Washington boosts LNG with Iran in sanctions crosshairs

The shale gas revolution has had a staggering effect on the world energy market, shifting many prior assumptions regarding the geopolitics of energy.
Whereas in 2000 and the first years of the new millennium, shale oil and gas accounted for just one percent of all fossil fuels produced in the United States, the country has now moved towards energy self-sufficiency and is taking on the role of an exporter.

Whereas the Obama administration was a major force in fostering this development as a means of freeing the country from foreign dependency through diversification, in tandem with increased green energy supplies, the Trump administration seems to have sought to focus on energy in a more traditional approach.

The shale gas revolution and consequent US energy boom finally meant that a static fact of world energy geopolitics, – ie: that the US was dependent on oil mainly imported from the Middle East – could be cast aside. The US is now energy self-sufficient and free to export Liquefied Natural Gas to neighbours and allies around the world, and thus has added to Washington’s political flexibility.

The uptick in gas production in the US has already decreased LNG prices in the EU and Asia and thus presents a challenge to the old energy order

Not surprisingly, this turn of events is being monitored closely by other energy exporters.

The US is already using its energy exports to reduce the EU’s dependency on Russian gas, while exerting pressure on its allies to see it as an alternative to Iranian natural gas.

The uptick in gas production in the US has already decreased LNG prices in the EU and Asia and thus presents a challenge to the old energy order. In terms of US national security then, the energy boom can be examined from two perspectives, first, its implications for US energy security and second, its implications for the wider field of international relations and its geopolitics.

 

US withdrawal from the Iranian nuclear deal 

Iran’s economy and energy sector has been devastated by the US and EU sanctions brought against it due to Iran’s former attempt to build a nuclear programme. Sanctions have not only scuppered Iran’s chances of success in achieving its energy goals but also have forced Iran to become more proactive in consolidating regional relations.

Since Washington’s departure from the JCPOA agreement, energy companies who had only just began to consider re-entering Iran have withdrawn in anticipation of further sanctions. Few international banks or financial institutes are willing to participate in energy projects in Iran under such conditions.
The US is interested in reducing Iran’s role in regional and global energy markets, with Washington often declaring a wish to bring Iranian oil production down to zero. It is a fact that American sanctions against Iran’s energy sector have vastly reduced the country’s production capacity. US sanctions have also wrought severe harm in terms of technology and finance.

The US plans to increase LNG exports to countries which depend on Iranian hydrocarbons in an attempt to wean these countries off their reliance. But some analysts believe the US oil and gas sector is unlikely to gain Iran’s share of the market, as technically, Iran’s export oil grades are heavier and sourer than the light, sweet crude exported from the US.

 

Following the US withdrawal from the treaty, the country further cut imports of oil from Iran. Japan now imports 5.5 percent of its oil from Iran, according to the Japanese Ministry of Economy and Trade. In August, Japan was receiving 17,775 barrels per day and bought 3.39 million barrels of crude in one month.

Japan called for an exemption from the US embargo on Iran, which was granted by the Trump administration – but only for six months. Part of Iran’s share of oil is expected to fall victim to an influx of LNG exports and US gas condensate onto Japan’s market. Sanctions against Iran’s energy industry have not only reduced Iran’s oil and gas production capacity, but also reduced Iran’s share of the global energy market. The rising lack of investment in the Iranian oil and gas industry is one particularly immediate result of renewed sanctions.

Reducing oil production capacity and, consequently, reducing Iran’s oil export potential will force Iran to find loans and facilities from banks and global financial institutions in order to develop its facilities – yet it is clear that new US sanctions will challenge Iran’s ability to retain much of its oil production capacity regardless.

Given the increase in natural gas producers and LNGs on the market, the US energy boom provides a good opportunity for Iran’s rivals – not least the US itself – from moving in on Iran’s share of the regional and global energy market.

The increase in US oil and shale gas production has made Iran more pressured to find new markets, yet the country does not have the capacity to produce LNG, thus competing with the US, and it is unclear when the capital and technology needed to complete its LNG project units will be provided.

The US superiority in terms of advanced technology, research, investment, and diplomatic reach ensure it will retain a high position in the world energy market, while Iran will likely flounder further. If Iran and the US agree on current political and security problems, Iran may gain the foreign capital and technology needed to recover some of its oil and gas production capacity.

