IRAN - Pollution - Demand For Clean Products.

Air pollution in Tehran and other major cities has reached dangerous levels since 1998. At times the authorities in Tehran ask people suffering from heart and asthmatic problems to remain indoors. Kindergartens and elementary schools close at such times. In view of this, the state has begun considering various gas-to-liquid (GTL) projects to produce ultra-clean fuels. Shell has proposed a 75,000 b/d GTL venture. There is a proposal to produce dimethyl ether (DME) from natural gas to fuel power plants (see Downstream Trends No. 15 of next week's Review).

National Iranian Gas Co. (NIGC), a unit of NIOC, in 2000 embarked on an aggressive ten-year natural gas vehicle (NGV) development programme with the conversion of 500 domestic diesel buses. By 2010, NIGC then forecast, all public transport vehicles would have been converted.

Natural Gas: Iran has the world's second biggest reserves of natural gas next to those of Russia. Its proven reserves exceed 28 TCM. The cost of producing the gas in this country is one of the lowest in the world. So the shift to this cheap and clean source of energy is logical. But the cost of shifting to gas is high, as the country still lacks the infrastructure for town gas.

Iran imports an important part of the gas it consumes, while its exports at present are limited to pipeline gas being supplied to Turkey and a relatively small volume of LPG. Since December 1997, Iran has been importing natural gas from Turkmenistan through a 200-km pipeline supplying the north-east of the country. Imports from Turkmenistan rose to 8 BCM/year from fiscal 2005/06.

For the second winter in succession, Iran in December 2006 was obliged to make its excuses to Turkey for sharply reducing flows of natural gas through the cross-border pipeline, owing to technical problems related to cold weather. The difficulty Iran had in abiding by the terms of its contract raised questions both about Tehran's future gas export plans and about its domestic energy strategy, though Iranian exports to Turkey were resumed in late January.

The pipeline to Turkey has been in operation since late 2001, and is covered by a 25-year agreement calling for supplies to reach a plateau of 27 MCM/day in 2007. Before the interruption, the pipeline was carrying just over 20 MCM/day, accounting for about 25% of Turkey's total gas imports. Most of the remainder came from Russia via the Blue Stream pipeline beneath the Black Sea.

The backbone of Iran's domestic gas distribution system is a network of trunklines (IGATs), the first of which was completed in the early 1970s, and was used briefly to export Iranian gas to the then Soviet republic of Azerbaijan. After the disruptions of the Islamic revolution in 1979 and the 1980-88 war with Iraq, Iran embarked in the 1990s on a major programme of expansion of its gas industry, based on the giant offshore South Pars field in the Persian Gulf. The field is being developed in 28 phases, each with a capacity to produce some 10 BCM/y. The gas distribution network has been expanded, with several more IGATs completed or underway, and plans have been drawn up for increasing gas pipeline exports, both westwards through Turkey to Europe and eastwards to Pakistan and India, as well as for setting up LNG export terminals (see Gas Market Trends No. 16).

NIGC is to build a ninth trunkline to take gas from Assaluyeh to Bazargan in north-west Iran, close to the borders with Turkey and Armenia. NIGC Managing Director Reza Kasaizadeh recently said the proposed 1,800 km pipeline would be built with gas exports in mind. He said the trunkline would be 56-inch in diametre, with 14 booster stations along the route, adding: "It is estimated that $3.5 bn would be needed to lay the pipeline. We have decided that a build-own-operate (BOO) contract would be most suitable for the project".

By 2015, according to NIGC, gas utilisation will be distributed as follows: 35% for injection into the fields, 35% for power, 12% for the petrochemical industries, 11% for gas liquids (NGL & LPG), and 8% for local field and operational needs.