currently] no way of exporting the gas,” Majedi said. “With these phases, it will be a necessity to construct pipelines to export gas.”

With few other options in the near term, it is essential for Iran to complete the pipeline to allow exports to Iraq within the next year. If not, the Islamic Republic will risk wasting the significant investments it has made into expanding gas production.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications