US, Russia Compete for EU Natural Gas Market

The global markets for natural gas and liquefied natural gas (LNG) are currently seeing an increase in the number of new producers. Natural gas’ geopolitical importance is also on the rise and it will increase its share of the energy basket of countries by 2040 as countries with natural gas resources seek to increase their share of the LNG market. The share of natural gas and volatile energy in the global energy market rises every day. In 2016, LNG’s contribution to the global gas market was 42 percent, and according to the International Energy Agency (IEA), will reach 53 percent in 2040.

Of countries that export LNG, Qatar has the largest export share. In 2017, of 264 million tons produced in the world, 77 million tons came from Qatar. Currently, countries such as Australia, Russia, the U.S. and Mozambique have made huge investments in to increase their market share. In the shadow of the shale gas revolution and technology and innovation, the U.S. has quickly become one of the largest manufacturers of LNG, which will soon play an important role in the security of energy in the European Union and East Asian countries.

Trump’s decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) has not taken place without considering the opportunity to export more energy resources. The United States uses energy exports, especially LNG, to expand its relations with its neighbors and allies everywhere. The energy security of the European Union and its strong dependence on Russian gas have led the United States to take a special look at the European Union energy market, and with the increase in LNG exports and the accelerated construction of the Southern Corridor, gas will require the EU to depend on Russia. Looking at the state of import of Iranian oil and gas condensate from Iran, the U.S. LNG role could be furthered in a boycott of Iran.

The geopolitical dimensions

Energy geopolitics is changing. The shale gas revolution and innovative high technology has enabled the U.S. to become a giant energy exporter. Energy exports play an import role in U.S. foreign policy, and the U.S. is using energy exports to expand relationships with allies. This important step was due to improving its infrastructure, including the development of gas pipelines and LNG facilities for export.

Russia is not interested in losing the EU market and is trying to keep its share in the EU market by diversifying transit pipelines and LNG projects such as Turk Stream and North Stream II. Gazprom also has several pipelines currently in operation or under construction with European energy companies. Gazprom is also preparing a Turk Stream pipeline to transfer Russian gas through the Black Sea to Turkey and southeastern Europe. The U.S. has many times officially declared that it is against North Stream II; this project has been heavily criticized in Europe and the United States, and the German “Trump,” Russia’s largest captive foreign gas buyer, has been “captured” by Russia.

According to Dan Brouillette, the deputy secretary of the U.S. Department of Energy, North Stream II will increase the dependence of Germany and Europe on Russian gas, but recently Germany has decided to help finance the final installations for importing liquefied natural gas that will reduce this dependence.

In October 2018, the largest volume of gas went to Europe, about 24 percent of total [U.S.] LNG: 0.6 billion cubic meters. By 2017, only 10 percent of LNG gas was exported to the European Union. The European Union Energy Commission expects U.S. exports and facilities for LNG terminals to double throughout Europe by 2022. “The fact is that American LNGs can play a more competitive role in supplying gas, increasing the diversity and security of energy in the future,” said the European Union on LNG trade between the United States and Europe in late November.

 

Qatar’s Plan

Early in January, Qatar’s energy minister told Reuters last year, Qatar’s petroleum company plans to invest at least $20 billion in the United States over the next few years and is expected to make its final decision on the LNG terminal concerning the Golden Pass of Texas soon. Qatar is also planning to invest in Germany and export LNG to Germany. According to Qatari officials, it will invest €10 billion in the German economy, which could be the continuation of successful Qatari investments in Germany.

Washington has been encouraging European countries to diversify Russian-dominated energy supplies, with Qatar and the U.S. as possible alternative suppliers. It is in the U.S.’ interest to allow Qatar to export to specific markets. Doha’s supplies play a key role in Washington’s strategy of providing balance in the market.

At present, Qatari gas is a lot more competitive in Europe than U.S. gas. U.S. officials are aware that U.S. LNG is not competitive with Qatar LNG in EU market but what is important for the U.S. is to decrease the dependency of the EU on Russian natural gas and Gazprom’s monopoly in the EU market.

