The Iranian and Global Natural Gas Industry
Natural gas is the most promising fossil fuel worldwide, and the natural gas industry has a key role in the sustainable global development and a guaranteed supply of energy.
The global economic recovery since 2018; the future of natural gas industry; forecasts on the incremental trends in the global demand; and the share of natural gas in energy portfolio until 2040; as well as; the huge gas reserves existing in the Middle East, especially in IRAN, highlight the role of IRI and other Middle Eastern countries in meeting the worldwide energy demand.
The potentials of IRI to turn to the natural gas hub of the region, and increasing the country’s market share of the international gas trade; the development of corresponding domestic industrial units and the localization of cutting-edge technologies are key indicators of the validity of IRI’s strategic vision and decisions about the natural gas industry.
The potentials for the development of sectors of natural gas industry in various countries all over the globe, and the capabilities of the IRI, further to those of other countries, also highlight the undeniable role of IRI in the future of global natural gas industry.
The following lines tend to provide an overview of the Iranian, and global, gas industries to elaborate on the reason for the significance of IRI as the host to the Global Gas Show (GGS).
The World’s Natural Gas Reserves
According to a June 2018 report by the British Petroleum (BP), holding 33.2 trillion m3 of natural gas, IRI is the second largest owner of natural gas reserves after Russia with 35 trillion m3 of natural gas. Qatar, Turkmenistan, US, KSA, Venezuela, UAE are the next ones in the rankings.
Based on the data, IRI owns 17.2% of the global natural gas reserves, and Iran, Russia, Turkmenistan and Iraq own a combined share of 58.3% of these reserves.
The charts below indicate that the Middle East and the Common Wealth, own 50% and 31% of the worldwide gas reserves. In other words, about 80% of the global natural gas is concentrated in Iran and its neighboring countries.
This is while the respective shares of North, Middle and South Americas, Europe, Africa, East Asia and Oceania are only 5.6, 4.2, 1.05, 7.1, and 10 %.
Production and Consumption of Natural Gas; IRI the 3rd Largest Producer and 4th Largest Consumer of Natural Gas
Based on the June 2018 report by BP, the largest producers of natural gas in the world are USA (734 billion m3), Russia (635.6 billion m3), IRI (223.9 billion m3), Canada (176.3 billion m3), Qatar (175.7 billion m3), and China (149.2 billion m3), while the world’s largest consumers of natural gas are USA (739.5 billion m3), Russia (242.8 billion m3), China (240.4 billion m3), IRI (214.4 billion m3), Japan (117.1 billion m3), KSA (111.4 billion m3) and Canada (115.7 billion m3).
As reported by BP, the total global natural gas export through pipelines in 2017, was 740.7 billion m3, and Russia, Norway, US, The Netherlands, Turkmenistan, and Algeria are the major natural gas exporting countries.
Importing 423.4 billion m3, Europe is the largest importer of natural gas. North America, East Asia and Common Wealth countries having imported, 146.8, 62.9 and 62.3 billion m3 are the next in the rank.
The total volume of the exported liquefied natural gas was 393.4 billion m3 in 2017, and Qatar, Australia, Malaysia, Nigeria, USA, Trinidad and Tobago, Russia and Indonesia are exporters of liquefied natural gas.
The Prospect of Global Economy, Energy and Natural Gas
- It is widely believed that the global economy entered a stage of recovery last year, with the IMF updating their 2018-2019 growth forecasts to 3.9% per year. The recovery has been broad, driven both by advanced economies, like the US and the EU, as well as the BRICS economies, specifically Russia and Brazil, and by accelerated growth in China.
- The next five years will see expansion, with the global economy growing at 3.7%, on average. In the long-term, a growth rate of 3.4% will be sustained. Average global GDP per capita will grow 80% by 2040, as the global population increases by 1.7 billion (bn).
This will drive energy demand, through increased consumption of industrial goods, larger car fleets (a 60% increase, with 2.07 bn cars on the road by 2040), and more residential housing (33% more households, reaching 2.8 bn in 2040).
Most growth will be localized in developing Asia and developing Africa, with populations of 3.8 bn and 1.2 bn, respectively. This, in part, includes MENA.
- Between 2018 and 2040, annual average production investments in the Middle East and Africa will grow over 18 times compared to 2000-2017. Over $1.3 trillion will be invested in upstream and transportation – or about 12% of global upstream investment.
- The most pronounced will be the impact of liquefaction investments, concentrated in projects from both MENA and Sub-Saharan Africa, including those in Algeria, Equatorial Guinea, Iran, Mozambique and Nigeria. This will constitute about 50% of global investment into liquefaction capacity over the long-term.
- Global energy demand is projected to grow by 1.1% per annum between 2018 and 2040, an overall increase of 28%, (climbing from 13.8 Gtoe in 2017 to 17.9 Gtoe in 2040), propelled by the aforementioned macroeconomic drivers. The main drivers for such an increase are economic prosperity, which will be driven by emerging economies, as well as population growth and improved living standards.
