GREATER CASPIAN WEEKLY OVERVIEW - DECEMBER 11TH 2015
Iran
Iran in talks with Russia over gas export to Armenia
Russia's Gazprom is in talks with Iran over gas swapping operations for gas supplies to Armenia, CEO Alexey Miller announced on 9 December after holding a meeting with the energy minister of the Republic of Georgia.
Currently Russia delivers more than 2 billion cubic meters per year (bmc/y) of gas to Armenia through Georgia, while Iran barters 0.3 bcm/y of gas with Armenian power.
"The issue of gas transit to Armenia was discussed. We are currently studying swap deals with our Iranian colleagues," Miller said, according to Gazprom's press office.
Russian gas deliveries to Armenia were part of talks between Miller and Georgia's Energy Minister Kakhaber Kaladze in Luxembourg on Tuesday, Gazprom said.
Apart from transit issues, Miller and Kaladze also discussed commercial deliveries to Georgia, Gazprom said.
Armenia is preparing to operate the Razdan thermal power plant’s 5th unit and raise the plant’s output to full capacity in 2016. Russia is negotiating with Georgia to evaluate the possibility of increasing gas deliveries to Armenia.
Meanwhile, a well-placed Georgian source told Natural Gas Europe anonymously that Georgia needs an additional 250-300 million cubic meters per annum of natural gas in 2016, despite pursuing some thermal plant options.
Iran also says it has the capability to increase gas exports to Armenia.
The price for the natural gas Russia's Gazprom exports to Armenia will be downed from the present $190 to $165/1,000 cubic meters (tcm), Miller announced in April.
The Russian gas price for exports to Europe stood at $240/tcm on average during 10 months of 2015.
In November, Iranian Petroleum Minister Bijan Zangeneh said Tehran was already in talks with Moscow on an oil and gas swaps agreement.
Soaring gas consumption in Iran impacts deliveries to Turkey
Daily gas consumption in Iran surpassed 645 million cubic meters (mcm) on December 6, while the country's total enriched and sweet gas production levels are 740mcm/day and 550 mcm/d.
Turkish media outlets reported on 8 December that Iran halved gas exports to Turkey, to 15 mcm/day. Iran announced a day after that "the volume of Iranian gas exports to Turkey reached 30 mcm/day at 16:00 local time on Monday, December 7, after a technical problem that occurred on the Turkish side was remedied.
National Iranian Gas Company Dispatching Director Manouchehr Taheri, said gas exports to Turkey decreased due to a problem in one of the turbo compressors at thgas supply facilities in Turkey, Shana news agency reported on December 9.
Dozen of cities in west and north-western regions faced gas outages, while according to Iranian media outlets, suppliesof gas to several industrial units, including cement firms and CNG plants, stopped, due to increasing domestic gas consumption by more than four times in recent weeks.
Mehr news agency reported that the ongoing problem, however, is not due to an output shortage, but because of a delay in inaugurating planned compressor stations.
According to plan, the country’s gas transmission capacity will increase by 80 mcm/day this year via the installation of five compressor stations en route of the transmission pipeline.
These gas compressor stations haven't become fully operational and as a result the country now is forced to send the surplus gas produced in southern regions, in particular in the South Pars Gas field, for flaring, according to Mehr.
Iran allocates $2.2 billion to gas refinery
Five Iranian banks have signed a cooperation agreement with the country’s Persian Gulf Petrochemical Industry Company to inject $2.2 billion into the Bidboland-II gas refinery project.
Kamel Taqavinejad, managing director of Sepah Bank, said on 6 December that a consortium has been formed with Mellat, Tejarat, Industry and Mine, and Parsian banks to establish the refinery in the southwestern province of Khuzestan.
The project will bring in an annual $750 million profit as well as $1.5 billion value-added products, he noted.
Bidboland refinery is projected to produce refined gas, ethane, propane, butane, and condensate, and will provide feedstock for a number of petrochemical units in the region.
Iran currently produces 550 mcm/day of sweet gas.
Regarding the petrochemical sector, Iran expects an 8-12% rise in its petrochemical production capacity in the next Iranian fiscal year, which starts on 21 March 2016.
Ali-Mohammad Bassaqzadeh, the production control director at Iran's National Petrochemical Company (NPC), said on December 9 the country’s petrochemical output will exceed 47 million tons by the end of the current year.
“Seven percent of the projected rise will be materialized through the exiting units and the rest by the units which are being constructed, such as Takht-e Jamshid, Entekhab, Kordestan, Shiraz, Pardis, Mahabad, and Lorestan.”
Once 67 semi-finished petrochemical projects are completed, the country’s annual petrochemical production will rise to 120 million tons. Moreover, implementing 36 new projects, which require $41 billion in investment, the capacity will surge to 180 million tons per year.