Increasing LNG supplies is the best way to reduce Europe’s dependency on Russian natural gas. Qatar is a major LNG provider and is trying to increase its share in the market. Russia is trying to keep its monopoly in Europe – in energy – and has used different pricing strategies to do this. Russia has sold a stake of its shares in Rosneft to Qatar, as Doha battles a blockade from a Saudi-led coalition. Russia is using a different pricing system in the EU market and has multiplied pipelines and LNG projects to increase and keep its share in EU natural gas market. It is expected that the EU natural gas market will bring a new competition era for the U.S. and Russia. In the short term and midterm, Russia will keep its share in the EU natural gas market, but if in the long term U.S. LNG can compete with Russia gas and Qatar LNG, it would be in favor of the EU as a consumer, and major LNG producers are trying to propose suitable prices to keep or maybe increase their share in the EU market.
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The Consequences Of U.S. Sanctions For Iran’s Oil Industry

Iran’s energy sector has often been the target of US-led sanctions, particularly in response to the perceived risk of a nuclear weapons program. However, after a brief thaw in relations and the lifting of certain restrictions, the United States imposed a new set of measures against Iran’s oil export industry in November 2018.

In October 2016, the peak of its crude oil exports, Iran was selling 2.44 million barrels a day. In 2017, Iran exports fell to 2.1 million barrels per day, earning revenues of around $40.4 billion. By September 2018, that number had dropped to 1.7 million barrels per day. U.S. policy makers are determined to drive Iran’s oil exports to zero and run Iran’s finances to the ground. Iran, meanwhile, needs to prevent its oil exports from falling below a million barrels per day. At the same time, it is hoping that the lack of supply in the market will increase prices as much as possible to allow for a natural balancing out.

A decrease in energy exports will certainly hurt Iran’s economy, and the government will likely struggle to mitigate the effects on ordinary life. Meanwhile, the United States will increase its own share of the global energy market, boosting its exports of liquefied natural gas to countries such as India and Turkey who would otherwise rely on Iran’s vast and near-by supply.

To continue exporting even at its diminished rate, Iran needs to attract capital and technology. Officials at the Ministry of Petroleum have frankly admitted that they need large amounts of capital to develop and maintain oil and gas fields or else Iran will fall well short of the goals of its sixth development plan. Iran hopes to reduce the national budget’s dependence on oil and gain a capacity of at least 4.7 million barrels, with 1.3 billion cubic meters of natural gas and gas condensate reaching 1.1 million barrels a day.

Iran requires around $100 billion in foreign investment for its oil, gas, and petrochemical sector. Most of Iran’s oil wells are in the second half of their lives, with eight percent of oil production dropping automatically each year. The country needs technology and capital from foreign countries in order to maintain, let alone increase, its oil efficiency. Once new sanctions are in place that target companies interested in investing in Iran, there will be even fewer possibilities for foreign investment. Furthermore, the ban on dollar deals with Iran raises the fear among financial institutions that they will feel the wrath of the Treasury Department.

Most technology-rich countries are interested in the investment opportunities the Iranian energy sector affords, from expanding oil wells to developing oil and gas technologies and petrochemical products. If geopolitics were not an issue, Iran would have many ready buyers for its energy. But Iran currently accounts for less than one percent of world trade in gas, despite its massive reserves.

However, every effort to revive the production capacity of oilfields requires high technology and foreign investment. Iran has signed a deal with the Russian company Zarubezhneft for the redevelopment of the Aban fields. It has also planned to sign contracts with Pertamina, an Indonesian state-run oil company, to operate the Mansouri oil field.

U.S. waivers to eight major Iranian oil importers provide the country with an opportunity to keep its share of the regional oil market for a limited time. However, it is inevitable that most of these countries will reduce oil imports from Iran in the first months of 2019, as all major Iranian oil buyers are looking to find alternatives for their supplies. U.S. sanctions present a steep risk to foreign firms otherwise looking to invest in Iran for they might be deprived of the technical cooperation of American companies and the financial resources of U.S. agencies and the U.S. government.

The U.S. withdrawal from the nuclear accord will undoubtedly hold the Iranian energy industry back from achieving its goals in terms of foreign investment and technology. After the re-imposition of sanctions, only Russian companies seem ready to continue work. Last year, the contract for the development of Aban and Persia Fields was signed with Zarubezhneft, but the Russian company has reportedly walked away from the deal. As recently as last month, meanwhile, Lukoil discussed further investment.

