Natural Gas Exports from Iran
Release date: October 9, 2012
Summary
Iran is a relatively minor and strictly regional exporter of natural gas via pipelines to three neighboring countries — Turkey, Armenia, and Azerbaijan. Iran supplies less than 1 percent of global natural gas exports and has no current capability to export to global markets via liquefied natural gas (LNG) export terminals. Such capability is years away.
Turkey receives more than 90 percent of Iran's natural gas exports under a long-term contract. Armenia and Azerbaijan have swap arrangements with Iran that account for 6 percent and 3 percent of Iran's natural gas exports, respectively. Armenia exports electricity to Iran to compensate for the natural gas volumes it receives. Azerbaijan repays Iran for the natural gas sent to its Nakhchivan exclave by exporting similar volumes to northeastern Iran.
EIA estimates that the average revenues from Iran's natural gas exports during the period July 2011-June 2012 were approximately $10.5 million per day, or about 5 percent of the estimated $231 million per day in revenues from crude oil and condensates exports over the same period. In 2010, natural gas exports accounted for less than 4 percent of Iran's total export earnings while crude oil and condensates accounted for over 78 percent.
Iran imports more natural gas than it exports. Iran's imports from Turkmenistan alone exceeded its exports during the July 2011-June 2012 period. Iran, which also imports from Azerbaijan and injects natural gas to support oil production, has some ability to divert export volumes to domestic uses.
Restrictions on the imports of Iranian natural gas could reduce the bargaining power of all three importing countries with other suppliers. Impacts on the physical availability of natural gas are likely to vary. Under current and foreseeable market conditions, Turkey cannot make up for all volumes currently imported from Iran from other sources. Excess capacity on import pipelines from Russia and Azerbaijan and at its two LNG terminals has declined as overall natural gas demand has increased, and it cannot serve all areas currently receiving Iranian natural gas. Shortfalls are especially likely to occur during the winter, when demand peaks.
The Azerbaijani exclave of Nakhchivan is wholly dependent on Iranian natural gas. It faces significant challenges due to ongoing tensions between Armenia and Azerbaijan and the general disrepair of the regional natural gas infrastructure. It may be unable to replace volumes from Iran regardless of the season.
Armenia, which uses only small volumes of Iranian natural gas, could likely replace a substantial portion or all of those volumes with increased supplies from Russia via Georgia.
The disruption of Iranian natural gas exports would not be expected to have a significant effect on global natural gas markets, which differ significantly from oil markets due to the inflexible and expensive infrastructure for international trade through pipeline or LNG shipments. Most pipelines operate under long-term fixed-price contracts, effectively limiting the global spill-over from supply disruptions due to captive-market effects. Changes in the utilization of Turkey's two LNG import terminals, which have limited excess capacity, are unlikely to affect global LNG markets.
Background
This assessment of the natural gas sector in Iran, with a focus on Iran's natural gas exports, was prepared pursuant to section 505 (a) of the Iran Threat Reduction and Syria Human Rights Act of 2012 (Public Law No: 112-158). As requested, it includes: (1) an assessment of exports of natural gas from Iran; (2) an identification of the countries that purchase the most natural gas from Iran; (3) an assessment of alternative supplies of natural gas available to those countries; (4) an assessment of the impact a reduction in exports of natural gas from Iran would have on global natural gas supplies and the price of natural gas, especially in countries identified under number (2); and (5) such other information as the Administrator considers appropriate.
This report provides information to be used in preparation of a subsequent report called for under section 505 (b) of the same legislation.