Where do the best natural gas investment opportunities lie?

Elchin Hasan's picture
Elchin Hasan, Independent Oil and Gas Researcher, A former BP Azerbaijan employee
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Elchin Hasan, independent oil and gas researcher and a former BP Azerbaijan employee, tells us that the biggest natural gas investment opportunities lie in East Africa and Iran, and explains what the key challenges in those markets are.

Investment opportunities refer to different criterion and dimensions for every company or country. Moreover, much depends on the organizational type of the investor. Geographically IOCs apparently have much less opportunities than NOCs, though it is the way round when talking about the technological aspect.

Nevertheless, considering the core requirements for an effective and efficient investment in the natural gas markets (e.g. large proven reserves, cost effectiveness, high demand, favourable prices, auspicious political circumstances, high reputation and financial credibility of the firm, etc) certain fields seem to be the most promising ones.

For instance, if the institutional, infrastructural and organizational gaps are filled, the recently discovered East African fields would be noticeably contributory to the global supply particularly owing to LNG opportunities. They are very favourably positioned, in particular relative to the LNG markets in Asia Pacific. The main players here are Mozambique and Tanzania.

For a risk taker company seeking for long-term prospects, Iran might be mentioned as the most promising area to invest in, albeit under question. Although, the country is not expected to become an LNG exporter in the mid-term, easing political situation in terms of relations with the West and eliminated sanctions could enable huge Iranian reserves to welcome IOCs in a short time even for pipelines to Europe. This is actually what is projected by many according to a reformist Rouhani’s political stance. As known, some big international players are already negotiating with Iranian government. On the other hand, I would say the most recent challenge that Iran has faced with regard opportunities to export to Europe is the new preliminary agreement made between Russia and Turkey for a huge 63 bcm Turk Stream pipeline that would replace the suspended South Stream.

Such a game-changing project would perhaps make Turkey less interested in transferring Iranian gas to Europe. Nevertheless, considering Turkey’s penchant to become a network country for energy exports, it can be assumed that Ankara might still be interested transferring Persian gas even without local demand and the Turkish Stream may not impede their realization. Adding the European ardour to secure non-Russian gas supplies may present even more optimistic view of the future of Iran.

Whatever we project or expect, because the gas markets, depending on internal and external factors, are changing so dynamically an investment considered favourable today may easily not prove to be so tomorrow. Therefore, I would suggest the players to extensively use scenario building techniques in their business appraisals.

Considering recent natural gas discoveries in Tanzania and Mozambique, do you think investments in East Africa are set to increase in 2015? What other areas will be crucial for gas investments this year? Let us know your thoughts below.

We’ll be discussing this with some of the most influential gas leaders at Gastech Singapore 2015.

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