Impact Of Political Turmoil On Iran’s Natural Gas Sector

Via Energy Daily, a report on the impact that the continuing political turmoil sweeping Iran will have upon its pressing need to develop its natural gas sector, which is widely perceived as the country’s answer to its worsening economic problems.  As the article notes:

“…Iran, whose oil is declining and whose energy industry is so rundown it has to import petroleum and other refined products, is desperate to exploit its massive gas reserves.

These total 27.6 trillion cubic meters, or 15 percent of the world’s known reserves, second only to Russia’s 44.6 trillion.

To develop these reserves, the Iranians need billions of dollars in foreign investment. With the U.S. and Europe blocked by sanctions, Tehran is increasingly looking eastward.

According to The Financial Times, the turbulence within Iran, and the confrontation between rival factions in the power elite, “will hamper the country’s beleaguered oil and gas industries” by scaring off potential Western investors prepared to defy U.S. efforts to bring Iran’s economy to its knees.

That, the FT concluded, will “encourage Tehran to look to China for investment. Â… Even before the turmoil, Iran signaled it had tired of Western foot-dragging and was likely to favor Chinese oil companies.”

As it happens, China is waiting eagerly in the wings to hook into one of Iran’s more ambitious projects that, should it ever get off the ground, will provide the Islamic Republic with a long-sought economic lifeline: its massive and dismally underused gas reserves.

Beijing has expressed readiness to join what was originally planned to be a gas pipeline from the giant South Pars offshore field to Pakistan and then on to India, both in drastic need of major energy supplies.

U.S. energy and security expert Gal Luft says that if the project goes ahead — and there are still question marks even after 14 years of on-off negotiations — it “could have profound implications for the geopolitics of energy in the 21st century and for the future of South Asia, as well as America’s ability to check Iran hegemony in the Persian Gulf.”

On May 24 Iran and Pakistan finally signed an accord to press ahead with a bilateral project, excluding India, costing $7.5 billion. The Iranian National Oil Co. would provide 750 million cubic feet of gas per day to Pakistan’s Interstate Gas System for 25 years.

India did not sign on. New Delhi has long been hesitant and has had a long-running dispute with Iran over pricing the gas. It has also been reluctant to entrust the future of its energy sector to its longtime adversary Pakistan.

The November 2008 terror attacks on Mumbai, which left more than 170 people dead, only heightened Indian unease about its western neighbor.

Luft, director of the Washington-based Institute of Global Security, says the bloodbath “has effectively taken the project off the table” as far as India’s concerned.

And there’s another important security problem. For 450 miles of the pipeline’s 1,300-mile length it will run through Pakistan’s province of Baluchistan, a turbulent and lawless region that straddles the border with Iran.

The Iranians have as much trouble with their unruly Baluchi tribesmen as the Pakistanis do, so that would leave the pipeline open to double jeopardy.

The Americans bitterly oppose the project as part of their campaign to cripple Iran economically. There seems little doubt that the U.S. – and possibly Israel — provide clandestine support for the militants to block the proposed pipeline, among other strategic objectives.

But China, ever hungry for new energy sources to fuel its mushrooming economy, is eager to take India’s slot to join Iran and Pakistan.

Leading European oil companies, such as Royal Dutch Shell, Statoil of Norway and Total of France, have dragged their feet on plans to develop South Pars, the world’s biggest gas field, and Beijing is ready to step in.

The Iranian National Oil Co. recently cancelled a deal with Total and signed a $4.7 billion contract with the state-run China National Petroleum Co. to develop South Pars.

The South China Morning Post newspaper published in Hong Kong has quoted Iran’s Oil Ministry as saying that Tehran has invited Chinese firms to participate in several oil projects collectively worth $42.8 billion.

This entry was posted on Tuesday, July 28th, 2009 at 5:38 am and is filed under Iran, National Oil Company of Iran.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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