Iran's vast gas reserves will remain largely untapped so long as Western companies are scared off by political tensions and US sanctions stop Tehran from getting the technology it needs to develop them alone. European and Asian energy companies had been lining up to invest in Iran's gas industry, with the lure of the world's second-largest reserves countering pressure from the United States to stay away.
But European companies, deterred by heightened tension over Iran's nuclear programme, have now shelved immediate plans for multi-billion-dollar liquefied natural gas (LNG) export projects, although they still yearn for Iran's gas riches. "Iran now has no access to foreign majors' technology for any of its LNG projects, and will find it impossible to import equipment and develop expertise on its own under the current sanctions," Samuel Ciszuk, Middle East energy analyst at Global Insight, said. "The narrow group of international companies that have experience of managing the construction of a liquefaction plant makes it close to impossible for Iran to proceed on its own," Ciszuk said after France's Total reiterated last week it would not spend any more on Iranian gas projects for now.
Companies including Total, Royal Dutch Shell, Spain's Repsol, and Norway's Statoil, have invested billions in Iran's oil and gas sector, defying the threat of sanctions from the United States. But, as Iran tested long-range missiles last week, Total became the last European major to delay plans. Growing confrontation over Iran's nuclear programme, which Tehran insists is for energy but which Western governments say is for weapons, is increasing the risk of investment.
The delays to investments in Iran mean it will do well to export any LNG within seven years, analysts say, with or without foreign help. Without LNG plants to export gas by tanker to the highest bidder, Iran could pump some gas by pipeline to neighbours. But they are small markets compared with the global hunger for LNG.
Analysts say the only large-scale pipeline project, which would pump gas across Pakistan to India, is fraught with security concerns and pricing disputes. It is doubtful the European Union would support Tehran's suggestion it could hook up to the proposed Nabucco pipeline to bring gas from Central Asia to Europe. That leaves LNG as Iran's only big export route, but it is unlikely to get obtain the predominantly US technology it needs to cool gas into liquid until Washington lifts its ban on US companies doing business with the Islamic Republic.
Iranian Oil Minister Gholamhossein Nozari said last week the country was prepared to develop its giant South Pars gas field without Total but analysts doubt it can do anything while US sanctions remain in place.
"That would be tough to do, not least because most of the technology is American and also subject to the boycott," Niall Trimble, a gas specialist at the Energy Contract Company in London, said. "It depends largely on the US boycott. If the Iranians decide to be more conciliatory towards the United States and the United States decides to lift the boycott, then it's game on."