Iran's Natural Gas Export Depends on China's LNG Technology Breakthrough

Under the weight of international sanctions, Iran has the second largest natural gas reserves in the world but it is difficult to effectively develop. As a key trading partner of Iran, if China cannot break through LNG technology, it will be difficult for Iran to become a large exporter of natural gas.

Iran's natural gas reserves are second only to Russia, ranking second in the world, but US trade sanctions have tumbled Iran’s development plans. Driven by strong domestic demand, Iraq is currently the third largest natural gas consumer in the world, but it is also the top 30 importer of natural gas.

The EU has recently banned the supply of energy equipment to Iran. Tehran wants to obtain a comprehensive LNG technology from Germany's Siemens (SIEGn.DE). In addition, the only natural gas liquefaction patent is owned by U.S. industry and military giant General Electric (GE.N: Quotes). According to U.S. law, Iran is simply not possible to obtain.

Wood Mackenzie's global gas analyst Noel Tomnay stated on the EU sanctions against Iraq: “The situation is more clear: If Iran wants LNG technology, it can only be helped by China, and China must develop its own technology.”

“China has been studying this for a long time... If it is finally researched, then Iran’s LNG project can still be promoted with the help of special projects with China, but this uncertainty is too great.”

China National Petroleum Corporation (CNPC) replaced the French oil company Total (TOTF.PA) this year and signed a South Paz gas field development agreement with Iran to meet China’s rapid economic development.

However, some analysts pointed out that China's interest in the Iranian gas field project may weaken under the dual effects of China's economic slowdown and other natural gas-producing countries' supply stability.

Iran and its neighbor Qatar share the world's largest natural gas field, which has become one of the world's major exporters. However, the persistent delays in international sanctions and Iranian natural gas projects have hindered the participation of Western companies in the development of the Iranian gas field.

The EU recently issued sanctions that prohibit European companies or individuals from transferring technology to Iran. It was only two weeks later that Iran admitted that it would shelve its original plan to build two new plants, freeze natural gas and export it to tankers, and instead pay attention to the export of pipelines.

Andrew Clayton, an analyst at PFC Energy in Washington, said: “Without Western countries’ natural gas liquefaction technology, it is almost impossible for Iran to advance any LNG project.”

Iran is still optimistic about exporting natural gas by pipeline to the surrounding markets. However, Iran’s own demand for natural gas has soared, and its industrial and oil extraction industry’s demand for natural gas has also continued to increase, which will further weaken Iran’s ability to export natural gas.

Iran is currently building a natural gas pipeline to Pakistan and hopes to eventually export it to the Indian market. Turkey is currently the only natural gas export market in Iran, but due to unstable supply, Iran is sometimes unable to complete export contracts to Turkey.