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Iran Struggles to Advance LNG Plans www.poten.com October 20, 2009 Iran Struggles To Advance LNG Plans With most western firms shunning investment in Iran, the nation is struggling to advance its LNG export program. For now, France’s Total and Malaysia’s Petronas have apparently abandoned their two train, 10.0 MMt/y Pars LNG proposal, while Shell and Spain’s Repsol are keeping their rival 8.6 MMt/y Persian LNG project on life support (see LNGWM, Jul ’08). The two European partners are reported to be still meeting with the Iranian side even after the disputed presidential election and the ensuing turmoil and government crackdown. Meanwhile, Iran is going it alone, for now, with its Iran LNG project. According to Ali Khayrandish, managing director at Iran LNG Co, $1 billion has already been spent on the two-train, 10.5 MMt/y Iran LNG plant. At the same time, the two- train 15 MMt/y North Pars LNG project is being advanced by the China National Offshore Oil Co, which is keen to build the first China-led LNG export project. According to Khayrandish, there are 2,000 workers at the Iran LNG site. They are doing site preparation work, laying foundations for storage tanks and constructing marine facilities. While construction is now 24% complete, work to date has been mostly civil in nature rather than process related and is largely being undertaken by Iranian firms. Pars International Development and Engineering Co is doing most of the site preparation work. PIDECO has apparently also teamed up with WorleyParsons Ltd to build the liquefaction units, winning the €700 million contract award following a competition with Farab Co and China’s Hua Fu Engineering. It is widely anticipated that Linde liquefaction technology will be employed at the site. South Korea’s Daelim will construct the LPG and LNG tanks, while local firm Rah Sahel is building the marine facilities. Neither Linde nor WorleyParsons has confirmed publicly their participation in constructing Iran LNG – nor have they denied it. So far, there is no indication of their presence at the site, since work to date has not involved outside technologies. The complex, Email: [email protected] NEW YORK LONDON PERTH ATHENS HOUSTON SINGAPORE GUANGZHOU which is being built at Tombak, some 50 kilometers northwest of Assaluyeh, will be supplied with 995 MMcf/d of feedgas from phase 12 of the South Pars gas field. Earlier this year, Construction Proceeds at Tombak Site the Central Bank of Iran gave the green light for a $900 million fund to support continued work of the $4 to $4.5 billion project. A syndicate headed by Bank Mellat and comprising other Iranian Source: Iran LNG banks has been created to facilitate the transaction. The National Iranian Oil Co, which along with its pension funds, holds 100% of venture equity, is looking to sell up to 80% of its stake to foreign partners to ease the financial squeeze. In spite of claims by Mr Khayrandish that three European firms are interested in investing in the project, none have yet expressed their intentions. After President Mahmoud Ahmadinejad’s disputed re-election and now the revelation of a second nuclear site, the list of western firms willing to flout US sanctions could dwindle even further. Meanwhile, CNOOC is quietly advancing its North Pars LNG venture, seemingly immune to pressures from Washington not to invest in Iran. This project, which presumably comprises two mega trains with a total capacity of about 15 MMt/y, has largely been under the radar screen since the Chinese firm signed a memorandum of understanding with NIOC in December 2006 for the development of the North Pars field under buyback terms (see LNGWM, Jan/Feb ’07). North Pars is located 85 kilometers north of South Pars and contains some 47 Tcf of gas. The two firms would develop the reserves for the production of LNG with each partner taking half of any gas recovered. CNOOC is understood to have Email: [email protected] NEW YORK LONDON PERTH ATHENS HOUSTON SINGAPORE GUANGZHOU 100 people working on the project in its Beijing offices and an equal number in Iran. North Pars LNG, similar to Iran LNG, will likely look to Linde for liquefaction technology. Until issues related to the sole existing 4.1 MMt/y Linde train at Norway’s Snøhvit LNG train are ironed out, it would seem a truly risky enterprise to scale up to the train size envisaged at North Pars. Nevertheless, CNOOC is very serious about this project and has a plaque in its offices proclaiming “first LNG from North Pars in May 2014”, a highly ambitious target. Perhaps an indication of this determination, the North Pars partners are already exploring shipping options with the National Iranian Tanker Corp, with exports split between China and Europe. But the Obama administration is pushing for new international sanctions against Iran and is pressing Beijing, as well as Moscow, to join this effort in order to make Iran come clean on its nuclear program. Following news of a second nuclear site near Qom and with the US agreeing to participate in upcoming talks in Geneva regarding Iran’s nuclear intentions, it will become increasingly difficult for China as well as international firms like Worley Parsons and Linde to resist US pressures to stop investing in Iran. Email: [email protected] NEW YORK LONDON PERTH ATHENS HOUSTON SINGAPORE GUANGZHOU .
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