Iran LNG Says It Will Overcome Sanctions to Start Exporting Fuel in 2012

Iran Liquefied Natural Gas Co., the country’s maiden LNG project, says it’s poised to begin exporting by the end of next year after tapping domestic funds to beat international sanctions.

The company, 49 percent owned by the government, aims to process LNG and ship it from a terminal to be built between the southern port towns of Assaluyeh and Kangan using foreign technology and cash from Iranian banks and investors.

“On the path we’re on now, we don’t have investment needs or technological needs,” Managing Director Ali Kheir-Andish said in an interview at the company’s headquarters in Tehran. “It’s a challenging objective, but we are making all the efforts towards meeting this target.”

Iran holds 16 percent of global gas reserves and is the world’s fourth-largest producer after the U.S., Russia and Canada, according to data from BP Plc. While it’s building or planning pipelines to export gas to regional neighbors such as Pakistan, India and Syria, the country wants also to develop the ability to produce the fuel in liquefied form for easier transportation to more distant markets.

Iran had aimed to start exporting LNG at least five years ago. Indian Oil Corp., a state-run refiner in India, discussed purchasing LNG as early as 2006. Zhuhai Zhenrong Co. of China agreed with state-run National Iranian Oil Co. to buy fuel starting in 2008.

Ambitious to Export

“Of course it is our ambition to be a top exporter, but that has to be in line with preserving our national interest and standing,” Kheir-Andish said on April 10. “We’re not going to make our people miserable and give nothing to local companies in order to export all the gas. Iran has lots of use for the gas domestically.”

Economic sanctions imposed by the United Nations, European Union and the U.S. over Iran’s nuclear program have discouraged investment in the Persian Gulf country. Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, and Repsol YPF SA (REP) of Spain pulled out of a project in Iran’s South Pars gas field last year. China National Petroleum Corp. replaced Total SA (FP) in the same field in 2009 after the French company postponed an investment citing Iran’s strained relations with the West.

“Domestic banks have become partners in providing the investment needed,” Kheir-Andish, 46, said. Iran LNG has cost some $1.5 billion so far and will need a total investment of almost $5 billion upon completion, he said.

European Technology

The company has secured the technologies it needs through contracts with foreigners, including companies in Europe, the executive said. He declined to identify the partners, citing concern that the U.S. and its allies might put pressure on them to try to intensify Iran’s isolation.

“We have the technology needed at our disposal,” he said. “We concluded the contracts, and these are being executed.”

Iran LNG is based in Iran’s southern Bushehr province in the Pars II special economic zone. The gas it wants to chill into a liquid would come from South Pars, which together with the adjacent North Field in Qatar comprises the largest known gas deposit in the world. Qatar is the biggest exporter of LNG, with annual production capacity of 77 million metric tons.

Iran LNG expects to produce 8 million tons of the fuel in its first year of operation and foresees potential annual output of 10.8 million tons, Kheir-Andish said.

Iran exported 5.67 billion cubic meters of gas in 2009 and imported 6.17 billion, mainly from neighboring Turkmenistan, according to the BP Statistical Review of World Energy issued last June. Iran was the world’s third-biggest consumer of gas that year, after the U.S. and Russia, BP said.

To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net.

To contact the editor responsible for this story: Steve Voss at sev@bloomberg.net.

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