A very important Iranian project for the production of natural gas in the “South Pars” field has entered a critical stage, as a result of Western sanctions on Russia, which have restricted Tehran’s moves to seek help from Moscow in developing the crumbling energy system, which puts the Iranian government in a major dilemma on the external level, especially with the decline of Exports that put importers, headed by Turkey and Iraq, in trouble, and also at the domestic level in light of the increase in consumption during the winter season, amid growing concern about interruption of supplies.
And the oil and gas sector in Iran has become afflicted by Western sanctions against Russia, according to the American “Oil Price” publication specializing in energy, while Tehran was looking at great importance to Russian support for the vital sector, to compensate for the Chinese withdrawal in order to avoid a clash with the United States, and before that the departure of Total. French, following Washington’s imposition of sanctions on Tehran following former US President Donald Trump’s withdrawal from the nuclear deal in 2018.
Iran is facing a very complex situation, and while it believed that Europe’s need for energy in the aftermath of the Russian war in Ukraine would serve as a pressure card in its hand during negotiations to revive the nuclear agreement, but freezing the negotiations may have found American palatability not only because of Washington’s desire to continue pressure. Iran, which has placed the lifting of sanctions on the energy sector at the forefront of its demands, but also to close the back doors through which Russia can pass into the international energy market by supplying gas to Iran and then reselling it to global markets as Iranian gas.
The repercussions of the ongoing US sanctions
The ongoing US sanctions on Iran for years have put the oil and gas sector in a state of decay, and it has become in dire need of modernization, development and the introduction of modern technologies, which prompted the National Iranian Oil Company, in the middle of last year, to sign a memorandum of understanding with the Russian company “Gazprom” to develop 3 Iranian gas fields. And 6 others for oil, worth $40 billion.
The deal comes within a series of urgent solutions that Tehran is looking for, as Oil Minister Javad Oji warned that his country would become an importer of oil and gas products if it did not attract $240 billion during the next 8 years to invest in the sector.
However, the Iranian-Russian plans are greatly hindered, as things were not supposed to go this way, according to the “Oil Price” report, noting that Moscow believed that it would quickly ensure control over Ukraine in the wake of the start of the invasion at the end of February 2022. , but it has become stuck in a disastrous war of attrition and is facing widespread sanctions affecting its oil and gas sources, and therefore Iran can no longer achieve any meaningful progress in the main phase 11 project in the South Pars field.
According to a senior official in the oil and gas industry working closely with Iran’s Oil Ministry, the past week witnessed a series of meetings between high-ranking officials from all relevant ministries and companies associated with the project in order to draw up a progress report for consideration by Supreme Leader Ali Khamenei and his team. This field is of great importance to Iran, as it contains an estimated 14.2 trillion cubic meters of gas reserves.
According to the data of the National Iranian Oil Company, the volume of Iran’s natural gas reserves amounts to more than 33.7 trillion cubic meters, and the volume of oil reserves amounts to about 157 billion barrels, while it extracted during the past 23 years two trillion cubic meters of gas from the South Pars field.
Iran’s plans to develop gas production from the huge field were subjected to many blows, while there was a scramble from international oil companies to sign agreements for various stages of developing South Pars, after Iran signed the nuclear agreement in 2015, so that the main 11th stage received great interest from companies, as energy was The target production for this stage is 57 million cubic meters of gas per day.
French Total withdrawal
Indeed, the French company Total at that time owned a 50.1% stake in the $4.8 billion project at this stage, and invested about $1 billion, but all of that stopped when the United States withdrew from the nuclear agreement in May 2018 and reimposed sanctions on Iran. At that stage, the Chinese National Petroleum Company “CNPC” acquired Total’s share, raising its share to about 80.1%, as it had originally controlled 30% of this stage before this deal, while the Iranian “Petro Pars” company owned the remaining share. amounting to 19.9%.
Unfortunately for Iran, 2018 witnessed the outbreak of a trade war between the United States and China, in the wake of Washington’s imposition of sharp tariffs on many Chinese goods, which prompted Beijing to focus on adjusting the map of its interest in foreign projects, especially those that might be an additional source of confrontation. With the United States, which prompted it to announce its withdrawal from the development of Phase 11 of South Pars in October 2019.-
One of the factors that prompted China to withdraw from the Iranian gas project is that it cannot “rename” Iranian gas from South Pars as Iraqi gas, as is the case with many of its Iranian oil imports, according to the “Oil Price” bulletin.--
Hope returned to the Iranians to resume work on the project again through other supporters, who this time were the Russians. Last July, the National Iranian Oil Company signed a $40 billion memorandum of understanding with the Russian company Gazprom to develop several oil and gas fields, including the Pars field. Southern.
However, a senior source in the European energy sector said, “The invasion of Ukraine was not as quick and easy as Putin intended… (The Russian president) thought it would be over within a week, but he found himself facing extended confrontation and economic sanctions as well,” adding, “I don’t have Russia is now offering Iran.. There are no machines, technology, good manpower, no funding.. Just promises to deliver military materials such as the S-300 (missile defense system) and Sukhoi-35S fighters, and even if they fulfill their promises, this will not help Iran obtain More gas from the South Pars field.
Ordeals of worn-out facilities
The ordeals of the oil and gas sectors in Iran were not limited to the deterioration of facilities, but internal consumption worsened, especially in the winter, which impedes the flow of its gas exports, especially to Turkey and Iraq, which puts them in trouble to provide alternatives.
In the first week of this January, a technical defect was announced that caused a decrease in Iranian gas exports to Turkey, which puts Ankara in front of a dilemma, as Tehran reduced its exports to Ankara by 70%, just before demand reached its peak in the winter season. According to the US Bloomberg Agency.
Iran is the second largest energy supplier to Turkey after Russia, as Iranian gas shipments reached about 9.4 billion cubic meters in 2021, according to data issued by the Turkish Energy Regulatory Authority.
This is not the first time that Iranian supplies to Turkey have been exposed to a disruption. Rather, in January of last year, 2022, Tehran cut off its gas exports to Ankara for about two weeks, claiming a leakage, which forced Turkey to reduce energy supplies. its vital industrial sector.
The increasing domestic consumption of gas in Iran has put pressure on the dilapidated production sites, prompting the Ministry of Oil to warn repeatedly of the consequences of the inability to expand production by attracting large investments to save the situation. In the winter of 2021, the Ministry of Oil took measures to compensate for the shortage of gas and electricity in the national grid. It delivered diesel fuel to power plants and cut off electricity to large production units, such as cement factories and petrochemical facilities, in order to provide electricity to homes to prevent power outages.
And last August, Iranian Oil Minister Javad Oji warned, in a television interview, of the impact of sanctions on the gradual decline in Iran’s ability to produce oil and gas. Iran has the second largest proven gas reserves in the world, and the country’s reserves in 2021 remained unchanged compared to the previous year at the level of 98.33 trillion cubic meters, while total gas production in the year before last grew by 8.5% compared to the previous year.
In 2020, Iran produced a total of 250 billion cubic meters of gas, of which 233 billion cubic meters was consumed internally. According to data issued by British Petroleum, Iran produced about 256 billion cubic meters in 2021, at a rate of 701 million cubic meters per day, which indicates a limited increase in production, which amounted to 2.4%.
The gas crisis has become the talk of the hour in Iran in recent days, after officials announced a reduction in supplies to many government departments with the aim of rationalizing consumption, and local newspapers criticized the government’s confusion in managing the file and the scarcity of gas in stations and factories.