World Business and Economic Analysis
World Business and Economic Analysis
Speaking at the global gas market outlook in the light of current challenges session, Azizollah Ramezani, the Director for International Affairs of the National Iranian Gas Company (NIGC), said “despite the possession of the world’s largest gas reserves, Iran enjoys a small share of gas exports; “the country needs to increase its share in the global gas market by taking advantage of the latest technologies.”
“Iran is currently producing 180 billion cubic meters of gas annually,” said Ramezani adding “meanwhile, the daily gas production of Russia reaches 800 million cubic meters and that of the US adds up to 700 million cubic meters even though American gas reserves are only 30 per cent of Iranian ones in capacity.”
The official reiterated that the country will be able to increase gas production merely relying on existing reserves given that the company access the required technologies and investments.
“In the current time, a rivalry has been formed between the US and Russia to gain a share of the gas market in Europe,” stressed the official underlining “gas exports to Europe in the form of LNG is cost-effective.”
The NIGC official announced that Iran would also be able to have a share in Europe’s gas market asserting “with the fall in oil prices, gas exports to Europe will be economically justifiable while India and China can mark great markets for the Iranian gas.”
“Russia exports gas to Europe by building a 3000-kilometer pipeline; Iran is also capable of doing the same,” emphasized the official.
NIGC’s director for international affairs noted that Iran’s high domestic consumption has led to the loss of its exports markets.
Maintaining that oil and gas respectively consist 40 and 60 per cent the country’s energy reserves, Ramezani called for more focus on the development of gas industry.
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Tehran’s sewerage project has been nominated for the Energy Globe Award 2015, which is one of the most prestigious environmental awards, the Energy Globe website reported.
Eligible for participation are projects with a focus on saving resources, improving air, soil, or water quality, increasing energy efficiency, using renewables, as well as anyone making a contribution towards the fight against climate change.
With the largest wastewater treatment plant in the Middle East, Iran is listed among 15 finalists such as Demark, Australia, Canada, Ethiopia, Nepal, Switzerland, and etc. which are competing against each other in the five categories of earth, fire, water, air, and youth.
Iran’s rivals in the category of water are China and United Republic of Tanzania.
On January 19, Tehran will be the stage for the best environmental projects. It is a memorable event since this awarding ceremony will be the first worldwide TV broadcast after the lifting of sanctions.
This year, more than 177 national winners have already been awarded, and more than 80 of them have announced their coming to Tehran.
Wolfgang Neumann, the CEO of the Energy Globe Foundation, expressed happiness over Iran’s nomination along with 14 other finalists.
Neumann made the remarks during a visit to Tehran’s sewerage treatment plant, Tehran Times reported.
He additionally thanked Iran’s cooperation to sustainable energies projects, adding that Tehran’s sewerage project is pretty effective in preventing air pollution, generating energy, and promoting agriculture.
The Energy Globe Award was founded in 1999 by the Austrian energy pioneer Neumann and is one of today’s most prestigious environmental awards. Projects submitted from over 170 countries take part each year in the awards.
Goal of the Award is to present successful sustainable projects for many of our environmental problems. By audience and/or online voting the Energy Globe World Award winner is selected from among the five category winners. The 1st prize in each category is endowed with 10,000 euro cash award.
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An oil rig is silhouetted against the sunset in St. Lawrence, Texas May 9, 2008. REUTERS/Jessica Rinaldi Thomson ReutersAn oil rig is silhouetted against the sunset in St. Lawrence
Many energy analysts like to make predictions at the end of the year for the coming year. Instead, I'll point to five possible surprises in energy--surprises because few people expect them to happen.
I am not predicting that any of the following will happen, only that there is an outside chance that one or more will occur. Naturally, these surprises would move markets and policy debates in unexpected directions.
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1. Crude oil ends 2016 below $30 per barrel
With oil hovering in the mid-$30 range it doesn't seem implausible that at some point in the not-to-distant future, crude oil will dip below $30 per barrel, if only briefly. What would surprise most people is if the crude oil price finished next year below $30 per barrel. The conventional wisdom is that cheap oil is giving a boost to the economy that will lift worldwide economic growth and thus demand for oil. There is also a belief that high-cost producers will simply have to stop drilling new money-losing wells after more than a year of financial Armageddon in the oil markets. This will bring down supply just as economic growth is rising, sending prices much higher as the year progresses.
The alternate view is that oil in the mid-$30 range is a reflection of an economy that has been weakening since the middle of 2014 and foreshadows a worldwide recession which should hit in full force by the end of 2016. In addition, with Iran almost certain to add to the current oversupply as sanctions are lifted and with the continued determination of OPEC to destroy the viability of tight oil deposits in the United States, the oil price could surprise on the downside, even testing $20 per barrel.
