CEO of National Iranian Gas Export Company (NIGEC) Mehran Amir-Moeini says the Iran-Oman gas project would not go ahead as long as the two aforesaid documents have not been finalized. In an interview with "Iran Petroleum", Amir-Moeini speaks about the details of Iran's planned gas exports to Oman and other issues discussed during Zangeneh's visit to Muscat.
Q: You accompanied Minister Zangeneh during his visit to Oman. Could you tell us about the issues discussed in Muscat?
A: Based on agreements reached between the Iranian and Omani oil ministers, meetings would be held to follow up on the progress in the Iran-Oman gas pipeline project. The negotiations were held to that effect. Of course, the Iranian and Omani oil ministers had already held relevant meetings and signed minutes. In addition to general ministerial negotiations, a steering committee had been established to review various aspects of Iran's gas exports to Oman.
Furthermore, during the meeting between Iranian and Omani ministers, emphasis was made on the principles discussed in the steering committee. The document setting out the framework of cooperation would be amended and a new document would be signed. That is a complicated issue, requiring international consultation in some cases because we have to incorporate details of the project in this international document.
Q: Why have Iran-Oman negotiations been slow over the past two years?
A: Since the Iran-Oman gas export project requires cooperation between the two countries, gas will be delivered in Sohar where Oman's LNG plant would convert gas to LNG to be delivered back to Iran. It is some sort of gas swap operation. Marketing will be handled by the National Iranian Oil Company. Whereas every country has its own rules and regulations; therefore, the project becomes complicated. In both Iran and Oman, in addition to oil ministries, other organs are involved and coordination between these bodies would take time. Discussions have been held in this regard and its full resolution would require time. What is clear is that reaching agreement on the details would be time-consuming and challenging. An agreement would be finalized when each and every clause has been agreed upon. In some cases, a single clause may affect all other clauses in an agreement.
Q: Iran's gas exports to Oman was supposed to start in 2016, is that right?
A: The preliminary talks for Iran's gas exports to Oman date back to 2005, but by that time Iran's gas balance was not positive, and our domestic consumption was overtook production ; therefore, in those days we were building export capacity. But after the 11th administration took office and new phases of the South Pars gas field became operational, Iran's gas production increased and the subsequently the Ministry of Petroleum envisaged exporting gas to other countries. Therefore, new round of talks started in 2013 and an MOU was signed.
As I mentioned, the talks for Iran's gas export to Oman began 13 years ago. But after a hiatus, the project was revived in 2013 and the NIGEC and the Omani Ministry of Oil and Gas signed an MOU to envisage launching the project.
One major reason for the protracted negotiations for gas exports to Oman was the pipeline route. After conducting studies on onshore and offshore options, it was decided that sections of the pipeline be laid in shallow waters crossing the border waters of the United Arab Emirates (UAE), but since this country was not cooperative we had to consider deepwater pipeline. For that purpose we needed a new consultant. Choosing a consultant and surveying studies were both time-taking.
Another reason was the complicated nature of the work. Iran's gas exports to Oman is not a routine project. This project is expected to be operated jointly with Oman. The project is not bound to exporting gas by pipe; rather it involves converting gas to LNG before being marketed. That requires various agreements to be signed. Furthermore, one-third of the capacity of the planned pipeline would be used for converting gas to LNG, which would require a tolling agreement. It means that converting natural gas to LNG would be paid. Neither we nor the Omanis have ever experienced such a project and that makes the project more complicated and therefore talks linger on. New agreements that must be signed between the two countries, legal issues and other such aspects are behind procrastination in the implementation of the project. Another important point is the mode of financing, which is yet to be finalized. Financial shortages in both Iran and Oman have forced us to seek methods which would not squeeze government budgets in the two countries. For that purpose, talks have been held with some consortia interested in implementing the project. When the contractor accepts the project risks it would require some guarantees. Financers also need guarantees and that would need some official permits, particularly in Iran.
Q: So the document for international cooperation framework and tolling agreement are the main topics of discussion on this project.
A: Yes, that's it. The two countries' ministers have agreed to finalize the document on framework in May and the tolling agreement by end-July. The main focus was on this issue because as long as these two documents have not been finalized the project would not make significant progress. The pipeline project would be put out to tender only when the two aforesaid documents have been finalized.
Q: Given the complicated nature of talks that you just referred to, when do you think Oman would receive Iran's gas?
A: We have no technical problem for exporting gas to Oman via deep waters. In case the agreement takes effect and no certain problem arises, I think that within three years we will see gas exports to Oman start and that would mark our entry into international LNG market.
Q: During the first days of Iran-Oman talks under the 11th administration, it was mentioned that Oman's LNG facilities had 23% idle capacity. Does that capacity exist now?