Russian companies are also investing in fields that—critically—provide no threat to Russia’s own energy goals. However, once Russian and Chinese companies begin playing an active role in oil and gas activities in Iran, questions regarding the nature and duration of contracts, and the technology used, will come to the fore—provided that these companies, too, succeed in withstanding U.S. diplomatic pressure.

 

https://lobelog.com

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US Wants Europe to Use Qatar Gas Instead of Russian Supplies

The US wants European countries to find other gas suppliers to Russia, with resource-rich Qatar as a possible alternative.

Deputy US Energy Secretary Dan Brouillette told Reuters that Washington was in talks with Doha to supply gas to Europe, and particularly countries that are reliant on Russian gas.

Russian gas accounts for around 60 percent of Berlin’s gas imports, with the Nord Stream 2 pipeline set to double Moscow’s export capacity to Germany.
US President Donald Trump has warned Germany that it would be “captive” to Russia if it relied on it as a gas supplier and urged Berlin to halt work on the Nord Stream 2 pipeline.

The move could see German companies face US sanctions.

Brouillette said he has held talks Qatar’s Minister of State for Energy Affairs Saad al-Kaabi about whether Doha could be an alternative gas supplies to Europe.

“We are talking to Minister Kaabi here about other markets, specifically Europe, to the extent that we can talk to the Qataris about supplying European markets with natural gas,” he said in an interview.
“They are very much interested in that and so are we – it’s very connected to deliberations with others we have around Nord Stream 2.”

He added that Qatar could help diversify the gas market in Europe, particularly with Doha’s investments in LNG export facilities.

“It is good for the national security of Europe. Cheap gas comes at a high price of freedom,” said Brouillette.

Last September, Qatar said it would invest $11.6 billion in Germany over the next five years including in a LNG terminal.

Omid Shokri Kalehsar, a Washington-based senior energy security analyst, told The New Arab that Washington has been encouraging European countries to diversify Russian-dominated energy supplies, with Qatar and the US as possible alternative suppliers.

“It is in the US’ interest allow Qatar to export to specific markets,” said Kalehsar, saying Doha’s supplies play a key role in Washington’s strategy of providing balance in the market.

“Increasing LNG supplies is the best way to reduce [Europe’s] dependency on Russian natural gas…. Qatar is a major LNG provider and is trying to increase its share in the market. Russia is trying to keep its monopoly in Europe – with energy – and has used different pricing strategies to do this.”

Russia has sold a stake of its shares in Rosneft to Qatar, as Doha battles a blockade from a Saudi-led coalition.
Turkey is also boosting its relationship with Russia with the construction of the TurkStream pipelines.

https://www.alaraby.co.uk

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Qatar’s Withdrawal from OPEC not a Good Sign

 

As Qatar’s withdrawal from OPEC takes effect today, the geopolitics of energy is changing. Each major energy producer is trying to take more shares in the world energy market. Political tensions between major oil and gas producers would affect regional and world energy markets. As the world’s largest exporter of LNG, Qatar gets the most revenue from it.

U.S. sanctions against Iran give an opportunity to Saudi Arabia which can use its producing capacity to produce and export more oil in the region in an attempt to weaken Iran’s position in OPEC.

A high oil price is not good for major oil consumers. The world oil market has been worrying about U.S.’sanctions against Iran.Regional tensions are one of the factors affecting members of the international organization. The tensions between Qatar and Saudi Arabia, which began in June 2017, would prevent Qatar from withdrawing from Saudi Arabia’s shadow even in an organization like OPEC. Qatar with production of 0.6 million bpd is not a major actor among OPEC members.

 

After a sharp rise in the price of crude oil to more than 100 U.S. dollars between 2011 and 2012, the price of crude oil gradually shrank in 2016 and reached a low of less than 40 dollars. The organization was unable to find a solution for the crisis, which had a huge impact on its member states.

Oil producers were able to cut crude prices to 70 dollars a barrel in mid-2018 with a drop in supply. But once again the policy of the largest oil producer Saudi Arabia, along with the White House’s political and economic measures and the gap in the queue of supporters for a reduction in production, led to a sharp drop in crude oil to about 50 dollars.

