Tuesday, November 10, 2015
Iran willing to sell Europe cheap gas, having no pipelines to transport it.
Iran sells to Europe cheap gas, having no pipelines to transport it. (Taz).
Iran intends to enter an unequal battle for the European gas markets – albeit without pipelines but with an attitude. Europe has promised to buy all the gas available amid falling local production and increasing gas demand. The European Union will attempt to solve the gas supply issue as soon as possible due to the potential rise in consumption since the Union is going to cease the old coal power plants, convert them to gas mode as of 2017.
Europe is a huge gas market.
I call this ‘an unequal battle’ as Iran is entering into serious competition, given that the Islamic Republic has a lot of gas but no pipelines to Europe by which to deliver this gas. The economic sanctions placed on Iran there may soon be lifted and with the largest proven gas reserves in the world amounting to some 1.2 trillion cubic feet; but since Iran has no pipelines enabling it to deliver its gas to the European market, the country by default falls behind in the gas race. But this does not seem to preoccupy Iran.
Deputy Oil Minister for International Affairs Amir Hossein Zamaninia told Iranian media in November that Tehran is ready to sell its gas to Europe even if it will not be viable economically. “That is due to the fact that we want to use economic relations to create some political cohesion,” Zamaninia said.
Evidently Iran wants to use its powerful gas reserves as a shield against new possible international sanctions since Zamaninia says “When economic relations grow, political disagreements diminish and that reduces the chances of having the sanctions brought back”. This is understandable. New sanctions are the last thing Iran needs at this time.
The country needs new gas infrastructure and contracts as soon as possible. These kinds of statements are indications that Iran there is attempting to claim its own share of the gas market even though it would be unprofitable at first.
Incidentally, Saudi Arabia applies the same approaches but with oil. Fiscal breakeven price of Saudi Arabia is 60 dollars per barrel Brent. But Saudis are persistently gloomy about the oil production decreasing. In this regard Saudi Arabia has many competitors. If the Saudis decrease oil production to support the prices it is obvious they don’t expect the same from neighboring rival countries. Most likely one of the rival countries will quickly hold the Saudis oil market share. For Iran, by the way, the fiscal breakeven price is 78 dollars per barrel Brent.
"I see no economical reason of Iranian gas export to Europe now. If they want to invest, to build pipelines it should be kicked off right now while the oil prices are low. One way or another I see no Iranian gas in the European market within the next 8-10 years", - said a Caspian energy trader who asked to remain anonymous. Hmmm.....As i said many times before the EU would sell all human rights in exchange for cheap gas, that's why they backed the Iran deal. Read the full story here.