- In 2040, fossil fuels are expected to meet 75% of global energy demand, and natural gas will be the fastest growing fossil fuel. The share of gas in the overall energy mix will increase from 22% in 2017 to 27.6% in 2040.
Oil and coal will lose their positions respective to other fuels. Coal is projected to be the biggest loser in the global energy mix in 2040, as it will be increasingly replaced by natural gas and renewables. The share of coal in the global energy mix will decline from 27% in 2017 to 21% in 2040.
Between 2000 and 2017, natural gas demand globally grew by 2.4% annually, dominated by the consumption in the power generation sector.
- The GECF forecasts that global natural gas demand to grow at an annual average growth rate of 1.8%, an overall increase of 50%, from 3715 bcm in 2017 to about 5,581 bcm in 2040.
The key changes to the projections are:
- Strong policy efforts to improve air quality through coal-to-gas switching in key regions.
- The acceleration of natural gas use in the power generation sector worldwide.
- These included the phasing out coal-fired electricity, and in some cases nuclear-fired power generations, which will lead to greater reliance on gas-fired power plants.
- On the assumption that the urban population reaches to about 5.8 billion by 2040, the potential use of gas in the domestic and residential sectors is large.
- Stronger demand in industrial sector as a result of economic and population growth will lead to in increased use of gas for exports of manufactured and industrial products.
- In the transport sector, LNG is expected to become an important alternative to heavy fuel oil in marine shipping sector in the long-term.
- Growth in electricity demand will increase the need for running more gas power plants. World electricity demand will grow by 3% on an annual average between 2018 and 2040, rising from 192 TWh to 307 TWh, accordingly. In 2017, coal with 38.5% remained the most preferred choice of fuel for power generation mix.
However, this trend is expected to decrease due to air pollution concerns, and coal’s share will drop to 31% in 2040. The share of gas will continue to rise from 22% in 2017 to 27.6% in 2040. In 2017, the share of renewables in the global electricity mix was about 6.4%.
Due to significant reforms in energy policies and governmental support in many countries, renewables will gain around 18.7% share. This report expects that over the outlook period, the share of nuclear in the global electricity mix will drop from 10.3% to about 8.2%.
Additionally, the share of hydro will drop from 16% in 2017 to 13.2% in 2040. Therefore, in 2040 about 57% of electricity generation will come from fossil fuels.
- Global natural gas production continued to ramp up in 2017 to reach the volume of 3660 bcm that is 60 bcm above 2016 level. However a decline around more than 35 bcm occurred driven by some countries such as The Netherlands, United Kingdom, Pero, Indonesia, Thailand, Vietnam and Mexico, this decline was prevailed by the significant increase of production in some other countries like Norway, Australia, Iran and China.
- Historical figures illustrate that during the recent years (the period from 2010 to 2017) except Europe all regions enhanced their gas production and in top of those is Middle East with 4% annual growth rate followed by Asia and Pacific region with 3.2% annual growth rate. Expansion in Middle East was driven by Iran and Qatar and to lesser extend Saudi Arabia that have already added 55, 45 and 18.6 bcm to the global gas production. In Asia and Pacific region China and Australia are behind the rise by adding more than 55 bcm each to the total production.
- According to the latest results of modelling and forecast in the GECF, global marketed gas production is anticipated to expand by around 1,850 bcm over the forecast period reaching over 5,500 in 2040 that is 100 bcm more than our forecast in last revision of the Outlook. The calculated average annual growth rate in this period is 1.8% that accounted for a total growth of 50% compared with the current value.
- Africa is expected to have the largest growth rate in the outlook period as a considerable amount of expansion in this region is expected. In addition, the region’s current value of gas production is comparatively low that makes the growth rate looks more significant. Mozambique, Egypt, Nigeria and Algeria are the most impactful countries in Africa’s gas production boom that is estimated to more than double the production by 2040.
- Europe would be the only region with negative growth both in historical and forecast figures in terms of natural gas production. Norway, The Netherlands and United Kingdom, the main three natural gas producer in Europe, lower their annual gas production aggregately by 130 bcm till 2040 and bring the Europe’s share in total gas production down from 7% in 2017 to 2% in 2040.
Production of 800 billion m3 of Natural Gas by Iranian Refineries
Currently the refining of natural gas in IRI is performed by the South Pars Complex, as well as the Bidboland, Ilam, Parsian, Fajr-e-Jam, Hasheminajd, Sarkhoon and Qeshm refineries.
The total refining capacity of the National Iranian Gas Company (NIGC) shall reach 1,200 million m3 per day by 2025, according to the plans for developing gas refineries.
The Unique Gas Distribution Network of IRI in the Middle East
The total of Iranian high-pressure gas transfer lines reaches 38,000 km. Distributed among 10 operating regions and including 81 compression stations, the network is capable of transporting nearly 800 million m3 of natural gas per day.
The countries 20-year Perspective foresees that the existing 38,000 km lines and 81 compression stations be increased to 70,000 km and 140, respectively.