In a situation where the future of oil demand is not clear in the long run, the market management method and the call for Russia to counterbalance the U.S. are also challenges to OPEC.

South Pars Gas field (North Dome) shared by Iran and Qatar is a major source of Qatar LNG production. It is the largest gas field in the world. Qatar has made it clear that by 2024 it would have used South Pars to produce 110 million tons per year.

At present, Qatar produces 77 million tons per year. Qatar’s withdrawal from OPEC is a good opportunity to increase its production from this shared filed, Iran is unable to attract more foreign technology and financial investment and Qatar’s oil production in South Pars is more than that of Iran.

According to Reuters in November, Australia grabbed the world’s biggest LNG exporter crown from Qatar in November. According to statistics, Australia produced 6.8 million tons of LNG in November, out of which 0.6 million tons were exported from Qatar.

Australia’s LNG exports rose by 19 percent in November compared to October while Qatar’s exports dropped 3 percent in November compared to the previous month, the country’s fourth consecutive decline for the year in exports.

It is not the first time that an OPEC member has withdrawn from the organization. The main point is that OPEC’s decisions are not followed by major oil suppliers and Qatar’s withdrawal is certainly not good for OPEC. As Qatar is not a major oil producer among OPEC members, it cannot cause any major changes in the oil price.

The major factor in the oil market is demand and supply. At present, the oil market is faced with oversupply which leads to a low oil price. Qatar’s withdrawal from OPEC is not a good sign for its future. If OPEC is interested in playing an important role in the world oil market, it needs cooperation and coherence among all members.

If major members continue to be inefficient in OPEC decision-making, there will not be a promising future for the organization. OPEC’s weak position favors major energy consumers. Obviously, OPEC does not have the same influence on oil prices as it used to be. Its strength has slowly weakened due to the growth of producers such as the United States and Russia.

 

https://news.cgtn.com

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Iran to Export 1mn bdp of Oil Despite US Sanctions

Qatar will withdraw from the Organization of the Petroleum Exporting Countries (OPEC), the Persian Gulf nation’s Energy Minister Saad Sherida al-Kaabi announced.

The decision to quit the bloc of 15 oil-producing countries that account for a significant percentage of the world’s oil production was confirmed by Qatar Petroleum, the state oil company, last Monday.

Following is an interview with Omid Shokri Kalehsar is a Istanbul based Senior Energy Security and Policy Analyst on the issue:

What are the reasons behind Qatar’s decision to withdraw from OPEC? Is it politically and economically right decision?

It seems that Qatar is interested to be more active in LNG market and keeps its place as world’s first LNG producer and exporter. But it is possible for Qatar to export more oil if Qatar withdraw from OPEC. It should be noted that there is a major challenge between Qatar and Saudi Arabia as OPEC major producers and actor. It is possible for Iran’s private sector to buy Iran crude oil from Energy Exchange and sell it to Qatar energy firms and Qatar firms after Qatar withdrawal from OPEC sell it oil to regional and world market.
Is there any relation between Qatar’s decision and the Saudi policy in the organization?

Some analysts believe that Qatar decision to withdraw from OPEC is reaction to Saudi Policy in OPEC. Qatar is against Saudi Policy in the OPEC, Saudi Arabia after Khashoggi was under pressure.  It should be noted that Qatar-Saudi relations faced major challenge after a Saudi-led coalition imposed blockade Qatar.
Any relation between Trump’s anti-OPEC policies and Doha decision?

 Stability in world oil and low price in oil market is in favor of oil consumers and US. US is against any

country or organization which decided to increase oil production or increase oil price. Trump administration can be expected to continue its policy toward OPEC and will ask OPEC member states to produce more oil to keep oil price down.

How do you see the future of the 60 years old organization?

Major OPEC oil producers must solve problems if they want OPEC to be one of the key factor in world oil market. Every country which has more production has a power in OPEC.
Cooperation and coordination between major oil producers and non-major oil producers is required. If OPEC members need to continue their role in world oil market, they require cooperation between themselves. Without cooperation and mutual understanding between all OPEC members, there is no clear future for OPEC and this organization may face serious challenges in the future.

