PD Dr. Lutz Mez Berlin Centre for Caspian Region Studies Freie Universität Berlin lmez@zedat.fu-berlin.de www.fu-berlin.de/bccare Iran and the future of European Gas Supply the European Perspective BC CARE Energy Policy Round Table Salzburg, August 31, 2013
Executive Summary The EU-27 is a net natural gas importer: to meet its growing consumption and low production rate. The largest share of natural gas is currently provided by Russia. A dependency of over 30% is currently experienced within the EU-28. A greater need for supply diversification has been recognized in the European Union. Additionally Gazprom has decreased its production volumes in recent years and seeks to negotiate long-term contracts as opposed to cheaper spot-market prices. Deemed as the country with the worldwide largest natural gas reserves worldwide, Iran could provide interesting opportunities for the EU s desire to diversify its energy supply by country of origin in natural gas. Foreign investments in the Iranian natural gas sector can only occur through the buy-back contractual model, a challenge for European energy companies Sanctions have made natural gas trade with Iran more difficult but not impossible. 2
Final Energy Consumption EU-27 2010 Source: Eurogas 2012 BC CARE & FFU. Lutz Mez
Largest natural gas consumers are Germany, the UK and Italy the Netherlands and Denmark are the only net exporter Gross inland consumption of natural gas in thousand terajoules (GCV) in the EU In 2012 +629% 3,154 +771% 2,855-44% 2,692 +90% 3,081-42% 1,314 1,693 1,520 1,622 267 366 312 433 154 25 193 171 328 399 91 0 56 123 49 0 633 341 178 420 518 187 30 251 139 47 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK production consumption Source: Eurostat 4
EU-27 is a net natural gas importer Total imports and exports of natural gas by country in the EU-27 3500 3000 2012 data indicates significant import dependency 2500 2000 1500 1000 500 0-500 -1000-1500 -2000-2500 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK Source: Eurostat Imports 2011 Imports 2012 Exports 2011 Exports 2012 5
EU-27 import dependency for natural gas remains dominant Main origin of natural gas imports Russia 32,4% 31,9% Norway 26,7% 29,4% Algeria 13,0% 13,8% Qatar 8,7% 11,0% Nigeria 4,3% 3,4% Trinidad and Tobago Egypt Libya 1,1% 0,8% 1,0% 0,5% 0,7% 2,0% Other third countries 9,8% 9,5% 2011 2012 6
Energy acceptance in EU-25 (Eurobarometer) Environmental Policy Research Centre, Lutz Mez
Gas Market Europe > competition BC CARE & FFU. Lutz Mez
Gazprom production projections 487 bcm in 2012 New alternatives may be necessary as increases remain low! - Gazprom production in 2012 amounted to 487 bcm 9
Since 2005 gas production in Iran has increased on average annually by 7% there are 33.6 tcm proven gas reserves Proven national gas reserves in Iran 1 In tcm 17,0 19,8 20,7 20,7 20,8 19,4 23,0 23,0 24,1 25,0 26,0 26,1 26,7 27,6 27,5 27,6 26,9 28,1 29,6 29,6 33,1 33,1 33,6 33,0 33,0 33,0 31,5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e Natural gas production in Iran 1 In bcm 23,2 25,8 25,0 27,1 31,8 35,3 39,0 47,0 50,0 56,4 60,2 66,0 75,0 81,5 84,9 +7% 103,5 108,6 111,9 116,3 131,2 +1% 146,2 151,8 160,5 158,0 161,1 164,3 167,6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014f 2015f 2016f Source: British Petroleum 2013 1. 2012-2015 Daten von Business Monitor 10
What are options to bring natural gas to Europe from Iran or the region? Heinrich Schulz 11
Current and potential natural gas trade from Turkmenistan to Iran to potentially Europe Pipelines: Korpedzhe-Kurt Kui Pipeline Dauletabad-Sarakhs-Khanigaran Pipeline Operational since: 1997 Operational since: 2010 Capacity: 8 bcm/year Capacity: 12 bcm/year Capacities and contracted volumes to Iran (in bcm/year): 2006 2007 2008 2009 2010 2011 2012 2013 Pipeline capacity 8 8 8 8 14 20 20 20 Contracted volumes 8 8 8 8 14 14 14 14 Unbound capacity 0 0 0 0 0 6 6 6 Exports (IEA) 6,3 6,2 7,1 5,8 8,6 13,4 Exports (OIES¹) 6,3 6,2 7,1 7 8 8 8 8 Exports (BP) 5,8 6,1 6,5 5,8 6,5 10,2 9,0 Free capacity 1,7-2,2 1,8-1,9 0,9-1,5 1-1,2 5,4-7,5 6,6-12 11-12 12 ¹ Forecasts for 2013 Source: IEA, OIES, BP, Cedigaz Heinrich Schulz 12
Currently, 90% of Iranian natural gas exports are destined for Turkey energy transit to Europe? Tabriz-Ankara Pipeline exports, 2001-2012 In bcm -25% -83% 4.0 3.5 4.3 4.3 5.7-17% -39% -22% 10.0 10.0 10.0 10.0 10.0 10.0 7.8 8.4 7.5 6.1 5.8 5.3 13? Negotiations for an additional 3 bcm to Turkey: - 2 bcm for domestic consumption and 1 bcm for European consumption 0.1 0.7 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2014e actual use operational capacity Source: OPEC 2012, BP Statistical Review 2013; Eurasia Review; Global Business; 13
Concluding remarks and open questions Europe seeks an alternative natural gas supplier to Russia that can offer: a) extensive volumes and b) financially attractive natural gas supply Some issues that apart to sanctions hinder European investments in Iran s natural gas sector, including the limited investment options are limited to buy-back models Free capacities towards Europe? Which route options are available? Spot-market vs. guaranteed pricing? 14
Thank you for your attention! PD Dr. Lutz Mez BC CARE. Ihnestr. 22. D-14195 Berlin Email: lutz.mez@fu-berlin.de Lutz Mez 15