Iran Targets 10% Gas Trade Share
Iran’s gas industry is five decades old now. When the industry started work the main objective was to export gas. To that end, Iran’s first gas refinery pumped gas to the then Soviet Union before it would be delivered to Europe.
Half a century later today, Iran is making fresh attempts to increase gas production from the new phases of the supergiant South Pars gas field in a bid to export more gas and win a higher share in this profitable and strategic business.
In order to get further familiar with Iran’s gas policy, Iran Petroleum has conducted an interview with Mohammad-Reza Qodsizadeh, director of planning at National Iranian Gas Company (NIGC).
Q: Why did Iran change policy in the past decades and favored domestic development of gas to the export of this energy commodity?
A: In the aftermath of the [1979] Islamic Revolution in Iran, the country was facing numerous problems including embargoes and repercussions of the [Iraqi imposed] war. Therefore, Iran’s gas industry shifted its outward-looking view to an inward-looking one. In other words, plans were made for natural gas to make up the main energy commodity in the country. Huge natural gas deposits, profitability of replacement of liquid fuel with gas and public satisfaction were among other reasons of switching attention from outside to inside to the gas industry.
Q: Does it mean that Iran’s gas industry would have remained export-oriented had the Islamic Revolution and the Iraqi war not occurred?
A: No! In my opinion it was reasonable to develop gas industry inside the country and the Revolution and the war accelerated this process. Over the past decades, supplanting liquid fuel with gas has earned Iran significant economic benefits.
Q: What is the current status of gas supply in Iran?
A: Gas makes up a 70% share in Iran’s energy mix now. More than 1,000 cities and 20,000 villages are benefiting from this energy. We hope that during the 6th Five-year [Development] Plan, all Iranian cities and villages will be benefiting from gas. Of course, gas supply in hot areas will be developed at a slower place.
Q: Some Iranian villages are located in remote mountainous areas and gas supply to these villages via pipeline would not be economical. What is NIGC’s plan for energy distribution in these villages?
A: In this regard, the policy of governments and the ruling establishment in Iran is important because administrations are tasked with supplying energy to people and it is people who would choose their energy of choice based on their economic status. In Iran, gas has so far been supplied at subsidized and unreal prices. The reason for inclination for gas is easy access and its low price. Meantime, most villages and cities in Iran receive gas via pipeline.
Of course, we have currently plans for some hot and remote areas where gas consumption is low. We plan to use liquefied petroleum gas (LPG) in these areas. Such projects are under way in some provinces like Khuzestan, Isfahan and Sistan and Baluchestan.
Q: Given the low oil prices, are gas supply projects still profitable in Iran?
A: Sure! What has changed due to the slump in oil prices is the length of the time of return on investment because we believe that using natural gas will have economic justification under any circumstances. Therefore, low oil prices could not much affect gas distribution network development in Iran. Oil prices are low now and we have more than 20 cents per cubic meter of gas that would replace liquid fuels like gasoil. A weak point of this industry is the low price of gas. This issue leaves no motivation for the application of state-of-the-art technology for efficient fuel and using other fuels.
Q: Given the increase in gas production in the country following the startup of new phases of South Pars, what is the status of fuel supply to industries and power plants and what are your future plans in this regard?
A: Every year, as gas production from South Pars increases and gas supply projects come on-stream, liquid fuel consumption in the country, particularly at power plants and major industries, drops. Gas supply to Iranian power plants has reached 90% and according to plans liquid fuel consumption at power plants is expected to reach