What’s emerged out of the late-February, 2017 Natural Gas Summit in Frankfurt, Germany is that Europe has extended solid support to Iran to allow that country to move forward with some of the largest natural gas and liquefied natural gas (LNG) projects in more than a decade.
While there are still long negotiations ahead, a thorough risk assessment of the proposed design and implementation stages must be done, the Europeans – especially the British and German governments — believe that Iran represents an impressive bottom-line potential for investors. To make this happen, the Iranians are talking with a group of international banking financiers in Paris who specialize in energy mega-deals – large project financing, derivative paper needed to bridge shortfalls, investing in parallel future commodity contracts, and the ownership structure of the project.
Not only do they want to support reform-minded President Hassan Rouhani to win decisively in an upcoming election, they want secure Iranian gas supplies to cut their reliance on Russia and Gazprom.
This despite their misgivings about the new heavy sanctions proposed by the U.S. Trump administration against Iran. Washington is musing about if it will apply secondary sanctions against any company or country involved in Iranian hydrocarbons. In response, Europe is considering if it should indemnify its companies from U.S. action.
Iranian estimates indicate the country could supply 35 billion cubic metres (bcm) of gas to Europe by 2030 and, more importantly, reduce reliance on Russian gas imports (currently at 158 bcm. The Iranian side of South Pars (the field it shares with Qatar) holds approximately 10 per cent of the worlds gas reserves and 60 per cent of Iran’s reserves. That translates into $4 billion (U.S.) per year (in today’s sales) for Iran.
Europe is also interested in accessing the 150 other hydrocarbon fields with 300 oil and gas reservoirs. In total, Iran holds the world’s second largest proven gas reserves (35 trillion cubic metres) and the fourth largest proven crude oil reserves (157.8 billion barrels of oil-in-place).
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