Greater Caspian Weekly Overview - January 1st 2016
IRAN
Review of Iran’s gas, petrochemicals, and power sectors in 2015
Iran’s gas production during spring, summer and fall increased by 18 million cubic metres per day (mcm/d).
The country’s gas production increased by about 50 mcm/d on average during 2014, while about 35 mcm/d was added to the production level in 2015.
Iran has the capacity to produce 172 billion cubic metres (bcm) of sweet gas annually and plans to increase that capacity, Azizollah Ramezani, the director for international affairs of the National Iranian Gas Company (NIGC), said on December 23. The country’s enriched gas production capacity also stands at above 210 bcm.
Recently, Iran announced that two phases of South Pars would become fully operational. However, the inauguration of phases 15 and 16 of Iran’s South Pars gas field, which was set to be on December 20, has been postponed. Iran says it will be self-sufficient in gas production within the next 4 months after inaugurating phases 15 and 16.
The development of phases 15 and 16 aims to produce 50 mcm/d of sweetened gas.
Iran has started early gas production from these phases since late 2014, producing 17 mcm/d of gas.
Coming to the petrochemical sector, Iran increased petrochemical products by 3-4 million tons per annum to about 45-46 million tons in 2015, but mostly by increasing feedstock or launching new petrochemical plants. Iran's petrochemical production capacity is about 60 million tons per year, far more than the actual production level.
In the power sector, the country hasn't developed new projects significantly, but 2015 was a milestone year for Iran in replacing liquid fuels with natural gas consumption in power plants.
According to statistics from Iran's Energy Ministry, the country's gas delivery to power plants reached about 55 bcm in 2015, showing a huge increase year to year.
In 2014, the amount of gas delivery to power plants was about 43 bcm, about 8 bcm more than the previous year.
However, in relation to the capacity growth of power production, the figures indicate a huge decline.
The country added less than 900 MW to production capacity in 2015, a drop on the more 1,900 MW added in 2014.
Iran’s gas industry could attract $40 billion if sanctions are lifted
Iran’s gas industry could attract $40 billion if sanctions against the country are lifted, Hamid-Reza Araqi, Managing Director of the National Iranian Gas Company (NIGC) said on December 27th.
Attracting more than $40 billion in BOO and BOT methods in the gas industry will be possible, Mr. Araqi said.
Tehran hosted 137 companies from 45 countries for a two-day conference in November, during which the legal generalities of Iran’s new model of oil and gas contract (Iran Petroleum Contract, or IPC) were introduced.
Iran has offered 50 hydrocarbon fields, including 21 gas fields with 226 trillion cubic standard feet of gas reserves, based on the IPC.
Iran needs $100 billion to rebuild its gas industry and has met with European energy giants to further that aim, Azizollah Ramezani, International Affairs director at NIGC said in June.
Half of the $100 billion that Iran requires will need to come from foreign producers, he noted.
Currently Iran has a capacity to produce about 700 mcm/d of enriched gas and plans to increase raw gas production to 1,100 mcm/d by late 2018.
Germans offer €12-billion investment in Iran’s petrochemical sector
German companies have offered investment bids equalling €12 billion for Iran’s petrochemical sector, said Abbas She’ri Moqaddam, director of Iran's National Petrochemical Company.
Iran’s petrochemical sector has set an annual output target of around 129 million tons by the end of the country’s sixth five-year development plan (2021).
The country produced 44.5 million tons of petrochemicals in the past Iranian calendar year (which ended on March 20, 2015), with an over 10% rise from 40.5 million tons in its preceding year.
Iran also exported 14.109 million tons of petrochemicals, valued at $8.205 billion, in the first seven months of the current Iranian fiscal year, which started on March 21. Despite a 36.36% uptick in volume of petrochemical exports, revenues rose by just 0.01% compared to the same period last year, according to the Iran Customs Administration's report released on November 10.
Iran’s NIDC drills over 268 kilometres of oil and gas wells
The National Drilling Company of Iran (NIDC) has drilled 268,786 metres of oil and gas wells in the first nine months of the current Iranian fiscal year, which began on March 21, 2015.
Utilising 75 onshore and offshore rigs, NIDC managed to drill 136 exploratory, developmental, and repaired wells across 10 provinces of the country, Hamid Reza Khoshayand, deputy managing director of NIDC, said on December 30th.
The wells included 69 exploratory, 65 developmental, and two repaired ones, he said, adding that through using modern methods of drilling and observing HSE regulations, the drilling operations terminated 457 days ahead of schedule.
NIDC operates 74 offshore and onshore drilling rigs in 10 provinces of the country.
Iran has capacity for a tenfold boost in gas export to Armenia
Iran has the capacity for a tenfold increase in gas export to Armenia, said an official with the Iranian Gas Transmission Company.
Yadollah Baybordi added that the main infrastructures, including pipelines, terminals, and pressure boost stations, have been provided. “If negotiations with the Armenian side are finalised, even 10 million cubic metres of gas can be exported to the neighbouring country,” he said.
Since the beginning of the current Iranian fiscal year (March 21, 2015), some one billion cubic metres of gas have been exported to Armenia on average per day, he noted.
For the time being, Iran can export three billion cubic metres of gas annually to Armenia, he said, adding that Iran exports gas to Armenia in exchange for electricity.
AZERBAIJAN
Norwegian Agility to supply equipment for largest gas project in Caspian
Agility Subsea Fabrication (ASF), a world-leading subsea fabricator based in Norway, has signed a contract with FMC Kongsberg Subsea AS for the supply of various equipment within the second stage of development of the Azerbaijani Shah Deniz gas field.
