Tuesday 16 August 2022

Iran and Russia face significant challenges in their attempt to jointly develop offshore Iranian gas fields as Western sanctions against the two countries are likely to pose problems in sourcing tubing of sufficiently high grades, according to Rystad Energy’s research.

Rystad Energy assesses that it is metallurgical issues that risk undermining Gazprom’s plans to support development of Iran’s offshore gas fields in particular. Both Iran and Russia are under sanctions from Europe and Japan, as well as others. This means that no Japanese or European oil country tubular goods (OCTG) or steel manufacturers can supply either country. It is OCTG producers from these regions that dominate the global supply of corrosion-resistant alloy (CRA) and high-alloy OCTG grades.

Rystad Energy believes it would take a considerable amount of time and investment for Russia’s steel industry to be able to move to significant commercial production of high-alloy grades, with the market being cut off from European billet supply over Russia’s invasion of Ukraine in late February. There would, therefore, appear to be limited scope for quick development of these major offshore sour gas fields until sanctions are lifted.

National Iranian Oil Company (NIOC) and Gazprom on 19 July signed a memorandum of understand (MoU) worth up to $40 billion covering the development of several oil and gas projects in Iran. Under the terms of the pact, Gazprom is set to help NIOC in the development of the Kish and North Pars gas fields, provide pressure enhancements to the giant South Pars gas field and help develop six oilfields. This will, however, require CRA and Super 13Cr OCTG tubing grades, which will prove difficult to source given the sanctions currently in place against both nations.

“The corrosive nature of Iranian oil and gas reserves requires high-grade piping for extraction, which neither Russia or Iran have the capacity or capability to produce in the short term. Indeed, the supply chains for these goods are mostly centered in countries applying sanctions on both states. Alternatives, such as Chinese-supplied piping, have reportedly suffered from leakages and other issues. As such, the $40 billion project is facing setbacks from the outset”, says James Ley, Senior Vice President, Analysis.

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