Iran’s LNG projects, risks and rewards

Iran’s LNG projects, risks and rewards
08:07 6 Dekabr 2015
Ölkə mətbuatı
A- A+

Nov. 5

By Dalga Khatinoglu, Mehdi Sepahvand – Trend:

Alongside several mini-LNG plant projects, mainly meant to meet domestic need for gas in remote areas, Iran expects to bring five LNG projects online in the next three years, including a 10.5-million-metric-ton liquefaction facility which is 60 percent complete.

Iran’s gas exports are limited amid the soaring residential demand which has made the country the world's fourth biggest gas consumer after the US,Russia and China. This comes despite the fact that Iran has the world’s biggest gas reserves.

Although back in November Iranian Oil Minister Bijan Zangeneh warned that Iran might turn into a net importer of gas in the next few years if consumption is not controlled, the country has been using gas as a cost-effective replacement for much liquid fuel formerly spent in power plants, industrial units, or by cars, giving itself the chance to export the surplus liquid fuels.

What is obvious from international reports on the topic, is that by 2020, anew wave of surplus LNG will hit the market, further plunging the prices. Even at the time being there are countries which claim that LNG production is not financially justified for them. Not only that, but LNG prices are low and are expected to remain so for some time. Thus, Iran turning into an LNG gas exporter becomes a stretch. However, Iran’s mini-LNG factories meant to increase the domestic reach of gas in the country denote a wise policy in the face of current situation.

Energy demand outlook by region

European Union

At 0.5 percent p.a., it has been said, the increase in energy consumption across the EU27 over the next 25 years will be very low in comparison to other parts of the world (which said to be + 1.6 percent). Investment in the new energy efficiency measures as well as climate change commitments by the EU, will bring about a significant 34-percent improvement of energy efficiency in the EU27.

Energy scenarios which have been composed under a number of different objectives have one common message: fossil energy sources will continue to be the backbone of European energy supply over the next two and a half decades.

Asia

Asia is the prominent market for LNG. Japan is responsible for about 35 percent of the world's LNG market. Combined with South Korea, it accounts for some 50 percent of it, while Asia as a whole accounts for 75 percent. The gradual return of nuclear reactors in Japan will mean depleted demand for LNG, which has accounted for about 50 percent of its generation mix in the last few years.

LNG deliveries in 2014 were estimated to have stood at 243 million metric tons, effectively flat for the 3rd year running. New supply from Papua New Guinea was balanced by reduced performance from some existing production units.

Asian imports increased in 2014, but despite record imports for most Asian Japan and S.E. Asian markets the growth in China was weaker than expected, and S. Korea demand was lower year-on-year.

It has been said that despite the shrinking global LNG demand, LNG projects proposed to take a Final Investment Decision (FID) in the current and next year have not diminished number wise. This has led to the prediction that this will lead to an additional 100 mmtpa of LNG to flood the market by early to mid-2017, increasing the chances that by 2025, Asia will face some LNG oversupply.

Although import volumes into Asia grew – the competition for spot cargoes likely decreased, leading to a reduction in spot prices over the summer. Falling oil prices at the end of the year further pressured spot prices downwards. Long-term contracts, which are generally indexed to oil in Asia, but are lagged against oil movements, will see more of an impact in 2015,BG Group says in Global LNG Market Outlook 2014-15.

Given that Australia and the US are looking to challenge the supremacy ofQatar as the global leader of LNG exports, the latter is looking to raise its game. Qatar is adapting its contracts to become more competitive with its leading consumers – who are, not surprisingly: Japan, South Korea andIndia.

For Qatar, costs are low; production and liquefaction are said to stand at $2/MMBtu, compared to a number closer to $12/MMBtu for projects planned to be launched in Australia.

Americas, Australia

In 2014, demand in Latin America grew faster than supply - the difference has been more modest in comparison to recent years, however, weak demand brought the reduction of spot market prices, compared to the preceding year.

Calculating based on company statements, a FID on some 50 mmtpa of LNG from the US is perceivable within the one and a half years from now.

Nevertheless, the US is preparing to launch a new LNG plant - the Cheniere Energy Inc.’s Sabine Pass - for the first time in about half a century. The UShas turned into the world’s biggest oil and gas producer and is going to shift from an importer into a net exporter of LNG.

