Welcoming back Iran: but what would this mean for the global gas sector?

Gavin Sutcliffe's picture
Gavin Sutcliffe, Head of Content, Global Energy Conferences & Gastech
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When Barack Obama steps down from office, he is sure to want to leave legacies both domestically and abroad, and settling a potential nuclear pact agreement with Iran by the summer is certainly a top priority for his administration. While long-term sanctions have undoubtedly damaged both Iran’s oil exporting capability and her wider economy, international enforcement towards Iran’s natural gas industry has been far more hesitant in recent years – with nations such as China, Pakistan and India carefully weighing up options to solve their own increasingly-dire domestic energy demands as they look to Iran to provide cheap and plentiful gas supply. Being that Iran is so well positioned geographically to act as a potential ‘hub’ for the transit of natural gas overland, she also possesses major coastal access to the Persian Gulf (including the oil price-influencing Straits of Hormuz), and to the prime LNG shipping routes out to Asia.

If key sanctions are lifted in the coming year, Iran (with the second-largest gas reserves and the fourth-largest oil reserves in the world) could become a major beneficiary both economically and politically. But...

  • Is Iran capable of developing her natural gas and LNG infrastructure quickly and effectively enough to benefit, or are there too many obstacles to overcome?
  • How long might it take for the Iranian government to actually build new infrastructure to supply countries like Pakistan or India – and where would the technology and the skilled manpower come from to deliver this?
  • And is there enough new supply of natural gas and LNG available to potentially strike Iran out of future supplier agreements and see emerging markets in Asia simply turn to others such as Russia – or new-wave LNG suppliers – instead?

A regional power struggle: Historically, Iran long held the prestigious position as the most powerful state in the Muslim Middle East. A large, relatively-youthful population, strong cultural identity, a geographically-strategic location and religious home of the Shia elite, the country has suffered considerably since the Shah was deposed in 1979 and many believe the Sunni-led Saudis (in close cooperation with the United States), are behind the continued downward pressure on Iran through both sanctions and (in recent months), lower oil prices. Saudi Arabia has consistently refused to prop up plummeting oil prices through any cuts to their own production and their motives may be, in part, an attempt to heap more pressure on Iran’s economy and on her Clerical leadership regime.

Key questions such as these will ensure that Iran remains in a precarious and fragile situation for some time yet, but if a nuclear pact is agreed courtesy of the Obama Administration then it is highly likely Iran will find itself with breathing room to negotiate and to develop productive new export avenues. What do you think? Will gas producers enter Iran’s natural gas industry this year? Leave your comments below.

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