End Of Iran Sanctions Begets Natural Gas Glut

Natural Gas Glut Begins with End of Iran Sanctions

In April, I told readers about how the removal of economic sanctions on Iran would unleash a flood of oil onto an already oversupplied market.

Well, an even greater glut may be on tap for natural gas.

A removal of sanctions by the United States, the United Nations, and the European Union will likely stimulate the production of Iran’s massive gas reserves.

According to the BP Statistical Review of World Energy 2015, Iran’s proven gas reserves are an estimated 34 trillion cubic meters. That’s more than any other country in the world.

Accelerating Gas Production

Deputy Oil Minister Hamid Reza Araghi told Bloomberg that Iran plans to raise gas production to 1.2 billion cubic meters per day within five years. The country’s current output is 800 million cubic meters per day.

Iran also plans to become a major exporter of natural gas. Araghi said that within four years exports should grow seven-fold, to 200 million cubic meters per day.

And as I’ve detailed for readers, Iran already has a plan in the works to ship gas to Pakistan via the “Peace Pipeline,” a portion of which will be built by China.

So how will Iran accomplish its goals?

For starters, it plans to entice foreign energy companies to invest into the South Pars offshore gas field. This Persian Gulf field is connected to Qatar’s North Dome field; the combined reserves make it the world’s biggest gas field.

Iran’s portion alone holds an estimated 14 trillion cubic meters of natural gas, equal to 8% of the world’s total reserves. It also contains about 17 billion barrels of condensate. And production from South Pars is on track to reach 7 trillion cubic feet per day by early 2016.

Iran’s Financing Plans

Iran is looking for $100 billion in investment to modernize its gas industry.

Part of that will be financed by Iran’s eventual return to the global sovereign bond market. It’s taking its tentative first step this year by issuing $1.7-billion worth of bonds domestically.

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