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Iran talks up possibility of regional cross-border gas exports

Despite sustained delays to the country's natural gas development plans, the Iranians are confident recent talks with Mideast Gulf states could yield material progress and enable the country to launch a series of pipeline projects.

A confidence booster of sorts came with the early February signing of an agreement with a local consortium, led by Bank Mellat, to develop the offshore Kish gasfield. National Iranian Oil Company (NIOC) plans to eventually raise production at the field to 3.5bn cubic feet a day (cf/d), with production expected to commence at 1bn cf/d by 2011. Oman, with which Iran has strong ties, is in line to import the Kish gas (PE 2/10 p16).

That agreement followed a couple of days after a delegation from Bahrain – a Gulf state with which Iran has a much frostier political relationship – visited Tehran to advance a plan to import 1bn cf/d of Iranian gas. Bahraini oil officials, led by deputy oil minister Faisal al-Mahrous, held a fifth round of technical talks over gas imports. No reports emerged of an agreement being signed, but officials on both sides are eager to scotch rumours that the deal is off.

There is also talk of movement with long-delayed proposals to export Iranian gas to the UAE. Sharjah-based Dana Gas said last month that long-awaited natural gas imports from Iran could begin, as testing and commissioning of the project's facilities are under way on the Iranian side. Iran said it had brought the Salman gasfield on stream in February, with initial output of 0.54bn cf/d.

Salman was initially intended to be the source of gas exports to the UAE in 2005, under a 2001 supply contract between NIOC and Crescent Petroleum, which holds a 21% stake in Dana Gas. A price dispute stalled the project, leading Crescent to begin international arbitration proceedings in November to settle the disagreement.

But despite the difficulties and political differences with the regime of President Mahmoud Ahmadinejad, the Gulf states' urgent need for gas has sustained the momentum for talks with Iran. And Iran must move fast; the US' increasingly hostile language towards the country suggests a willingness to tighten sanctions-pressure further.

For Oman, Bahrain and the UAE, a deterioration in the political and security situations could end their hopes for Iranian gas imports.

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