At the present moment which Iran is under US and its regional allies’ pressure such as Saudi Arabia and UAE to cut Iran’s oil export to zero, will Doha withdrawal from OPEC affect the US goals toward Iran?

As I mentioned before in my interviews and papers it is not easy to drop Iran oil export to zero. Iran during sanction era will be able to export average 1000000 bpd and 300000 bpd condensate bpd.  Iran oil export’s drop is in favor of rest major oil exporters and all major exporters are satisfied with new sanctions imposed against Iran oil exports.

How will be possible reaction of Russia and China to Qatar’s withdraw? Will this decision affect China’s One road-One belt project? 

Russia has a plan to be a key player in LNG market. Russia is careful about all major oil and gas producers, Russia wants them to lose their share in world energy market and plans to increase its own share. China as energy costumer has its own strategy toward energy producer countries in the Middle East such as Qatar. China in promotion of its “Going out Strategy” encourages energy companies to invest in Qatar’s energy sector mainly in natural gas fields. Chinese officials have repeatedly stated that China’s common goal from One road One Belt project is to create dialogue, help to bring peace and stability in the Middle East, link East and West Asia and joint development, eliminate obstacles and biases. Arab Countries and Qatar has special position in this project. According to Wang Yi, Foreign Minister of China, Arab countries cooperation in One Road One Belt will bring Peace in the Middle East. China is interested to keep stability in the region to import oil and gas freely from the region. energy security is key factor in China foreign policy. Last September PetroChina inked its biggest Qatar LNG deal as U.S. Trade at Risk and it seems that China will increase its investment in Qatar energy sector to promote Qatari cooperation in One Road One Belt project.

Omid Shokri Kalehsar is a Senior Energy Security and Policy Analyst, Istanbul.

https://en.mehrnews.com

Interview by payman Yazdani

News Code 140293
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The Effects Of U.S. Sanctions On Iran’s Natural Gas Projects

Iran holds the second largest natural gas reserves in the world. Despite this advantage, the country controls less than one percent of the world’s natural gas market. Nevertheless, Iran is the third largest gas producer and, over the past few years, has focused on increasing its share of the global gas market. By the end of 2017, according to the National Iranian Gas Company, Iran was producing 800 million cubic meters per day. Iran’s short-term intention is to increase the volume of gas available for export by 365 million cubic meters per day by 2021.

Exporting natural gas takes a back seat in terms of priorities to more immediate economic considerations like boosting investment into oil fields, satisfying domestic consumption, and expanding gas-based industries. Iran has 50 independent gas fields, of which currently only 23 are developed and producing. Iran’s largest gas field at South Pars, with reserves of 14 trillion cubic meters, accounts for around 40 percent of the country’s gas reserves. In 2017, Iran produced 130 billion cubic meters of natural gas from this field. Iran plans to complete Phase 11 in the next two years so that it can produce about 180 billion cubic meters of natural gas annually. But based on estimates from the Ministry of Oil, South Pars will experience a significant drop in pressure, known as the “dew point,” probably around 2023.

In 2015, after the signing of the nuclear agreement, Iranian officials repeated calls for an injection of around $100 billion in foreign investment into the country’s oil, gas, and petrochemical sector. Most of Iran’s oil wells have entered the second half of their lives. With 8 percent of oil production dropping automatically year on year, Iran desperately needs technology and capital from foreign countries just to stabilize its oil production. The U.S. ban on companies engaging in dollar deals with Iran, however, means that large financial institutions risk heavy fines from the Treasury Department, thus hampering any progress in Iran’s ability to gain such investments through formal and legal restrictions.

Iran signed major agreements with foreign companies in the natural gas sector, including contracts for the development of the 11th phase of the South Pars field with both French and Chinese partners designed to increase the production capacity of the field by 56 million cubic meters per day. After the U.S. withdrawal from the nuclear deal, however, the French company Total abandoned the contract, and China National Petroleum Corporation officials stated that only they would remain in Iran’s natural gas sector. However, Chinese companies do not have a good record in Iran’s oil industry. For instance, several Chinese companies have delayed work in the Azadegan Fields for no good reason. Also, Chinese firms with interests in the United States or in U.S.-funded projects may be reluctant to invest in Iran.

