Impacts of New Gulf Geopolitics on Natural Gas Exports to Asia

1. Impacts of New Gulf Geopolitics on Natural Gas Exports to Asia Dr NajiAbi-Aad 6th Asia Energy Security Summit Goa, 1-3 March 2016

2. Outline • Strong Return of Iran... as a Major Gas Exporter? • An Iranian Focus on LNG • The Iran-Pakistan Gas Pipeline • Impacts of More Iranian Gas on the Market • Growing Tensions within the Gulf, and Potential Impacts of its Gas Exports

3. Strong Return of Iran… • In mid-January 2016, the US and the EU lifted their sanctions on Iran including the embargo on buying crude oil and natural gas, and ended all restrictions on trade, shipping and insurance • In the oil sector, lifting the sanctions will enable Tehran to export as much crude to the world as it can, or as much as it can find demand for • Iran would hike output by about 500,000 b/d and increase exports to some 2.5 million b/d by 2017 • This would push the price in the already-flooded market in only one direction: downwards

4. Strong Return of Iran… as A Major Gas Exporter? • Iran, holding the world’s largest gas reserves (more than 18% or 34 tcm, of which some 60% are in non-associated form), has surely the potential to become a major regional and global gas supplier • However, several challenges facing the Iranian gas sector may hinder its gas export, including: • Steep growth in domestic gas demand; • Growing reliance on gas to increase oil recovery through its re-injection into ageing oil wells; • Disagreements between Iran and potential buyers over gas prices

5. An Iranian Focus on LNG • The real gas potential of the Islamic Republic will particularly materialise through its export as liquefied natural gas (LNG) to global markets • In the new political era, it is easier for Iran to obtain the necessary financing and technology needed to start building its LNG ambitious programme, through the development of the huge South Pars field • In addition, Tehran has been pursuing many proposed gas pipelines, to Europe, Oman, Iraq and Pakistan

6. The Iran-Pakistan Gas Pipeline • The 7.7-bcmy project has experienced considerable financing difficulties, but both countries seem visibly committed to achieve it • Construction of the pipeline on the Iranian side is almost complete, while building it on the Pakistani side has been delayed • Its fate could well be linked to the warmth in relationship between Iran, Pakistan, the US and the Arab Gulf countries, and to LNG competition • Extension to India of this pipeline, if and when implemented, is out of question

7. Impacts of More Iranian Gas on the Market A strong and quick return of Iran on the gas market would lead to a growing global oversupply, with the world market already overfilled with piped gas, LNG, shale gas and other forms of unconventional gas The saturated global market condition has led to a fierce race for gas market shares over European, South American and especially Asian consumers 7

8. In this context, speed matters as established (such as Russia, Qatar, etc.) and new gas exporters (including the US, Australia, East Africa, etc.) and now Iran are all anticipate to produce more, in order to, hopefully, sell more For Asia, among others, that would mean a wide diversification of the sources of gas supply and thus an enhancement of the security of supply, better contractual and commercial terms, and competitive lower prices… 8

9. Growing Tensions within the Gulf • There has been growing tensions within the Gulf, specially between Saudi Arabia and its regional allies (mainly Bahrain, Kuwait and the UAE) on one hand and Iran on the other over the Syrian and Yemeni conflicts, and over many other issues • Until now, those tensions have been contained but the risk of military actions in the region remains pretty high • Such escalation could lead to great damage in petroleum production and export facilities, and thus badly impact the region’s oil and gas exports

10. Thank You !