Saturday, November 8, 2008

Iran seems super-keen to progress Omani Kish Gas deal

More news from Iran yesterday, again talking up the idea of an imminent completion of the long delayed agreement on the Iran/Oman Kish gas field development deal.

In the current economic climate, and with Oman now getting almost 6 million m3/d from Qatar and lots of talk on Oman pressing on with the coal-fired options, it - surprisingly - seems more and more the pressure to do a deal rests with the Iranians. The Iranians also keep stressing the LNG angle too, and the article goes on with some boilerplate propaganda about how Iran is successfully doing deals despite the economic sanctions from the USA.

Hard for me to believe a development of that size could be completed by 2012.

Iran, Oman Plan LNG Cooperation
TEHRAN (FNA)- Iran and Oman said they intend to seal a major gas deal by the year end that would allow export of more than 1 billion cubic feet of gas per day via pipeline. This would not only supply Oman's needs, but also provide supply for liquefied natural gas that would belong to Iran.

A deal to develop the Kish field which may hold as much as 45 trillion cubic feet of recoverable gas was signed in April, but the final agreement had been delayed due to price wrangling. [UD: my emphasis] Yet, negotiations picked up after a recent visit to the Persian Gulf country by Iran's Oil Minister Gholam Hossein Nozari.

Nozari struck the deal with Oman during his recent visit. Both countries are eager to finalize the agreement so production can begin by the targeted launch date in 2012. Oman would get the gas it badly needs to meet its export commitments and its soaring local demand. Iran would not only open new export routes to gas hungry Arab Persian Gulf countries, but also market a portion of its exports as LNG, which is more profitable and can be sold on the global market.

Oman has just 24 Tcf of gas reserves, compared to Iran's 982 Tcf. It produces 2.3 bcf/d and demand is expected to increase by more than 25 percent by 2012.


  1. UD

    Can you comment on the nature of the fiscal relationship between Oman and the USA?

    I have not delved into it deeply, but my understanding was that an agreement was reached whereupon the GCC states get to peg their currencies to the dollar, continue petro-trade in dollars and purchase mostly American defense products on preferential terms in exchange for the security provided by the omnipresent contingent of US forces in the region.

    If the above is wholly or partially true, wouldn't trade with Iran create a conflict of interest?

  2. Boxster

    The USA and Oman have had close military ties for years. It was surprising Oman didn't change the peg value recently, but I agree a link to the dollar is part of general GCC foreign policy - but mainly driven by the Saudis.

    The Iran problem probably isn't as big as you'd think in that regard. USA knows Oman could use the gas, as would rather it went south than east. But I'm sure Oman are cautious, and undoubtedly using it as a chip in the negotiation on price.

    A far bigger issue would be the resulting dependency on Iran to keep the taps open. In the short term I'd hope Oman would use Iranian gas to shut in domestic production for the long term, and max out capacity on the LNG plants. Building a lot of infrastructure based on Iranian feedstock would e a strategic mistake until there have been big changes in Iran's foreign policy.

    But meantime, Oman can hopefully exploit an Iranian desire to engage Oman economically to get a good long term price and have Iran borrow the money for the development.

    Oman's special position as the other side of the straight of Hormuz must play to Iranian regional strategic goals for building long term closer ties.

    The USA would be quite comfortable with a pragmatic approach from Oman as long as they are in the loop.

    Better Oman than the French! ;-)


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