News ID: 2094
Published: 0818 GMT September 24, 2014

EU plans for Iran gas imports

EU plans for Iran gas imports

The European Union is quietly increasing the urgency of a plan to import natural gas from Iran, as relations with Tehran thaw while those with top gas supplier Russia grow chillier.

Two "ifs" – the removal of sanctions on Iran and the addition of some pipeline infrastructure – are not preventing EU planners preparing, a European Commission source involved in developing EU energy strategy told Reuters.

"Iran is far toward the top of our priorities for midterm measures that will help reduce our reliance on Russian gas supplies," the source said. "Iran's gas could come to Europe quite easily and politically there is a clear rapprochement between Tehran and the West."

Russia is currently Europe's biggest supplier of natural gas, meeting a third of its demand worth $80 billion a year. The EU has imposed sanctions on Moscow over the conflict in Ukraine, increasing the need for gas from elsewhere.

Iran has the world's second-largest gas reserves after Russia and is a potential alternative given talks between Tehran and the West to reach a deal over the Ian’s nuclear program.

"High potential for gas production, domestic energy sector reforms that are underway, and ongoing normalization of its relationship with the West make Iran a credible alternative to Russia," said a paper prepared for the EU's Directorate-Generale for External Policies following Russia's annexation of Ukraine.

However, the paper added that Iran was not a credible alternative energy supplier in the short-term due to sanctions and large infrastructure needs before exports become viable.

Internal EU energy security documents seen by Reuters also describe plans to tap new non-European gas import sources in central Asia, including Iran.

 

Iranian President Hassan Rouhani said on Wednesday the Islamic Republic can be a reliable supplier of energy for Europe, adding that Tehran is ready to transfer gas to the European countries via Austria.

The Iranian president made the remarks in a Tuesday meeting with his Austrian counterpart Heinz Fischer in New York on the sidelines of the 69th UN General Assembly meeting.

Tehran's assertions over reliable supply are likely to ring alarm bells at Russia's giant Gazprom, after interruptions to its exports via Ukraine in previous disputes scared Europe.

Analysts say Iran has already lost out on lucrative liquefied natural gas (LNG) exports in Asia, where customers pay the highest prices, to Persian Gulf rival Qatar, so Tehran has to look to Europe.

"Iran's interest to deliver gas to Europe is very big. Parts of Iran's economical and political elite as well as Western companies are preparing for an end of the sanctions," said Frank Umbach, energy research director at King's College in London.

The most feasible route for Iranian gas to Europe would be via Turkey, already a customer, although the existing Tabriz-Ankara pipeline would not be big enough for major exports.

Iran has long lobbied to build a designated pipeline that would connect its huge South Pars gas field with European customers – the Persian Pipeline.

Investors in Europe, as well as the European Commission, favor the cheaper, and politically less controversial, option of importing Iranian gas to the EU via Turkey through extended pipelines that already exist or are currently being developed.

Energy majors Total of France and Italy's Eni have in the past expressed interest in developing South Pars with total reserves estimated around 50 trillion cubic meters (tcm), enough to meet European demand for over 100 years.

Independent feasibility studies show that, if sanctions were to be eased and investments started soon, Iran could supply 10-20 billion cubic meters (bcm) of gas a year to Turkey and Europe by the early 2020s.

 

 

   
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