Gazprom signs deal to make Iran LNG player

Russia’s Gazprom says it has signed a basic agreement with the National Iranian Oil Company (NIOC) that envisages cooperation over the production of liquefied natural gas (LNG).    

The company announced in a statement posted on its website that this would be part of a wider plan for cooperation that focuses on the development of Iran’s gas fields “with subsequent transportation and monetization”.

The agreement was signed between Gazprom’s Deputy Chairman Vitaly Markelov and Iran’s Deputy Petroleum Minister for Trade and International Affairs Amir Hossein Zamaninia.  If made final, it would make Iran a key player in the profitable global market of liquefied natural gas is has been absent so far.  

Production of LNG requires a technology heavily patented by American companies. That technology cannot thus be provided to the Islamic Republic due to sanctions by the US against the country.

Foreign companies are also banned from developing any LNG project on Iran’s soil due to the same sanctions.  The country had previously devised three liquefaction projects – Pars LNG, Persian LNG and NIOC/Iran LNG – but had to shelve them after investors – Total and Shell - refused to push them forward as a result of sanctions.

Gazprom is already a major player in the global natural gas liquefaction market.  It currently supplies LNG to ten countries – Japan, Korea, China, India, Taiwan, Britain, the USA, Kuwait, the United Arab Emirates, Mexico – as well as others. 

The company’s only operational LNG project is Sakhalin II which has an annual capacity of 9.6 million tonnes and was built in 2009 in cooperation with Shell. A second key liquefaction project is Baltic LNG which the Russian company is planning to develop - again with the help of Shell.

The technicalities through which Gazprom would cooperate with Iran over production of LNG without falling afoul of US sanctions are not known.

Gazprom further said in its statement that it has signed another basic agreement with Industrial Development & Renovation Organization of Iran (IDRO) over the past few days over joint gas liquefaction projects in third countries. The agreement also envisages projects in the field of advanced gas processing and petrochemistry in the territory of Iran, it added.   

Iran has for long been discussing with Oman to produce LNG in its Qalhat liquefaction plant.  The project involves piping gas from southern Iran to the Persian Gulf sultanate and liquefying it into LNG for shipments to international markets. 

Gazprom’s agreement with IDRO could be a copy of the same scheme in what could be a new strategy by the Islamic Republic to launch liquefaction projects in offshore facilities.  An earlier instance of such strategy became visible when Iran said an LNG project would be launched on a ship in Persian Gulf waters.

The project has been awarded to Norway’s Hemla Vantage energy giant which would install the plant on a vessel close to Kharg Island.  It would become operational over the next two years.        

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