Tuesday, September 17, 2013

gas deal with Iran announced. big deal if followed through.

While the Government works to protect Omanis from the corrupting influence of having the press mentioning homosexuality, other government ministries have been more productive. The recent visit of His Majesty to the Islamic republic of Iran resulted in the signing of a deal on getting Iranian gas. The Iranian press release stated that the deal would involve 30 million cubic meters of natural gas per day. That's a significant amount. Even more interesting was that the Iranian oil minister also quoted a price, saying the deal would give Iran (a much needed) 2 billion dollars per year, sanction free. Doing some quick math then is sufficient to work out a gas price of $5.17 per MMBTU, assuming the Iranians pay for the development of the gas field.

Actually, that's the big if. Who will pay for the development, don't know. I suspect Oman will at least have to kick in loans for the infrastructure, and 'pay' for the development.

That would be a great price for Oman, and would certainly be cheaper than say, domestic shale gas. The gas would provide enough gas to support the demands of gas-hungry Petroleum Development Oman, and leave extra for re-export as LNG for Korea and Japan at more than twice the price. Win for Oman, as right now the country is 'gas short', with such demand from PDO, desalination and power generation that the country has about 20% of its LNG capacity sitting idle due to lack of gas reserveAlso a win for Iran as that's 2 billion more than they are getting now, as well as tying the 2 countries together. Also a win for the Asian customers, as demand for LNG is very high after Japan's nuclear problems, and more gas will help lower spot prices.


  1. $5+/mmbtu looks like a big number until you compare the cost of tight gas in Oman!

  2. This has been going on at least since 2008. You can read about the various negotiations in the US embassy Muscat wikileaks reports.
    Look what happened to Crescent in Sharjah; they planned to import Iranian gas and built a plant to strip out the H2S which has being lying unused for at least 5 years and must have cost at least US$ 500 million. The Iranians decided they wanted a higher gas price and that was the end of the deal.



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