A: I regret to say no! In 2013 the Omanis had idle capacity to convert Iran's natural gas to LNG, but during recent years when negotiations were under way the Omanis developed Khazan gas field which came online late last year; therefore, our LNG share was replaced by the Khazan gas.
Q: Does it mean that Oman is no longer committed to providing Iran with 23% of its plants' capacity for LNG production?
A: No, that's not so. The Omani Oil and Gas Ministry's commitment for 1.5 million tonnes a year of LNG is still in effect, but our negotiations are under way for increasing it to 2.5 million tonnes a year.
Q: Has the tolling fee dispute been settled between Iran and Oman?
A: There is no problem to that effect and the two countries have reached agreement on tolling now. But the tolling fee may be still discussed as the capacity of LNG production is to increase from 1.5 million tonnes a year.
Q: How is the project to be financed? BOT or EPCF?
A: One reason for the slow process of work is this issue. Different modes of financing have so far been discussed, but we have yet to reach a final conclusion. The issue we have agreed upon is that the tender documents would be drawn up so as to empower the contractor to choose their desired financing mode. When that happens the steering committee and finally ministers will make up their minds on the method of financing.
Of course under the current circumstances the governments are under financial pressure; therefore, BOT is seen to be prioritized. If oil prices were higher the EPCF would be a better solution.
Q: Since Oman is developing some of its gas fields will it still need to receive Iran's gas?
A: Among countries in the region, Iran holds the largest gas reserves and Oman is interested in the project. The Omanis are developing their own gas field, but they will need Iran's gas on the long-term. The negotiations between the two parties indicate the Omani side's interest in receiving Iran's gas in coming years.
Q: Using the Omani LNG facilities' idle capacity was important for Iran in the project. What are Iran's plans as there is no such idle capacity now?
A: You are right, but lack of idle capacity does not mean that the Omanis could not meet their obligations. Even if they have gas they can consume it somewhere else and at the same time honor their commitments. We planned to step into the market of Oman and neighboring countries via the remaining capacity of the pipeline, which would be the subject of the new phase of the project. In Phase 1, we will concentrate on using one-third of the idle capacity of the pipeline for LNG production. In Phase 2, we intend to be present in regional and international markets.
Q: At what stage is negotiations with Royal Dutch Shell, South Korea's KOGAS and France's Total for involvement in the Iran-Oman gas project?
A: These negotiations are going on. We are in talks with all of these companies. The main point of discussion is that everyone is willing to invest and so far no party has spoken about non-financing. Initial estimates show that implementation of this project would need at least $1 billion, which would be mostly spent on offshore compressors. The onshore section is not as complicated as the offshore section and will be handed by Iranian companies.
Q: Are talks with foreign companies for the offshore section of the pipeline under way in parallel with gas export talks?
A: Yes! Financial resources and technology-owning companies capable of laying subsea pipes are very important for us. A few companies in the world are able to lay pipes in deep waters. But before any companies step in for investment, the two countries should reach agreement on the project. As long as the framework of agreement has not been defined and signed by the two parties, foreign companies would not be willing to offer any method of financing for the pipeline construction.
Q: At what stage is the establishment of planned Iran-Oman joint company?
A: Establishment of a joint company would depend on our decision on how to operate the project; BOT or EPCF. This issue is under review and will be finalized soon.
Q: Will Iranian and foreign companies work together in the deepwater section?
A: Pipe-laying in deep water requires sophisticated technology which a few companies own, but we will do our utmost for Iranian companies to be present alongside foreign companies in the project. However, experienced Iranian contractors would definitely handle the onshore section.
Q: Apart from gas exports to Oman, are there any other negotiations under way by NIGEC for gas exports?
A: We are ready to negotiate with any country in the Persian Gulf for exporting Iran's gas, and are currently following up on the Oman and India projects.
Q: Do you have any plans for Iran's gas exports to Europe?
A: No, Europe is not on the agenda now.
Q: At what stage are negotiations with India and Pakistan in?
A: Negotiation with Pakistan is a little bit complicated. Regarding exports to India we are in talks with a company, as they are interested in receiving gas from Iran, but would like to get involved in the project on their own. They are for Iran's gas delivery via deep waters, which would significantly increase the project costs. And recently Russia's Gazprom announced it would be willing to carry Iran's gas to Pakistan and then India from Chabahar. It (Gazprom) has had talks with the two countries on this issue.
Q: How can gas exports contribute to reducing political tensions?
A: They are definitely related. But gas is different from oil. Gas cooperation would help alleviate pressure, keep ties from turning sour soon and reduce tensions.
Q: Can gas become a diplomacy tool for us?
A: Sure it can. Implementing a gas project lasts five to six years and such contracts are often long-term, which could help strengthen ties between nations.
Courtesy of Iran Petroleum
# Tags