Energy continues to play an important role in US foreign policy, with implications not only on relations with designated rivals but also allies across the world.

Energy exports play a key role in US relations with its neighbours and allies, and are a key tool in fostering and furthering relations with others. Energy exports as a means of expanding relations and helping US allies in South Asia and Europe are sure to lead to interesting geopolitical developments, and US LNG exports are most likely to be effective in reducing Iranian oil exports to Japan and South Korea.

Turkey and India


Turkey is a major purchaser of Iranian natural gas. Turkey has huge investments in LNG storage facilities and plans to increase its share of LNG in the domestic energy market. In 2015, Turkey began to import LNG from the US, and is now the second-largest importer of US LNG in Europe.

An increase in US and Qatari LNG – alongside new natural gas transit projects such as TANAP and the Turkish Stream – means that Iran may be largely sidelined by Turkey in the near future. Similarly, India has also signed a 20-year agreement to be supplied with US LNG, also ensuring a reduction of Iranian supplies to the Indian energy market over a similar period.

South Korea 

Seoul is one of the main customers of Iranian gas condensate. More than 55 percent of Iran’s gas condensate is exported to South Korea. According to official statistics from the Ministry of Oil, Iranian gas condensate exports in 2017 numbered 428,000 barrels per day on average.

Since the US withdrawal from the nuclear deal, major Korean companies importing Iranian oil and gas condensate have cut imports from Iran. In the first six months of 2018, the Hanwa Total Petrochemical Company, the largest importer of Iranian gas condensate, imported 15.92 million barrels from Iran, but since August has reduced its imports to one-third, in favour of supplies from Qatar and the United States.


Japan

Japan is another main consumer of Iranian oil in East Asia. According to the Japanese Petroleum Association, in 2017 the country imported 172,216 bpd of oil from Iran, down 24.2 percent from the previous year. Iran’s oil accounted for 5.3 percent of total oil imports to Japan’s refineries in 2017.

Japan called for an exemption from the US embargo on Iran, which was granted by the Trump administration – but only for six months

Following the US withdrawal from the treaty, the country further cut imports of oil from Iran. Japan now imports 5.5 percent of its oil from Iran, according to the Japanese Ministry of Economy and Trade. In August, Japan was receiving 17,775 barrels per day and bought 3.39 million barrels of crude in one month.

Japan called for an exemption from the US embargo on Iran, which was granted by the Trump administration – but only for six months. Part of Iran’s share of oil is expected to fall victim to an influx of LNG exports and US gas condensate onto Japan’s market.

Sanctions against Iran’s energy industry have not only reduced Iran’s oil and gas production capacity, but also reduced Iran’s share of the global energy market. The rising lack of investment in the Iranian oil and gas industry is one particularly immediate result of renewed sanctions.

Reducing oil production capacity and, consequently, reducing Iran’s oil export potential will force Iran to find loans and facilities from banks and global financial institutions in order to develop its facilities – yet it is clear that new US sanctions will challenge Iran’s ability to retain much of its oil production capacity regardless.

Given the increase in natural gas producers and LNGs on the market, the US energy boom provides a good opportunity for Iran’s rivals – not least the US itself – from moving in on Iran’s share of the regional and global energy market.

The increase in US oil and shale gas production has made Iran more pressured to find new markets, yet the country does not have the capacity to produce LNG, thus competing with the US, and it is unclear when the capital and technology needed to complete its LNG project units will be provided.

The US superiority in terms of advanced technology, research, investment, and diplomatic reach ensure it will retain a high position in the world energy market, while Iran will likely flounder further. If Iran and the US agree on current political and security problems, Iran may gain the foreign capital and technology needed to recover some of its oil and gas production capacity.
Energy continues to play an important role in US foreign policy, with implications not only on relations with designated rivals but also allies across the world.

www.alaraby.co.uk/

Read More

US LNG and Turkey’s Energy Security

The shale gas revolution had provided the US with an opportunity not only to become energy efficient, but also a natural gas exporter. US interests in energy exports hinges on boosting relations with neighbors and allies. Turkey’s growing economy and equally increasing energy demands make it a good candidate for US liquified natural gase (LNG) supplies. At present, Turkey imports most of its natural gas from Russia, Iran and Azerbaijan.