According to Mohammad Hassan Adeli, former secretary general of the Gas Exporting Countries Forum, sanctions are one of the main reasons for Iran’s failure in its gas export policy. However, other factors include the long process of achieving consensus on big decisions in Iran and a prevailing opinion among Iranian policy makers that gas should only be consumed domestically or turned into petrochemical products.

Iran has plans to increase its export of natural gas to other countries. For instance, Iran and Pakistan began work on a pipeline in March 2013 that would send 1.5 million cubic meters per day natural gas to Pakistan. However, US sanctions against Iran may force Pakistan to seek a less controversial alternative. Iran is also eyeing the European market. But gas exports to Europe face two major problems. Firstly, traditionally, Russia has dominated this market and Iran cannot hope to play as large a role as Russia in supplying gas to Europe. Second, in order to export Iranian gas via pipeline to Europe, Iran must secure transit through several intermediary countries.

Given recent developments in the energy market—not to mention the sanctions imposed by the Trump government—attracting foreign capital and technology to the Iranian energy industry, especially the natural gas industry, carries none of the optimism of previous years.

Foreign private companies have enough financial resources to make a splash in the Iranian market. But attracting foreign investment requires a suitable legal framework and an efficient and fast decision process, as well as political stability. In addition, Iran needs to revise its foreign policy and solve its issues with neighbors as well as the West. With neither foreign technology nor capital, Iran will not be able to produce more oil and gas to export to neighbors, let alone export to the EU.

At present, major natural gas producers such as Russia and the United States have made huge investments in their own natural gas sectors. If these major natural gas producers control the regional and world gas markets, Iran is likely to struggle to find importers. Boosting Iran’s share of the market from one percent to 10 percent, as the government would like to do, is possible only with foreign investment, which requires a reduction of political risk in the country and an effort to eliminate tension with neighboring countries.

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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/

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Tanker Insurance Cancellations threaten Iranian energy sector

The US’ withdrawal from the JCPOA and declaration of a new set of sanctions has been hard to swallow for those planning Iran’s energy sector, as they had been relying on the deal as a means of revivifying Iran’s oil and gas production capacity. These new sanctions are set to be implemented against Iran’s oil and gas sector on November 4. This is likely to have ahuge impact on Iran’s coffers, with insurers reportedly already halting coverage for shipments.

Following the announcement of a resumption of sanctions against Iran, owners of oil tankers were some of the first to start refusing trade with the country. When the previous round of sanctions against Iran was first established, tanker insurance was considered one of the main barriers to Iranian oil exports, as, given that most ship-owners carrying Iranian oil were not able to secure insurance, a number of Asian trading partners were forced to concede to government-sponsored security coverings.

When sanctions were imposed in 2012, the European Union prevented the International Group Corporation in London from providing any cover for Iran-bound cargo, which led to the de facto deployment of Iran’s tanker fleet, as foreign ships seeking to carry Iranian oil would henceforth be excluded from operating in the mainstream oil tanker market. This time, however, it remains unclear as to whether the EU will back US-led sanctions with such gusto.

Iranian companies have announced that they will continue to insure oil tankers, although this is somewhat difficult to do without connecting the Iranian banking system to international banks.

An Iranian supertanker called Happiness, which docked at a terminal operated by Iran’s national oil company on Kharg Island, for instance, currently has on board 2m barrels of oil. It was set to head for Asian markets at the beginning of September, although with Iran’s return to pariah status, its fate is now unclear. Iran’s own insurance companies are not recognized in international insurance circles. Additionally, these companies are facing their own domestic problems due to a lack of credit among financial and credit institutions in the country.

As one of Iran’s biggest export markets, firms and refineries in India in particularare very concerned about the insurance for tankers going between the two countries. Some refineries have already cut back on purchases of oil from Iran. Reuters reports that two major Indian refineries, Indian Petroleum and Bharat Petroleum, will reduce their purchases from Iran due to insurance concerns specifically. In response, Iran is planning to insure tankers transiting oil to India and to give special discount to Indian buyers.