Iran, Oman to sign gas deal
Iran and Oman will sign a gas deal very soon, Ali Abdullah Al-Riyami, director general of oil and gas marketing at the Ministry of Oil and Gas of Sultanate of Oman, said on December 8.
The two countries have been negotiating for 3-4 years and very soon we will witness the signing of a gas deal between Iran and Oman, he said.
Iran had already signed a memorandum of understanding with Oman to deliver 10 bcm/year of gas through an underwater pipeline to Oman.
Iran also wants to sign a deal with Oman to use the free capacity (about 2.5 million tons per year) of Oman's LNG plants to deliver further gas to be liquefied for export.
"Oman had requested 56 mcm of gas per day from Iran in order to supply its LNG production and other industrial units," Alireza Kameli, director of the National Iranian Gas Exports Company, said.
Gas accounts for 86% of fuel for Iranian power plants
Natural gas accounted for 86% of fuel for Iranian power plants in the first 7 months of the current Iranian fiscal year, which started on March 21, 2015, said Arash Kordi managing director of Iran Power Transmission, Generation and Distribution Company, known as TAVANIR.
The volume of gas delivered to power plants rose by 16% this year compared to the same period in the past year, he said on December 6.
Gas delivery to power plants increased by 34% in the past year compared to its preceding year.
Manoochehr Taheri, director of the dispatching center at the National Iranian Gas Company, said on November 7 that the volume of gas supply to the power plants will reach 58.2 bcm by the end of the current Iranian year. The power plant sector requires as much as 72 bcm of gas per year, he added.
Iran’s energy bourse ready to transact natural gas
Iran’s energy bourse is ready to transact natural gas as a new product, said Ali Hosseini, managing director of the bourse.
Thanks to its appropriate infrastructures, the bourse is ready to admit natural gas, oil and petrochemical products, Hosseini said on December 5.
“Based on predictions, production of oil and gas in the downstream sector will rise after lifting of the sanctions. That will pave the way for admitting, supplying, and transacting oil and gas in the energy bourse,” he explained.
Transacting oil products can accelerate the trend of emerging from recession and bring in economic benefits for the country, he added.
“The successful experience of transacting fuel oil and diesel in the energy bourse has created a reform in selling oil products.”
Iranian law has put a priority on selling crude oil and natural gas, as well as condensates and electricity through the energy bourse.
Iran establishes LNG research institute
Iran has established an LNG research institute in a bid to boost capabilities of domestic producers and engineers in this area.
Saeed Pakseresht, the director for research and technology at the National Iranian Gas Company, told Shana that the first mini LNG pilot plan will be implemented.
The institute will act as a bridge to connect universities with industries, he said.
Managing director of the National Iranian Gas Company (NIGC) Hamid-Reza Araqi announced on November 24th that Iran is negotiating to launch five LNG projects within the next 3 years, a move that aims to increase its share of the global market.
Moreover, Rokneddin Javadi, the head of the National Iranian Oil Company sees Iran joining the elite club of LNG exporters in the next 2 years.
The first Iranian LNG unit has yet to come on stream. The project is being implemented and is currently 60% physically completed. The project will be completed pending the removal of sanctions to import necessary equipment and structures.
This plant’s capacity is projected to be 10.5 million tons per year and it is estimate it will earn the country more than $7 billion annually.
Italian firms express interest in developing North Pars infrastructure
Italian firms have voiced interest in developing infrastructure at Iran’s North Pars gas field in the post-sanctions era, said Mehdi Yousefi, managing director of Pars Special Energy and Economic Zone.
Specifically, Italian companies (which he did not name) have announced their readiness to establish a port at the North Pars gas field. The issue will be discussed and decided in a joint committee meeting, Yousefi said on December 8.
There is no such a place in the world which can combine all such facilities and capacities, he stressed, adding that the prospect of sanctions being lifted for Iran has provided foreign companies with a potentially bright future for investment in the Pars Special Energy and Economic Zone.
North Pars' gas reserve is around 1.6 trillion cubic meters. Its current production is zero, but its estimated final production is 100 mcm and 12,000 barrels of gas condensate per day.
The North Pars development plan was introduced to foreign investors within the framework of Iran’s new oil and gas model of contracts, known as the Iran Petroleum Contract (IPC), on November 28.
Iran in talks with Pakistan, India, Turkey on gas export
Iran is patiently waiting for Pakistan to complete its section of the Iran-Pakistan gas pipeline, said Alireza Kameli, managing director of the National Iranian Gas Exports Company, on December 5.
“We are patiently waiting for Pakistan to find an investor in the new situation,” he added.
“Nearly five months passed from the last talks with Pakistan. At that time Pakistan announced that it had come to terms with China for building a terminal and also 700 kilometers of pipeline.
“Of course, it is not important for us [to know that] with which country or company Islamabad has agreed on the establishment of the pipeline. The important issue is the completion of the pipeline,” Kameli explained.