 

The US’ LNG has the potential to provide an alternative to Iranian natural gas in Turkey’s domestic market. Trump is currently actively trying to decrease Iran’s influence in the region and weaken its economy. Turkey is a major costumer of Iranian natural gas and uses gas from Iran to cover excess winter demand in its South. However, the real question is Turkey’s lack of integrated natural gas infrastructure. Turkey will need more investment to create an integrated infrastructure. Current Iran-Turkey natural gas agreements will end by 2026, and more LNG imports from the US wuld provide an opportunity for Turkey to gain the upper hand in negotiations to decrease natural gas prices for next decade if both countries want to extend this agreement.

 

Turkey is also dependent on Russian natural gas, importing more that 50% of natural gas from Russia. Russia and Turkey’s joint construction of the Turkish Stream pipeline will lead to further integration once in operation. Turkey will import natural gas from the Turkish Stream and also export gas to Greece via this pipeline. Last June, Turkey also begin to import natural gas from the TANAP project: Azerbaijan will also increase its share in Turkish natural gas market.

 

In the past few years, Turkey has made significant contributions to the realization of this dream, with significant investments in infrastructure, especially in terms of pipeline development and increased capacity for the maintenance of LNG and has even supported Qatar in its endeavors to do the same. The country’s natural gas storage capacity will double by 2023 to 11 billion cubic meters. If this is achieved, Turkey will preside over one of the largest gas reservoirs in the region.

 

A few years ago, Turkey began working to build an import terminal with an annual capacity of 5 to 6 billion cubic meters of gas. Cooperation between Turkey and Qatar is increasing due to agreements between Ankara and Doha on certain political crises in the region.

 

Within the scope of Kuzey Marmara Natural Gas Storage Expansion Project, there are plans to increase total storage capacity to 4,6 bcm and withdrawal capacity to 75 mcm/day. Furthermore, the TuzGölü (Salt Lake) Natural Gas Underground Storage Project in Central Turkey, whose first phase has since been completed, is planned to reach 5.4 bcm working gas capacity and 80 mcm/day withdrawal capacity by 2023.

 

The first Floating Storage and Regasification Unit (FSRU) of Turkey has been launched by the national private sector in Aliağa/İzmir to achieve supply security and diversification of gas sources. In Hatay/Dortyol, the second FSRU of Turkey has been opened. Moreover, studies on the connection of FSRU to the natural gas transmission system in Saros Gulfs are continuing by BOTAS. As Berat Albayrak, Turkey’s former Energy Minister stated: “In addition, this time we pressed the button for BOTAS ‘second floating LNG project with a daily capacity of 20 million cubic meters. With the new investments, the LNG capacity to be supplied to the system will rise to 107 million cubic meters per day. This means an increase of more than 3 times (in LNG capacity) after two years of investment. With just the steps we took in 2016, we increased the LNG capacity by 90 percent to 34 million cubic meters to 64 million cubic meters. ”

 

Turkey’s former Minister of Energy and Natural Resources claims that 78 cities have already been connected to natural gas supplies. Albayrak emphasized that installed power in the next 10 years should increase by 50 thousand megawatts: by 2018 Turkey will have constructed 17 natural gas and LNG facilities and 21 new natural gas reserve facilities. The US plans to play a more active role in Asia over the medium term by investing in related projects in 2018 and 2024.

 

The United States currently has an active terminal for liquid gas exports. There are also 6 terminals under construction and 30 terminal construction projects for liquid gas exports. At the same time, the capacity of these six terminals under construction in the United States is projected at 57.55 million tons.

 

The US can use its LNG to undercut Russian LNG and increase its share in the regional and global market. Turkey’s market is one that US LNG can contribute to and help Turley’s energy security at the sime time by reducing dependency on Russia and Iranian natural gas. LNG from the US needs to be more competitive in regional markets in general, and especially in Turkey. Turkey must attract more foreign financial resources and foreign technology and use domestic firm’s technology to invest in the required infrastructure. Similarly, such a development would provide an opportunity for Turkey to move forward in its aim to become a regional natural gas market, benefiting from its increased investment and technological capacities

 

source: https://uwidata.com/434-lng-and-turkeys-energy-security/

Read More