Iran will not want to lose its share of the Indian energy market. According to Business India Online, The Indian government has allowed two Iranian insurance companies to pay a one-billion-dollar insurance coverage for Iranian oil tankers. This effort from New Delhi may have China, as the other largest consumer of Iranian oil, in mind. Custom from these major importers, however, are unlikely to mitigate the effects of US sanctions sufficiently by November if Iran is cut off from the global oil market.

EU buyers are also concerned about Tanker insurance. Coverage for the vast majority of ship leasing contracts is provided by IG Insurance Services Inc., if damage occurs, all actors in the tanker supply chain are aware that the group presides over billions of dollars in order to compensate. Even if both public and private insurance companies accept the risk of providing insurance for Iranian oil tankers, since no Iranian insurance company is a member of the International Syndicate of Oil Insurance, Iran’s insurance policy is essentially uncertifiable.

If Iran green lights such shipments regardless, it would be possible for Iranian tankers to be detained in international waters, leading to very severe legal consequences for Iran. The fact that both China and India have asked Iran to bear the cost of transporting and insuring their oil products shows that these Iranian oil customers want to put all liabilities on Iran as the seller.

To sum up, the hope of being able to by-pass tanker insurance with Iranian insurance is an overly optimistic move and may lead to an even greater conundrum of problems for Iran.

 

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Iran’s joint oil fields could resolve regional tensions

It is common for oil and gas fields to be joint-owned by two or more countries, which often presents various challenges. There is a particular fervour over the need to focus on extracting from such fields, with international energy companies often invited to vie for generous extraction contracts.Iran shares 26 oil and gas fields with its neighbours yet, due to a lack of technological and financial investment over the past years, Iran has been unable to extract a competitive amount of oil from such fields. This has led to their exploitation by Iran’s neighbours. Studies show that around 20 per cent of Iran’s recognised oil reserves and 30 per cent of its natural gas reserves are in joint fields.

 

So far, Iran has only been able to procure from ten of these 26 fields. Despite an increase in productivity in these fields – most notably in the South Pars, in the Persian Gulf – the Rouhani Administration has failed to acquire the capital and foreign technology needed to compete with, let alone acquire an edge over, neighbours in terms of procurements.

 

The majority of Iran’s joint oil fields are located on the Iraqi border – Iran shares at least five oil fields with Iraq. Iraq, for its part, has a seven-year plan to increase oil production capacity and reach 1.2 million barrels per day (bpd). Its focus has been on those fields it shares with Iran and, in 2010, the Iraqi government invited Iran to invest in joint fields with the aim of increasing production and developing an equal production capacity.

 

However, Iran was unable to invest more in these joint fields due to a lack of financial resources. During the period in which heavy sanctions were placed on the Iranian energy sector, Iraq produced 295,000 bpd from joint fields with Iran, yet Iran was able to produce a mere 130,000 bpd in the same period. Iraq also managed to sign agreements with major international oil companies to increase its share from joint fields with Iran. Iraq revised oil contracts and added new conditions in order to attract oil companies, offering increased benefits in return for technological know-how and investment. Iraq’s new contracts are more attractive for oil companies, while the fields themselves are geologically favourable for procurement. Iraq has a program to increase oil production from joint areas shared with Iran.

Iran has no production capacity in its fields in the Caspian Sea, where it has two oil fields shared with Azerbaijan and Turkmenistan. Both countries plan to increase production from these fields and Iran will be not able to attract the foreign technology and capital needed to benefit due to US sanctions.

Qatar has also become a major exporter of liquefied natural gas, with a lot of investment in foreign technology and gas production focused on the South Pars. Given that the South Pars field has been Iran’s top priority, over the past five years Iran has at least succeeded in increasing procurement through investment here. In March 2017, Iran drew a competitive 250,000 bpd from the South Pars, with Qatar drawing 300,000 bpd over the same period.

Iran and Saudi Arabia share four oil and gas fields. By 2017, Iran’s oil production from the Forouzan oil field – also in the Persian Gulf – numbered between 38,000 to 40,000 bpd, while the Saudi side has far outstripped its rival with a production capacity of 400,000 bpd from this field. Similar imbalances are apparent in all shared fields in this area.

