DUBAI: Iran wants to work with Qatar to improve gas production from the giant field they share under the Gulf, Iran’s new oil minister said Tuesday.
Multibillion-dollar sales of liquefied natural gas have made tiny Qatar one of the world’s wealthiest countries, while strict Western sanctions have prevented Iran from making the most of its share of the world’s biggest gas field.
Western companies supplied the technology Qatar needed to ship LNG from the vast North Field around the world, while their governments banned them from selling that technology to Iran.
Iran sits on the world’s largest gas reserves, according to the latest statistics compiled by BP, but it has been prevented from exporting much of it because of Western sanctions.
Difficulties accessing foreign technology and expertise have also slowed Iranian progress in raising production from the field it calls South Pars, constraining exports by pipeline.
Since starting work last week, Oil Minister Bijan Zanganeh has made a rapid ramp-up of production from South Pars a top priority, and suggested on Iranian state television that Qatar might be interested in boosting cooperation as Iran’s output grows.
“We are ready to negotiate with this country ... but the point is that Qatar shows willingness for talks anytime our conditions are conducive to recovery from this joint field. When our [rate of gas] recovery is low they are reluctant to talk,” he said.
“Under the present circumstances, we will definitely negotiate with the Qatari side and naturally they will pursue their own interests in recovery from this joint field.”
Having already built a multibillion-dollar a month LNG export business, which is bankrolling Qatar’s 2022 World Cup soccer tournament and its growing political ambitions, Doha has imposed a moratorium on any new projects on the field to preserve it for future generations.
The self-imposed production project ban is expected to last until at least 2015. Zanganeh did not say why he thought U.S. ally Qatar would want to work with Iran to pump more gas.
State-run Qatar Petroleum was not available for comment.
Zanganeh, who previously filled the post under reformist President Mohammad Khatami, hopes to revive Iran’s sanctions-battered oil exports through a more conciliatory stance in Iran’s nuclear standoff with the West.
In comments reported by Oil Ministry news service Shana Tuesday from the interview on state television, he said Iran’s Foreign Ministry could help the Oil Ministry in its quest to reverse a slump in sales over the last year.
“The Foreign Ministry, by developing marketing for oil sales and the Oil Ministry by enhancing production, can play an effective role in oil exports,” Zanganeh said.
Sanctions imposed by Washington and the European Union in a bid to deter Iran from its nuclear enrichment activities have cut Iran’s oil exports to less than half their from presanction levels of about 2.2 million barrels per day.
Iran signed a memorandum of understanding Monday to export gas to Oman from 2015, in a 25-year deal valued at around $60 billion, Shana reported Tuesday.
Energy-hungry Oman agreed to buy gas from Iran as far back as 2005 and a later draft deal in 2007 included plans for Oman to process Iranian gas for export as LNG.
But the two sides have never finalized terms and Oman has been pressured by the United States to source fuel from alternative suppliers such as Qatar, according to U.S. Embassy cables released by Wikileaks.
Oman, which has warmer relations with Iran than other Arabian Peninsula countries, began importing Qatari gas in 2007, but its demand has risen rapidly since, threatening its LNG exports and pushing Muscat back to the negotiating table with Tehran.
The latest MoU signed by Zanganeh and his Omani counterpart Mohammad bin Hamad al-Rumhy, includes an agreement to start laying a gas pipeline to Oman as soon as possible, Shana reported.
“We can start implementation of the project; mainly because top executives of the two countries insist that the project should be implemented as soon as possible,” Shana quoted Zanganeh as saying after the signing ceremony held Monday during a visit to Tehran by Oman ruler Sultan Qaboos.
Oman has plants able to produce up to 10.4 million tons of LNG a year but the Gulf country has not produced more than 8.8 million in the last five years and output fell to 8.4 million in 2012, according to Oman LNG’s latest annual report.
According to a working copy of the 2007 agreement between the two countries, in addition to imports of 1 billion cubic feet per day of gas from Iran for domestic use, Oman would allocate 2 million metric tons per year in excess capacity at its Oman LNG plant to process Iranian gas for export.
The copy of that agreement was obtained by the U.S. Embassy in Muscat, according to a 2007 cable leaked to whistleblower website Wikileaks.
It is very unlikely that the big European shareholders – Shell and Total – would agree to liquefy Iranian gas while EU sanctions on Iran are in place, but Iranian gas imported for domestic use could free up more Omani fuel to feed Oman’s existing LNG export facilities.
In addition to sanctions pressure, U.S. ally Oman’s enthusiasm for building the pipeline with Iran may well depend on whether it can agree terms for BP to develop the Kazzan tight gas project, which could supply around 1 billion cubic feet per day by 2018.