Iran's Push for Oil, Gas, and Petrochemical Exports in the Post-Agreement Era

As reaching a nuclear agreement between Iran and six world powers seems almost certain, Iran is not only discussing its plans to resume oil and petrochemical exports to Europe but has also outlined its gas export project to the European Union for the first time, aiming for 'the shortest possible time.' Before sanctions in mid-2012, the EU was a customer for 18% of Iran's total oil exports. European markets also accounted for over 10% of Iran's total petrochemical products. Prior to Western sanctions, Iran exported 2.5 million barrels of crude oil daily, a figure that dropped to just over one million barrels last year. Iran also had over $15 billion in petrochemical exports in 2011, which severely declined after sanctions, but improved again after the interim nuclear agreement in fall 2013. Last year, Iran had about $14 billion in petrochemical exports. The country's petrochemical production capacity is around 60 million tons, but a lack of feedstock and customers has resulted in only 40 million tons produced in 2013, increasing to 44 million tons last year. According to the latest issue of the 'Mashal' monthly, affiliated with the Ministry of Oil, the shortage of ethane gas as feedstock for petrochemical units is the reason. Last year, only 2.8 million tons of ethane were delivered to petrochemical units, and this year, due to increased gas production in South Pars, this figure is expected to reach 4.2 million tons, raising total petrochemical production in Iran to 50 million tons. Iran also states that it needs $70 billion in investment to triple the country's petrochemical production capacity over the next ten years. During Mahmoud Ahmadinejad's presidency, it was planned for the country's petrochemical production to reach 100 million tons by 2012, but when the government was handed over to Hassan Rouhani, production was only 40 million tons. Iran hopes to improve oil and gas production, as well as downstream projects like refineries and petrochemicals, by attracting foreign investment. From 2009 until early 2014, Iran did not manage to launch any new phases in South Pars, and it was only last year that it successfully increased its production capacity by 100 million cubic meters of gas per day through the early launch of several phases in South Pars. The same amount of production capacity increase is planned for this year. However, what stands out among Iran's post-sanction projects is the country's push for gas exports to Europe, a topic that has not been previously explored. With rising tensions between Russia and Europe, there are hopes that Iran could begin gas exports to Europe as an alternative to Russian gas after 2020. Alireza Kameli, the CEO of the National Iranian Gas Export Company, announced on Saturday, without naming a specific company, that negotiations are underway with the largest company active in the field of LNG (Liquefied Natural Gas) carriers. These vessels receive natural gas at sea shores and reduce its volume by about 600 times during the liquefaction process for transport to destination markets. He stated, 'Negotiations with the largest company active in LNG are ongoing, and they will come to Iran immediately after sanctions are lifted to convert gas into LNG.' The CEO mentioned that gas negotiations worldwide typically take a very optimistic six months to a year, referring to the lengthy negotiation process for gas exports in Iran due to sanctions. Currently, initial negotiations are ongoing with over 170 foreign companies eager to receive gas from Iran. Iran also has projects to produce over 10 million tons of LNG annually and export it via vessels to international markets, which were stalled during Ahmadinejad's presidency due to sanctions, but negotiations for these projects with Western companies have recently resumed.