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Qatar expansion and Total-Iran deal put world’s biggest gas-field in spotlight

The giant North Dome gas-field has become the focus of the energy world over recent weeks, as both Iran and Qatar announce major expansion projects. At the same time, the Arab blockade of Qatar is pushing the tiny Gulf state towards closer cooperation with Iran, which should help underpin development – there is, after all, plenty of gas for both of them.

At the centre of the Mideast Gulf and straddling the border of Qatar and Iran lies the world’s biggest conventional gas-field – known as North Field/Dome in Qatar, and South Pars in Iran. At 51 trillion cubic meters, according to the US Energy Information Agency (EIA), it contains enough gas to supply Europe’s entire needs for over a century – a truly strategic asset of geopolitical significance.

And North Dome is not just the biggest gas field, but the biggest by far. It is in the order of six times the size of the world’s second biggest field, Urengoy in northern Russia, and ten times the size of Russia’s Yamburg and Algeria’s Hassi R’Mel - the world’s third and fourth biggest fields. Hugoton is the biggest field in the US, at a 15th the size of North Dome, while Europe’s biggest field, Groningen was about a 20th the size in the 1950s, before heavy extraction.

The field also contains 50 billion barrels of condensates, which also makes it one of the biggest liquids accumulations in the world. Together with the gas, this represents 325 billion barrels of oil equivalent (bn boe), making it the largest hydrocarbon deposit of any kind (non-coal) in the world, with Saudi Arabia’s giant Gawar oilfield – the world’s biggest conventional oil-field - trialling with less than 150 bn boe, of which 65 bn boe had been produced by 2010.

Global impact 

Given this size and the low cost of extraction, what happens at the field is critical to the global gas market. So far, Qatar has exploited the field in partnership with companies including Exxon and Shell, to become the world's largest exporter of liquefied natural gas (LNG), although only a tiny fraction of the reserves have been extracted to date. Iran's development of South Pars, on the other hand, has struggled with frequent delays, in part because of international sanctions, and is limited to 500 mmcm/d pipeline supply to its domestic market, along with significant liquids production.

There is clearly potential for far higher production levels from the field on both sides, and to that end, both have indeed announced major expansion over recent weeks – with Qatar lifting its self-imposed moratorium on expansion, in place since 2005, and Iran inking deals with international companies following the removal of sanctions. The blockade of Qatar by Saudi Arabia and its allies is already encouraging greater cooperation between Qatar and Iran. Each has an incentive to raise gas output and draw down reserves before the other side, but Iran has had little success, and there is so much gas that there is plenty for both sides anyway.

Qatar is now planning to boost LNG output by 30% by 2025 – involving a rise in production capacity from 77 million metric tons/yr (mmt/yr) currently to 100 mmt/yr. The additional volume will add to anticipated global LNG oversupply in the first half of the 2020s, and due to its low-cost gas and scale, the additional LNG could threaten the economics of LNG projects elsewhere, such as those in Mozambique and Canada.

Total deal

At 18 billion boe, South Pars makes up nearly half of Iran's total gas reserves, and the country is keen to develop it further as quickly as possible, especially now sanctions have been lifted and Qatar has announced its plans to resume expansion across the southern part of the field. Currently, Iran produces 885 mmcm/d from all fields - almost the same as Qatar - but most of it is being consumed domestically to maintain oilfield pressure, and not a drop of LNG has been produced.

Iran’s President, Hassan Rouhani, recently said that with full development of South Pars, Iran would be earning $100 billion a year in export revenue. “It will be possible to export gas to neighbouring and even non-neighbouring countries and Iran's interaction with the world will grow,” he said. Qatar has certainly seen its global presence grow since it began major LNG exports.

In June, a $5 billion deal was announced with France's Total to develop phase 11 of South Pars. But, again, production will not involve LNG and will only reach as far as the domestic market, with first gas expected in 2021.  Total had been active in Iran before the sanctions, and will operate the 2 bncf/d project with a majority share, alongside CNPC, and state Petropars.

While the project and other expansions at South Pars may boost output, LNG exports remain some way off, and production at some of the earlier phases is understood to be dropping, requiring additional compression to compensate – leaving Iran with much still to do to achieve Rouhani’s vision. Qatar, on the other hand, is firmly tied to the international markets. Although the blockade may threaten local sales, including condensate and flows through the Dolphin pipeline to the UAE and Oman, Qatar’s LNG expansion should remain unaffected and ensure even greater market power and influence on the international stage.

Some observers even claim the giant gas field itself is behind much of the current politics in the Gulf, including the blockade of Qatar and Iran/Saudi stand-off (reinforcing other factors perhaps), with some believing the field will become more valuable relative to oil assets as the mooted ‘gas transition’ takes place.

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