The Russia-Iran memorandum of understanding may presage the creation of a major new Russian gas export route south, to India, Pakistan and China. [Gas in Transition, Volume 2, Issue 8]

In July Gazprom and Iran’s NIOC signed a memorandum of understanding (MoU) on multiple projects with a total reported value of $40bn. The MoU has not reached the public domain, but its size begs a large question as to what its contents might be. The few public details announced (a few field developments and some tinkering with gas reservoir pressures) cannot account for more than one or two per cent of the total, so what is the rest of the deal about? Some clues to its likely contents, might be found by looking at the interlocking agendas of Iran, Russia and their respective energy customers and geopolitical competitors. Oil production issues are too small and too cheap to be the heart of the deal First, the deal probably has little to do with oil production or marketing. Iran and Russia are essentially competitors in the oil export market, with a combined potential 11mn barrels/day of exports (limited by sanctions) looking for customers. They might well cooperate to manage customers and prices, but that won’t demand much investment capital. No. This deal has to be a gas deal. On the gas supply side Russia’s present export capacity is some 250bn m3/year. Proven reserves provide for seventy years of total production, and reserves yet to be explored will undoubtedly add substantially to that. Iran’s export capacity is much smaller at about 17bn m3/yr, to Iraq and Turkey when they find the cash to pay their bills. Proven reserves are sufficient for 140 years (the data is out of date, but close enough for this big-picture view...

Natural Gas & LNG News, Europe, Middle East, Insights, Premium, Gas In Transition Articles, Vol 2, Issue 8, Iran, Russia

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