The worldwide oversupply is said to reach 31 million metric tons, tantamount to eight percent of capacity, by 2018.

Prices

LNG to northeast Asia, which has the highest LNG consumption rate in the world, plunged by 27 percent in 2015, outpacing Brent’s 23 percent plunge as of December 2. While it has been estimated that crude will recover in 2016, prices for LNG will probably continue to stay low by as much as 23 percent.

LNG for delivery in the next one to one and a half months in Asia cost $7.40 per million British thermal units as of November 30. The spot prices are likely to go down to $5.70 in 2016, surveys show.

Asian spot prices for LNG are estimated by some to fall below $5 mmBtu next year.

It is expected that commissioning cargoes from new plants will weigh on spot price, as demand from new importers is less than enough to meet soaring supplies.

Conclusion

There are considerable challenges for the LNG market in the coming years. After the prices plunging last year due to falling oil prices and stymied demand, the market is going to have to adapt for greater international competition amid both rising demand and rising supply. With the expectation for supply to outpace demand through the rest of the decade – amid a lower price environment to boot – it would seem that the future for LNG exports looks brighter from a consumer’s point of view, than for a producer.

Many of Iran’s prospective LNG production units are in the small scale and meant to satisfy the domestic demand, while many still think, and even officials sometimes misrepresent the fact that other major LNG units that would produce for exports.

Seeing the faster pace of LNG supply to demand in the global markets, as well as occasional statements by officials of LNG-producing countries that the business is growing increasingly unjustifiable, Iran’s decision to use LNG as a means to enhance its domestic gas penetration seems wise.

Dalga Khatinoglu is an expert on Iran's energy sector and head of Trend Agency's Iran news service

Mehdi Sepahvand is Trend Agency’s Tehran-based journalist

Do you have any feedback? Contact our journalist at agency@trend.az

Follow us on Twitter @TRENDNewsAgency

RƏYLƏR

BU KATEQORİYADAN DİGƏR XƏBƏRLƏR

Ölkə mətbuatında bugün

250-dək "London taksi"si ikinövbəli qrafikə keçir - İslamiadaya görə

28 Aprel 2017 12:49

Rayonlarda intensiv yağışlar yağacaq

28 Aprel 2017 12:48

Yağış, 24 dərəcə isti - Sabah

28 Aprel 2017 12:44

Mayda hava necə olacaq? - PROQNOZ

28 Aprel 2017 12:43

Sabah Azərbaycanda intensiv yağış yağacaq

28 Aprel 2017 12:42

May ayına olan hava proqnozu açıqlanıb

28 Aprel 2017 12:42

Ukrayna Azərbaycan üzərindən İrana yük göndərəcək

28 Aprel 2017 12:42

ATA: "Qızım, sənə "soyun" deyəcəklər

28 Aprel 2017 12:41

"Zaxarova qeyri-peşəkar mövqe ortaya qoyub” - Əflatun Amaşov

28 Aprel 2017 12:39

Cümhuriyyəti satan adam: Çingiz İldırımın xəyanəti və qəribə aqibəti - TARİXİ ARAŞDIRMA

28 Aprel 2017 12:38

Azərbaycanın xarici işlər naziri Macarıstana səfər edəcək

28 Aprel 2017 12:37

Rusiyada iki Azərbaycan vətəndaşı uzun müddətə azadlıqdan məhrum edilib

28 Aprel 2017 12:37

BMT qızların İKT sahəsində imkanlarını genişləndirməyə çağırır

28 Aprel 2017 12:35

Bina çap edən robot yaradılıb

28 Aprel 2017 12:35

Nəqliyyat, Rabitə və Yüksək Texnologiyalar Nazirliyində IV İslam Həmrəyliyi Oyunlarına hazırlıq üzrə geniş müşavirə keçirilib

28 Aprel 2017 12:35

Ötən il abituriyentlərin 56,4 faizi 0-200 bal toplayayıb

28 Aprel 2017 12:34

İslam Oyunları ilə əlaqədar mobil cihazların IMEI nömrələrinin qeydiyyat müddəti iki dəfə artırılıb

