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12/28/11

Iran: newly-discovered gas field in the Caspian Sea

By Bahman Aghai Diba

Iran has the second biggest gas reserves in the world but it is not a major gas exporter.


The Caspian Sea is the largest enclosed body of water on Earth by area, variously classed as the world's largest lake or a full-fledged sea. The sea has a surface area of 371,000 km2 and a volume of 78,200 km3. It is in an endorheic basin (it has no outflows) and is bounded to the north by Russia, to the south by Iran, western Azerbaijan, and eastern Kazakhstan and Turkmenistan.

Iranian officials have declared that huge new reserves of gas have been discovered in the “Iranian sector” of the Caspian Sea (1). Iran has announced that the newly-found Caspian gas field has at least 50 trillion cubic feet (some 1.4 trillion cubic meters) of gas. (2) While it is not clear who owns what in the Caspian Sea, due to the conflict of the littoral states about the criteria for delimitation of the waters and sea-bed of the Caspian Sea, and while the other four Caspian sea littoral states consider the share of Iran from the seabed of the Caspian as less than 12 percent (Iran has claimed 20 percent so far, if not more), the legal status of the newly discovered sources is not clear.

In addition to that, Iran’s problem at the moment isn’t that they are not finding oil and gas reserves, especially in the deep parts of the Caspian Sea (the Iranian side of the Caspian Sea is deeper and the deepest point of it is almost 1000 meters). Iran’s problem is investment and technology. The sanctions imposed on Iran make getting these resources very difficult for Iran.

There are many places in Iran that a lower level of technology and investment can be effective for getting the oil and gas out and transferring them to markets. This is more important when we note that gas reserves, as compared to oil reserves, need a higher kind of technology for all upstream and downstream activities (pre and post-extraction activities) related to that, such as the pipelines and ships which should be built in a more sophisticated way. This technology is in fact currently in the monopoly of several countries, or better said, several companies.

The case of the South Pars gas field is very revealing. Iran’s most important single source of natural gas is the South Pars field in the Persian Gulf, which it holds in common with Qatar. What causes a major embarrassment for Iran here is that the tiny emirate across the Persian Gulf has been exploiting the gas from South Pars to the tune of billions of dollars; while Iranians helplessly witness the depletion of the reserves (Qatar enjoys the highest per capita income in the region). The natural slope of this joint field is towards the Qatari side and there is no mechanism to stop them from exploiting Iranian side. Qatar has succeeded in obtaining US and South Korean technology for liquid natural gas and this has created a great advantage for them. Even the Russians do not have this technology, and they are in desperate search of it.

The Islamic Revolutionary Guards (Sepah) wanted to take the South Pars project over, but after failing to find even a third-hand subcontractor to do the job, they gave up on South Pars (the general practice of the Iranian private and state-owned companies is to take projects and claim to be implementing them, but in fact, they give them to subcontractors out of the country and enjoying status of deal-makers).

The situation is not limited to the case of South Pars. According to many sources, Iran has more than 18 joint oil and gas major reserves with Saudi Arabia, Kuwait, Bahrain, UAE, Oman and Iraq on water and land borders. At the moment, Iraq and Saudi Arabia are making the utmost use of the joint fields, and only Iraq takes between two to eight million barrels of oil per day from the joint resources. (3)

While holding the second largest natural gas reserves in the world, Iran is not a major exporter of gas. The EU seeks to lower its dependence on Russian energy, and Iran could potentially benefit by joining projects like the Nabucco gas pipeline. However, Iran’s isolation and its poor relations with the international community impede progress in this regard. The so-called peace pipeline between Iran, Pakistan and India has not made any progress in spite of the enormous price reductions proposed by Iran.

Iranian politicians have claimed many times that Iran’s international isolation and economic sanctions-including those imposed by the UN Security Council-have not hurt the country seriously, and they insist on continuing the nuclear program at all costs. In reality, however, Iran’s oil and gas industry (the country’s main source of income) has suffered and will suffer further. The projected construction of oil and gas pipelines over the next 25 to 50 years all bypass Iranian territory and Iran will lose the transit fees, jobs, investment and prestige that accompany such projects.

The United States supports Nabucco as a means of avoiding Russian participation in the European gas-supply chain, and has backed the participation of Azerbaijan, Kazakhstan, and especially Turkmenistan in the project. The US and the EU are supporting the construction of a Trans-Caspian pipeline, a natural gas pipeline to run from either Kazakhstan, or more likely from Turkmenistan, along the seabed to Azerbaijan, where the gas would be pumped into pipelines leading to Nabucco.

In a nutshell, while Iran is suffering from international, multilateral and unilateral sanctions, the discovery of joint oil and gas fields only works to benefit the countries neighboring Iran that take advantage of Iran’s isolation in the international community. Without extensive investments (to the tune of hundreds of billions of dollars) and using the most advanced technologies of the world, Iran will not only lose the opportunity to exploit the newly-discovered reserves, but it will also fail to keep the present oil and gas fields at sustainable levels.

Notes:

  1. The Iranian officials have said that they have reached gas reserves in the depth of 2415 in the Caspian Sea. (http://www.khabaronline.ir/detail/189049) and http://www.khabaronline.ir/print/189233
  2. http://www.payvand.com/news/11/dec/1135.html
  3. http://www.fardanews.com/fa/news/174130

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