Iran has signed an agreement with Pakistan to export 25 mcm/day of gas. Pakistan should have started Iranian gas intake in early 2015, but it hasn't even begun construction of pipeline in its territory. In the Iranian section, the pipeline should be completed as well.
Iran also announced earlier that it is ready to sign a new contract with Turkey to deliver more gas to this country. Iran currently exports 30 mcm/day of gas to Turkey.
Iran also started negotiations with India to construct a $4.5 billion undersea gas pipeline from Persian Gulf to Gujarat, India.
Negotiations are “under serious consideration" for a pipeline from the Iranian coast via the Oman Sea and Indian Ocean to Gujarat, National Iranian Gas Export Co (NIGEC) Managing Director Alireza Kameli said at the World Energy Policy Summit in India, on December 7th.
The pipeline will carry 31.5 mcm of gas per day and will be built in 2 years from the date of necessary approvals and a gas sale and purchase agreement being signed, he said.
Central Asia
Gazprom dissatisfied with Turkmen gas price
Though Russia has an ongoing dispute with Turkmenistan over the price it pays for Turkmen gas, it continues to purchase it.
Russia does not plan on bringing up the issue of termination of the intergovernmental agreements on the purchase of gas from Turkmenistan and Uzbekistan at this point, said Gazprom’s Deputy Chairman of the Management Committee Valery Golubev on December 8.
"Turkmenistan isn't showing a willingness to come to a compromise with Russia on the gas price issue, Golubev said, adding that the contract on gas purchases from Turkmenistan was concluded at a high price level, but, since that time, world gas prices have gone down and gas purchases from Turkmenistan have become unprofitable for Gazprom, Interfax reported.
Gazprom decreased the volume of Turkmen gas purchases from 10.5 bcm in 2014 to 4 bcm in 2015.
Gazprom announced in July that it had lodged a case against Turkmenistan's Turkmengaz at the international arbitration court in Stockholm over the price in a supply contract.
Two weeks before that, Turkmenistan accused Gazprom of not paying for gas supplied from the Central Asian country this year.
According to Forbes magazine, the purchasing price stood at $240/tcm - lower than the price Gazprom charges its customers in Europe.
Ground breaking of TAPI in Turkmenistan
A ground breaking ceremony for the USD 7.6 billion TAPI gas pipeline, covering four nations including India, will be held on 12 December in Turkmenistan, Indian Oil Minister Dharmendra Pradhan anoounced on 9 December.
Turkmenistan's state company Turkmengaz will lead the consortium for building the 1800-kilometer-long pipeline carrying gas from the former the Soviet state to energy-hungry India, Pakistan and Afghanistan.
"[The] Turkmen government is holding a ground breaking ceremony on December 13, 2015 for commencing laying of the pipeline with Turkmenistan," he said.
Kazakh Karachaganak field expansion expected by 2018
Kazakhstan's Ministry of Energy expects that the investment decision on the project to expand the oil and gas field Karachaganak will be made by 2018, said Deputy Energy Minister of Kazakhstan Magzum Mirzagaliev, reports IA News-Kazakhstan on7 December.
Completion of the design of the Karachaganak field and devising an investment decision on the transition to its future expansion project is expected by 2018.
Discovered in 1979, the Karachaganak field is one of the largest gas condensate fields in the world. It is located in north-western Kazakhstan, and covers over 280 square kilometers. Its estimated initial reserves of hydrocarbons hit 9 billion barrels of condensate and 48 tcf of gas, while the total estimated reserves exceed 2.4 billion barrels of condensate and 16 tcf of gas.
Karachaganak produces about 49% of gas and 18% of oil production of Kazakhstan.
Kazakh gas not to reach Ukraine without Russia's permission
Kazakhstan is not able to export gas to Ukraine without agreement with Russia, Deputy Energy Minister of Kazakhstan Magzum Mirzagaliev said at a briefing in Astana on 7 December.
"As far as gas deliveries to Ukraine [go], it needs to be understand that in order to send gas to Ukraine, first of all we need to come to agreements with Russia. We don't have such arrangements right now; we are selling gas at the border with Russia and now it is good enough for us," he said.
Kazakhstan-China pipeline capacity to increase to 55 bcm/year
Kazakhstan-China pipeline capacity will be increased from 30 to 55 bcm/y, said Vice Minister of Energy Magzum Mirzagaliyev during a press conference on 8 December.
He added that the implementation of the gas pipeline project “Beineu-Shymkent-Bozoi” is underway.
“The construction at the site 'Beineu-Bozoi' has been completed. The section 'Bozoi-Shymkent' was put into operation in 2013, and currently it has transported more than 2 bcm of gas. In general, the full completion of the project is planned in 2017,” he said.
The planned design capacity is 10 bcm of gas. Six hundred settlements with a total population of more than 2 million people will be gasified. As a result, the south of Kazakhstan will be provided with domestic gas, and the region's dependence on foreign fuel supplies will be reduced.