28 Aprel 2017 12:32

Moskvada Qarabağ danışıqları başladı

28 Aprel 2017 12:29

Lavrov-Məmmədyarov-Nalbandyan danışıqları başlayıb

28 Aprel 2017 12:28

AMB-nin depozit hərracında tələb təklifi 40% üstələyib

28 Aprel 2017 12:27

Öz ölümünü də görən almandan ŞOK PROQNOZ: Sarı əjdər gələcək, Qızıl şəhər məhv olacaq - FOTOLAR

28 Aprel 2017 12:23

Akif Əlizadə: “Akademiyanın alimləri ötən il 14 dövlət proqramının icrasında iştirak ediblər”

28 Aprel 2017 12:22

Qlobal neft bazarında rəqabət güclənir

28 Aprel 2017 12:22

Yol polisinin düşdüyü dəhşətli qəza ilə bağlı RƏSMİ MƏLUMAT

28 Aprel 2017 12:19

Nərgiz Paşayevaya medal verildi

28 Aprel 2017 12:18

“İçerde” serialında daha bir ŞOK OLAY - VİDEO

28 Aprel 2017 12:18

DİN YPX avtomobilinin ölümlə nəticələnən yol qəzası ilə bağlı məlumat yayıb

28 Aprel 2017 12:17

İstanbulda Mirzə Ələkbər Sabirin anadan olmasının 155 illiyi qeyd olunub

28 Aprel 2017 12:17

İnsanları tanıdığınızı düşünürsünüz?

28 Aprel 2017 12:17

Cəbhədə yenidən vəziyyət gərginləşib

28 Aprel 2017 12:15

Tale Heydərov Leyla Əliyevanın rəsm sərgisində - FOTOLAR

28 Aprel 2017 12:13

"Nizami Gəncəvi adına Qızıl medal" Nərgiz Paşayevaya təqdim olunub

28 Aprel 2017 12:12

Rusiya gündəlik neft hasilatını 300 min barel azaldıb

28 Aprel 2017 12:12

Azərbaycan taekvondoçusu Yunanıstanda bürünc medal qazanıb

28 Aprel 2017 12:12

Təbrik kartı valideyn-uşaq bağını artırır

28 Aprel 2017 12:10

“Finance Leasing” yeni istiqraz emissiyasına hazırlaşır

28 Aprel 2017 12:07

Azərbaycan MN: Ermənistan cəbhədə “OSA” zenit raket kompleksindən istifadə edib

28 Aprel 2017 12:07

Daimi Nümayəndəlik: ATƏT üzvü olan ölkələrdə islamofob hücumlar və ictimai ritorika narahatlıq doğurur

28 Aprel 2017 12:07

MSK partiyalarla bağlı geniş araşdırmalara başladı

28 Aprel 2017 12:04

XİN Zaxarovanın açıqlamasına münasibət bildirdi

28 Aprel 2017 11:59

Azərbaycan-İran sərhədində ZƏLZƏLƏ

28 Aprel 2017 11:58

ABB: Vətəndaşlara qarşı dələduzluq əməlləri üzə çıxaran sürücü hazılrda həbsdədir

28 Aprel 2017 11:57

Qızına küçədə söz atılan ata görün nə etdi...

28 Aprel 2017 11:57

Azərbaycan-İran sərhədində zəlzələ baş verib

28 Aprel 2017 11:54

XİN-dən Zaxarovanın Azərbaycan jurnalistləri ilə bağlı açıqlamasına REAKSİYA

28 Aprel 2017 11:53

DİN 6 regional qurumda işləmək üçün jurnalist axtarır

28 Aprel 2017 11:52

​Mayın 1-dən 40 manat cərimə oluna bilərsiniz

28 Aprel 2017 11:51

Cem Yılmaz özünə yeni SEVGİLİ TAPDI - Aktyor 20 yaş kiçik qızla YAXALANDI (FOTOLAR)

28 Aprel 2017 11:48

Macarıstan XİN başçısı: "Ötən 25 ildə Azərbaycanla ikitərəfli münasibətlər yüksələn xətlə inkişaf edib"

28 Aprel 2017 11:47

XİN: Dilqəm Əsgərovun taleyi barəsində suallarla müraciət edən jurnalistləri düzgün başa düşmək və anlayışla qəbul etmək lazımdır

28 Aprel 2017 11:47