 

Joint oil and gas fields are important for all countries in the region, with all countries which share oil and gas fields with Iran gaining billions from their procurement. The US withdrawal from the JCPOA (Joint Comprehensive Plan of Action, more commonly known as the Iran nuclear deal) has motivated many regional rivals to accelerate their activities further. Since major foreign oil firms have abandoned Iran in response to the now-ineffective agreement, these firms have similarly sought activities elsewhere in the region. Unconfirmed reports so far state that around $6 billion worth of gas has thus been lost to competitors. Any delay in the development of joint fields will thus cause irreparable losses for the country. Experts warn that any delay in signing contracts for foreign investment will hinder the development of joint fields and will help the neighbouring states to plunder Iranian oil reserves.

 

Cooperation between Iran and neighbouring Arab countries in the development of plans for joint fields could provide the basis for increasing security and stability in the region. Moreover, foreign investments are important for Iran in recovering its oil and gas production capacities. Iran’s huge oil and gas reserves can play a key role in the world energy market yet, as expected, with the withdrawal of the United States from the nuclear agreement the Iranian energy industry faces yet more challenges in attracting foreign investment and technology. After the removal of sanctions, Iran plans to create conditions for attracting foreign investors by drafting new oil contracts. Iran has repeatedly stated that it needs $2 billion of foreign investment to revive its oil and gas production capacity.

 

Considering developments in the energy market and US sanctions, attracting foreign investment and technology to the Iranian energy industry will be tougher than ever. Achieving the goals of the country’s Sixth Development Plan and Twenty-Year Development Plan is possible only with foreign investment, which requires a reduction of political risk in the country. In the event of a reversal of fortunes in terms of foreign policy and the provision of other requirements for foreign companies, capital can be expected to pour in – particularly from Russian and Chinese companies.

 

A change of attitude in foreign policy and an attempt to eliminate tensions with neighbouring countries will be an important step towards attracting foreign investors. An increase in the oil and gas production capacities of the country is a short and mid-term priority for Iran’s Oil Ministry. Yet Iran must resolve political tension with its neighbours and also negotiate with the West to if these goals are to become workable.

Iran’s joint oil fields could resolve regional tensions

 

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The fate of Iran’s energy development plans under US pressure

Tehran, Iran, November 18

By Mehdi Sepahvand – Trend:

A recent expression of doubt by Patrick Pouyanné, the chief executive officer of France’s energy giant Total, whether to carry out cooperation with Iran has strengthened worries over the fate of Iran’s energy development projects.

 

Omid Shokri, a Washington-based energy analyst, told Trend November 18 that “Total or any other oil and gas company is interested to have good relations with US,” adding, it is possible for Total to withdraw from South Pars field.

 

Total’s chief executive officer last week said under political pressure, his company is liable to leave the $4.8 billion deal with Iran. “If we cannot do that for legal reasons, because of [a] change of [the] regime of sanctions, then we have to revisit it,” he said.

 

Total last week increased its US presence with the purchase of a portfolio of liquefied natural gas assets from Engie (ENGIY), including the company’s stake in the Cameron LNG project in Louisiana, one of the first new gas export terminals in North America.

 

Sealed a few months ago, the deal with Total over the development of South Pars gas field used to be vied by Iran as an icebreaker and itself a discouragement for new sanctions on Iran.

However, last month US President Donald Trump unveiled a tough and comprehensive new policy towards Iran. He accused Tehran of violating the 2015 nuclear accord (which had paved the way for removal of sanctions) and announced that he would no longer certify that the lifting of sanctions was in US interests.

 

Shokri believes that major to-be partners of Iran’s oil and gas companies are waiting for US Congress decision about Iran and nuclear agreement.

 

This is while Iran used to cherish the nuclear deal as a means to open way for the development of its oil and gas industries, which had been kept outdated by years-long sanctions.

Iran’s economy is heavily oil-dependent. In the early 2010s, sanctions efficiently stifled the country’s oil revenues as its exports dropped from 2.3 mbpd to 1 mbpd.

 

Iran’s oil, gas, and petrochemical infrastructure are not by far as efficient as they could. Many of the country’s oil fields are in the second half of their lives and need restoration or else they lose profitability.

https://en.trend.az/business/economy/2823946.html

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