FMC Kongsberg Subsea AS is a contractor of BP-Azerbaijan for equipping mining complexes No.3, 4 and 5 on the Shah Deniz field consisting of subsea manifolds, control units and other equipment.
The contract is worth $49.27 million and includes the supply of manifolds, bases and well jumpers to Azerbaijan, according to a statement on ASF's website. The total weight of the equipment supplied will be 3,600 tons.
Gazprom, SOCAR discuss increase of Russian gas supply to Azerbaijan
Gazprom and SOCAR (State Oil Company of Azerbaijan Republic) are contemplating the possibility of increasing Russian gas supply considering the growth prospective in consumption of natural gas in Azerbaijan, according to a press release from Gazprom.
Gazprom said that this issue was discussed by the chairman of Gazprom PJSC Alexey Miller and SOCAR president Rovnag Abdullayev during a meeting in St. Petersburg.
“The meeting participants discussed the current state of bilateral cooperation in gas sphere,” the press release said. “Special attention was paid to the issue of export of Russian gas to Azerbaijan. In particular, the possibility of increasing supplies taking into account the prospects for growth in natural gas consumption in the country was considered.”
Earlier this year, Gazprom started gas export to Azerbaijan, but stopped after 22 days.
SOCAR: 2.7 bcm gas injected to gas storage facilities
The gas storage operation department of the Azneft Production Unit of the State Oil Company of Azerbaijan Republic (SOCAR) has finished pumping gas into underground gas storage facilities Garadagh and Galmaz for the 2015-2016 Autumn/Winter season.
A total of 1.8 bcm of gas was pumped to underground gas storage during the warm months of 2015, including 920 mcm in Garadagh and 887 mcm in Galmaz gas storage facilities.
The total capacity of both gas storage facilities is about 5 bcm.
SOCAR reported that gas pumping out of the underground gas storages started in November 2015. “Until now, 646 mcm of gas has been pumped out from the gas storages, of which 261 mcm [was pumped] out of the Garadag storage and 385 mcm out of the Galmaz storage."
CENTRAL ASIA
Turkmenistan No. 1 supplier of gas to China--but revenues down
The volume of China's gas imports in January-November 2015 increased by 13.8% compared to last year, to 50.15 million tons in volume. At the same time, the value decreased by 15.3% to $22.29 billion, official Chinese customs statistics indicate.
Turkmenistan is shown to be the leading provider of the natural and other gases China imports, at a rate of 17.985 million tons during 11 months, an increase of 6.7% on last year. However, the revenues received by Turkmenistan for gas export to China decreased by 18% to $6.97 billion. The average cost of a ton of gas in the reporting period decreased by $116.8 to $387.8. The share of Turkmen gas in Chinese imports in the first 11 months amounted to 35.8%.
During the reporting period, Uzbekistan also exported 1.134 million tons of gas to China. The volume of shipments declined compared to the same period in the last year by 49.6%. The value of China's imports of Uzbek gas also decreased by 29.2% to $371.97 million. The average cost of a ton in the reporting period decreased by $119.74 to $327.98.
In the period of January-November, Kazakhstan also exported 358.5 million tons of gas to China. Thus, the volume of shipments decreased compared to the same period in the last year by 6.5%. The value of China's imports of Kazakh gas also decreased by 31.2% to $371.97 million. The average cost of a ton in the reporting period decreased by $85.25 to $237.41.
198.32 tons of gas also were shipped from the Russian Federation to China during the reporting period, which is 51.2% more than in January-November of the last year. The value of Russian exported gas to China increased by 27.8% to $111.27 million. The average cost of a ton decreased by $104.5 to $561.07.
Western sanctions hinder work on Caspian field
Western sanctions have delayed work on the Tsentralnoye offshore field in the Caspian Sea, the president of Russian oil company Lukoil, Vagit Alekperov, said. The field is jointly being developed by Russia’s Lukoil and Gazprom and Kazakhstan’s KazMunayGas.
“We now cannot receive a drilling rig [for Tsentralnoye] because it belongs to non-Russian companies," Mr. Alekperov told Russia’s Rossiya-24 television channel last week when commenting on his company’s work on Tsentralnoye field.
"It is illogical to build a drilling rig for a single well, so Gazprom and we [Lukoil] have paused—we will wait until either drilling rigs are available or the sanctions are lifted.”
Afghanistan to raise dedicated force for TAPI gas pipeline security
Afghan Petroleum Minister says work on clearing of the passage of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project would be started in April.
Afghanistan will raise 7000-member security force to guard the gas pipeline project, state-owned Radio Pakistan reported.
Afghan Mines and Petroleum Minister Daud Shah Saba told the Upper House in Kabul that the force will keep security for the implementation and demining the route.
Daud Shah Saba told the House that the procurement process for demining will be completed next month and practical work on clearing of the pipeline passage would be started in April.
The overall cost of the TAPI project is $10 billion. Turkmenistan, being the consortium leader for the project, has agreed to contribute 85% of the equity required.
A 700-kilometre portion of the nearly 1,800-kilometre TAPI pipeline will be built in Afghanistan and, according to officials, is scheduled to be completed by 2019 after being stretched to Pakistan and India to deliver 33 bcm of gas to the participant countries.
Ilham Shaban is a Natural Gas Europe expert on Caspian region's energy issues