U.S. Shale Gas Bigger Threat To Iran LNG Than Sanctions

July 12, 2013

Iran’s ambition to exploit the world’s biggest natural gas reserves, stymied for years by U.S. sanctions, faces an even sterner test as rising global output and the North American shale boom threaten to erode prices, Bloomberg reports.

The Persian Gulf state would need a decade to build planned export capacity of at least 40 million metric tons a year of liquefied natural gas even if unfettered by economic curbs over its nuclear program, say analysts including Tony Regan at Tri-Zen International Pte. A surge in U.S., Canadian and Australian gas from shale deposits may depress prices for new LNG projects by 35 percent, according to Barclays Plc and Royal Bank of Canada, reducing Iran’s potential profit from selling the fuel.

The U.S. and European Union already restrict Iran’s largest revenue source, crude exports, and the financial industry that enables payments for them. The constraints have cut Iranian crude sales by half since 2011, the International Energy Agency said, and are stifling projects to export some of Iran’s 1,187 trillion cubic feet of gas reserves, about 18 percent of the global total, as LNG. Iran’s President-elect Hassan Rohani said June 17 that he’ll seek a gradual removal of sanctions.

Copyright: Bloomberg, 2013.