Iran and Oman reach agreement on gas exports

The deal will give the Islamic republic access to liquefied natural gas (LNG) export facilities.

Iran has agreed to export substantial gas volumes from its Kish field to Oman in a deal promising the Islamic republic access to liquefied natural gas (LNG) export facilities. Tehran's deal to export one billion cubic feet a day (cfd) to its trans-Gulf neighbour, reported by the Iranian Oil Ministry's official Shana news agency, follows an April agreement between the two countries for joint development of the Kish gas reserves at a projected cost of US$7 billion (Dh25.7bn) to $12bn. The Kish field is near Kish Island in the Gulf, a tourist destination offshore southern Iran. Early last month, according to previous Iranian media reports, an Iranian delegation headed by the country's oil minister Gholamhossein Nozari visited Muscat for talks with Omani officials on having Oman convert Kish gas imports into LNG for the National Iranian Oil Company. An Omani official said the two countries planned to start producing the gas in 2012. He said Oman would foot the bill for development, including construction of a 200km undersea pipeline to Musandam, an Omani territory facing Iran across the Strait of Hormuz. Initial output of one billion cfd expected from the Kish field could peak at three billion cfd, the official added. Facing US-led sanctions over its nuclear programme and home-grown bureaucratic hold-ups, Iran has been slow to develop its vast gas reserves, which rank second in the world after Russia's. The country also lacks facilities for supercooling and liquefying gas so that it can be loaded onto tankers for export. Without the participation of western energy companies with proprietary gas liquefaction technology, Iran would be unable to develop its own LNG facilities in the near future, analysts said, severely limiting its gas export options. Oman, on the other hand, has been exporting LNG to Japan and Korea since 2000, and last year shipped 5.25 billion tonnes of liquefied gas to those two Asian states. It also exports minor amounts of LNG to China, India, Taiwan and Spain. However, much of Oman's 10 billion tonnes of LNG capacity has been idle in recent years, as the country has set its domestic gas requirements ahead of exports. The prospective Kish gas exports to Oman would yield more than seven billion tonnes of LNG annually if liquefied, offering Oman the option of retaining more of its own gas production for domestic use in power generation and natural gas-based industries such as petrochemicals. Along with most of the Gulf region, Oman has been grappling with worsening electricity shortages as rapid expansion of its population and industrial base have outstripped gas production. Last year, Oman produced 851 billion cubic feet of gas from 24.37 trillion cubic feet of proved reserves. Iran produced 3.95 trillion cubic feet of gas from 981.75 trillion cubic feet of reserves. [e-mail]