2. US natural gas production declines
2. US natural gas production declines
Gleb Garanich/Reuters
Despite persistent low U.S. natural gas prices, U.S. production has continued to grow. Most of the growth has been coming from two places: the Marcellus Shale where ample deposits continued to be economical in the range of $3 to $4 per thousand cubic feet (mcf) and Texas where furious fracking for oil locked in deep shale deposits also produced associated natural gas without concern for the price of that gas.
With oil drilling across the United States in precipitous decline because of low oil prices, we won't see nearly as much new natural gas associated with oil drilling as we saw in 2014 and 2015. With natural gas now hovering around $2, even the very sweetest of the sweet spots in the Marcellus are unlikely to be profitable to exploit.
Having said all this, U.S. natural gas production growth has continually defied predictions that it would dip in the face of low prices. Part of this had to do with desperate drillers carrying heavy debt loads who had to produce gas at any price in order to pay interest on that debt.
3. Several approved US liquefied natural gas (LNG) export projects are postponed or abandoned
A man works at Chevron's drilling site during a media day in Pungesti April 8, 2014.
One of the memes of the so-called shale gas revolution was that the United States would produce far more natural gas than it consumes and that that would open the way for liquefied natural gas exports to other energy-hungry countries. Two things went wrong. First, U.S. production, while growing, has not exceeded U.S. consumption. Despite the highest natural gas production in history, the United States had net imports of natural gas of about 3 percent of its consumption so far this year.
Second, with the price of landed LNG around the world between $6 and $7, LNG exports from the United States are currently uncompetitive. Even with U.S. natural gas at $2, when the cost of liquefying and transporting gas--about $6 per mcf--is added to the American price, landed LNG prices would have to rise to about $8 just for American suppliers to break even. And, of course, just breaking even is not a proposition investors are very much interested in.
Now, some of the export projects have already undoubtedly received commitments from buyers to take U.S. LNG under long-term contracts, usually priced at Henry Hub plus a certain amount for liquefying and transporting the gas (plus something to reward investors, of course). If those contracts are in place, then the builders of the LNG export projects don't care what U.S. prices are. They make money no matter what. And, it doesn't matter whether they export so much LNG that the United States is forced to IMPORT more from Canada via pipelines or possibly in the form on LNG itself.
Whether buyers make out under such an arrangement will all depend on how world spot LNG prices unfold over the next couple of decades. Undoubtedly, many of those with long-term contracts today would be better off buying in the spot market. But, of course, when prices are high, they have no protection.
What we'll find out this year is which projects have contracts from buyers and which do not. The ones that do not yet have such contracts will almost certainly be postponed or abandoned. For those that proceed, investors who are not careful to understand how much of the capacity of the project has been taken up by long-term contracts and how much will be sold on the spot market may be in for rude surprises if they are too exposed to the spot market and that market remains soft.
4. Bipartisan support for climate change measures emerges in the US Congress
You will certainly think I'm reaching here, and it would be a surprise if this does happen. But expectations for the recent climate conference in Paris were extremely low. And yet, world leaders hammered out an agreement that committed the parties to emissions limits with regular reviews. True, there is no enforcement mechanism. But even so, this result was better than most anticipated.
The same could go for a U.S. Congress stalemated on the climate issue. Even though the Republican majority has taken the view that regardless of the science, Republicans are better off opposing any measure to address climate change, not all Republicans have taken this extreme position. If enough of them peel off and join Democrats on even a small measure, it will mark progress--though it will certainly be a surprise coming in an election year.
5. World oil production declines
In the past world oil production has declined only during recessions or once in the early 1980s following a long period of rising prices and the most severe recession since World War II (that is, until 2008). We've had a long period of price rises from 2000 onward, followed by a severe recession. But production continues to eke out some growth.
According to figures from the U.S Energy Information Administration, worldwide production of crude oil including lease condensate (which is the definition of oil) grew by 15.7 percent in the nine-year period leading up to 2005. In the nine-year period from 2005 to 2014, production grew only 5.3 percent despite record prices and investment.
If worldwide production declines, it will almost surely be because drillers simply lay down even more rigs and companies delay development of tar sands mining projects in Canada to wait for higher prices. This restraint would have to counterbalance additions to world production expected from Iran which will have sanctions lifted in 2016 allowing it to increase its oil production and exports substantially. If peace breaks out in Libya, then the rise in Libyan oil production will probably prevent an overall decline in world production.
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