The 75% share of Natural Gas in the Iranian Energy Portfolio
The development of the Iranian natural gas distribution network (INGDN) has led to an increase in the share of this clean fuel in the domestic energy portfolio up to 75%. Currently, an over 345,000 km urban and rural gas distribution network is the vehicle for meeting the requirements of the 1,135 cities, 1198 villages and 11,460,000 gas service lines.
Providing the feed of power plants is one of the plans of the Iranian Ministry of Petroleum. Further to saving the liquid fuels used and enhancing the added-value. This considerably helps save the environment. Supplying natural gas to power plants has increased during the past years and the using 67.7 billion m3 of natural gas in 2017, the Iranian power plants use only 10% of liquid hydrocarbons in their fuel portfolio. About 83 power plants currently have access to natural gas.
Supply of natural gas to industries faces the minimum limitations ever, and in 2017 over 37 billion square meters of natural gas were delivered to major Iranian Industries. Also over 2,426 CNG stations were active in Iran in 2017, and over 4.5 million gas-burning vehicles are used in Iran.
Natural Gas Storage Strategies
Saving ample quantities of natural gas is among the strategies of the NIGC. Currently the Seraje and Shoorije reservoirs in the center and north east of the country are used to this end. The former has a capacity of 2.5 billion square meters, which shall be increased to 4.5 after its development. Five further reservoirs all over the country are being considered for the same purpose.
Iran as the Regional Natural Gas Hub
Located in the Middle East, and having access to international waters through the Persian Gulf, Oman Sea, Indian Ocean, the Black and the Caspian seas, Iran is a very interesting country.
Iran has 15 neighboring countries, and 9 other countries form the second ring of the neighbors. Also the countries ties with the People’s Republic of China highlight the geopolitical significance of IRI in the region and its potentials of turning to the global and international natural gas hub.
So far, Iran has been exporting natural gas to Iraq, Turkey, Armenia, Azerbaijan, and Nakhichevan based on long, as well as short, term swap and gas/electricity exchange agreements. After ending its export to Russia, Turkey is currently the largest consumer of the Iranian natural gas. The 25-year gas export agreement between the two countries was signed in 1996 and the export actually started in 2002.
According to the Iran Armenia natural gas gas/electricity exchange agreement each square meter of natural gas is exchanged with 3 kW/h of electricity. Iraq receives Iranian natural gas in the two cities of Basra and Bagdad. As mentioned above, Azerbaijan and Nakhichevan are further consumers of Iranian natural gas.
Some Highlights on the 50-year Presence of Iran in the Natural Gas Industry
- Natural gas industry is a strategic sector in the priorities and the master industrial, economic and diplomatic plans of IRI.
- After half a century of the development of the Iranian gas industry, the industrial capabilities of the country in the area are now at a mature state, and the establishment of the infrastructures (including on- and off-shore upstream facilities, high pressure lines, urban distribution network, compression and decompression stations, underground reservoirs, refineries and the control and execution systems) are among the achievements of the country.
- 3,000 km of marine lines in Asaluyeh, 345,000 km of urban and 38,000 km of high-pressure, lines are among the other infrastructures developed in Iran. Over 11,260,000 service lines are currently active in the country and 26,550,000 households use natural gas.
- The industrial capability of the Iranian companies to produce over 95% percent of the gas distribution facilities, 70% of the refinery equipment, and 50% of the refinery chemicals reflects the countries domestic power. This, further to the transfer and localization of the technological needs of the natural gas industry is one of the distinguishing features of IRI from other Middle East and North Africa countries.
- The domestic human capital is the main ring in the natural gas value chain in Iran. The involvement of trained and skilled workforce in the various segments of the natural gas industry, also enhances the capabilities of IRI to play a more significant role in the gas export industry.
- IRI is currently extracting 0.5% of its natural gas reserves per year. Reaching 2 to 2.5% shall bring the country closer to the international norms and shall create 140 billion Euros of income for the country per year. If the refining and storage infrastructures, especially in the shared fields, are developed, the added value can increase up to 3 to 4 times.
- Iran currently produces 800 million square meters of natural gas per year, which should be increased to 1,200 by 2025 according to the country’s development plans. In parallel, issues including energy optimization, substitution of natural gas with other energy sources, and decreasing the usage intensity are among the country’s plans.
- The 6th Master Development Plan of the country has foreseen the yearly export of 80 billion square meters of natural gas, 50 billion of which can be allocated to the neighboring countries. It is worthy to note that only the implementation of the Bagdad and Basra pipelines shall increase the Iranian natural gas export to 40 million square meters per day.
- The tendency of European countries to diversify their natural gas resources, and their explicit focus on Iran, promises a yearly income of 150 to 200 billion Euros for the country, if the Iranian natural gas can be delivered to Europe.
- As opposed to Russia and Norway, respectively exporting 212 and 103 billion square meters of natural gas per year, Iran has a great capacity for development since it is currently producing only 10 billion square meters of natural gas (only 1% of the global trade).