178
Given the current situation and the level of domestic consumption as well as the
high energy intensity, Iran needs foreign investment and without this, it is unlikely
that Iran will become one of the oil producers in OPEC. With regard to foreign
investment, Iraq and Saudi Arabia are gaining much, and if Iran fails to make investments in this regard, it will reduce Iran’s oil production against these regional competitors. In terms of OPEC’s power too, any country with a low oil output will
reduce the group’s influence. Therefore, to redress the power balance of OPEC, Iran
is obliged to increase its oil production. Iran needs to reduce the potential impact of
US withdrawal with strong diplomacy (www.sputniknews.com 2017). As Gal Luft
has stated, more oil production in the Northern Hemispheric gives the opportunity
for the US to impose sanction against Iran, and these sanctions have proved, in the
minds of US policymakers, to be successful based on the fact the country was able
to replace lost supply after Iran lost its production capacity (Luft 2014:80). He
believes that the shale gas revolution has an impact on US policy as manifested
toward the Nabucco project:
European disunity on Caspian energy and the termination of the Nabucco project have
made it hard for the US to maintain its interest in bringing Caspian gas to the EU market.
(Luft 2014:80)
Sanctions have also had negative effects on Iran natural gas sector. Aside from oil
fields, Iran may face problems in its gas fields too in the coming years. In the
Southern Pars fields, for instance, which contains 60% of the country’s total gas
production, levels are today a mere 500 mmb. If the remaining phases of the South
Pars field can be completed, production could increase to 500–720 mmb. However,
to achieve this, on top of a 70-billion-dollar investment, a further 20 billion dollars
will be required. However, due to a drop-in pressure expected by 2022, a great drop
will occur and production will necessarily fall by 25–30%. To prevent this, Iran
must swap the current 1500 ton platforms used with 15–20 ton platforms carrying
2–3 compressors each thus renewing capacity.
Iran’s second-largest natural gas project is located in the Kish Basin, which still
awaits progress after 10 years of stalling. While Iran needed an injection of 2.5 billion dollars in investments to achieve its goal of 28 bmd by 2017, only 250 million
dollars of this has materialized. The project is expected to be operational in 2022
(www.trend.az).
According to Wood Mackenzie analyst Homayoun Falakshahi, if Iran ensures
that the South Pars and Kish fields become operational, the country could achieve a
production level of 320 mmd by 2022. Falakshahi believed that gas sales for 2017
would comprise of 231 bmd. Supplying to the EU represents no mean feat. To supply the EU, Iran would need the completion of Iran’s LNG project to produce 14
bmd (10.4 million tons), which requires 6–9 billion dollars of investment.
Alternatively, with an injection of 6–8 billion dollars, the South Pars could be connected to the North West via a 17-compressor, 1800 km pipeline to Europe. Time is
also a major factor which must be taken into account in considering the complications involved in any of these two projects (www.trend.az 2017).
5 US Energy Diplomacy Under the Obama Administration
Given the current situation and the level of domestic consumption as well as the
high energy intensity, Iran needs foreign investment and without this, it is unlikely
that Iran will become one of the oil producers in OPEC. With regard to foreign
investment, Iraq and Saudi Arabia are gaining much, and if Iran fails to make investments in this regard, it will reduce Iran’s oil production against these regional competitors. In terms of OPEC’s power too, any country with a low oil output will
reduce the group’s influence. Therefore, to redress the power balance of OPEC, Iran
is obliged to increase its oil production. Iran needs to reduce the potential impact of
US withdrawal with strong diplomacy (www.sputniknews.com 2017). As Gal Luft
has stated, more oil production in the Northern Hemispheric gives the opportunity
for the US to impose sanction against Iran, and these sanctions have proved, in the
minds of US policymakers, to be successful based on the fact the country was able
to replace lost supply after Iran lost its production capacity (Luft 2014:80). He
believes that the shale gas revolution has an impact on US policy as manifested
toward the Nabucco project:
European disunity on Caspian energy and the termination of the Nabucco project have
made it hard for the US to maintain its interest in bringing Caspian gas to the EU market.
(Luft 2014:80)
Sanctions have also had negative effects on Iran natural gas sector. Aside from oil
fields, Iran may face problems in its gas fields too in the coming years. In the
Southern Pars fields, for instance, which contains 60% of the country’s total gas
production, levels are today a mere 500 mmb. If the remaining phases of the South
Pars field can be completed, production could increase to 500–720 mmb. However,
to achieve this, on top of a 70-billion-dollar investment, a further 20 billion dollars
will be required. However, due to a drop-in pressure expected by 2022, a great drop
will occur and production will necessarily fall by 25–30%. To prevent this, Iran
must swap the current 1500 ton platforms used with 15–20 ton platforms carrying
2–3 compressors each thus renewing capacity.
Iran’s second-largest natural gas project is located in the Kish Basin, which still
awaits progress after 10 years of stalling. While Iran needed an injection of 2.5 billion dollars in investments to achieve its goal of 28 bmd by 2017, only 250 million
dollars of this has materialized. The project is expected to be operational in 2022
(www.trend.az).
According to Wood Mackenzie analyst Homayoun Falakshahi, if Iran ensures
that the South Pars and Kish fields become operational, the country could achieve a
production level of 320 mmd by 2022. Falakshahi believed that gas sales for 2017
would comprise of 231 bmd. Supplying to the EU represents no mean feat. To supply the EU, Iran would need the completion of Iran’s LNG project to produce 14
bmd (10.4 million tons), which requires 6–9 billion dollars of investment.
Alternatively, with an injection of 6–8 billion dollars, the South Pars could be connected to the North West via a 17-compressor, 1800 km pipeline to Europe. Time is
also a major factor which must be taken into account in considering the complications involved in any of these two projects (www.trend.az 2017).
5 US Energy Diplomacy Under the Obama Administration