EU considers energy deals with Iran

The potential areas for collaboration would include nuclear, oil and gas, renewables and energy efficiency and power generation.

Miguel Arias Canete, the commissioner for climate action and energy for the 28-member bloc, said the 'Iran deal opens the door to a closer EU-Iran energy cooperation'. Delores Johnson / The National

The lifting of international sanctions on Iran opens up a new possibility for the European Union’s oil and gas strategy, according to its energy ­commissioner.

The EU’s first technical assessment mission to Iran will take place next month to help gradually resume EU-Iran energy cooperation.

“The Iran deal opens the door to a closer EU-Iran energy cooperation,” said Miguel Arias Cañete, the commissioner for climate action and energy for the 28-member bloc.

The International Atomic Energy Agency confirmed on Saturday that Iran had complied with a deal to prevent the country from developing nuclear weapons. This led to Implementation Day, or the waiving of certain sanctions on Iran, which includes the sale of oil on international markets and access to the global financial system for trade.

Mr Arias Cañete said that potential areas for collaboration would include nuclear, oil and gas, renewables and energy efficiency and power generation.

Of particular interest would be the involvement of Iran in the Southern Gas Corridor, a plan to bring gas supplies from the Caspian and Middle East areas in an effort to diversify Europe’s energy suppliers. About 40 per cent of natural gas imports come from Russia, European Commission data for 2013 shows.

Europe is looking to increase competition in its energy market to drive down costs and improve security of supply. The group imports 53 per cent of the energy that it consumes at more than €1 billion (Dh4bn) per day.

“Security of supply is one of the pillars of the EU, and we’re trying to diversify our suppliers and the roots of suppliers for sure. We want lower prices and for that, we have to have competition,” Mr Arias Cañete said, adding that there was “space for cooperation”.

While Iran has said that it would immediately ramp up its crude oil production by 500,000 barrels per day, there is the potential for substantial gas exports. “The focus has been on oil exports and upstream and downstream investment while the gas side gets less attention internationally, but it is very important for Iranians,” said Richard Mallison, a geopolitical analyst with the UK consultancy Energy Aspects.

Iran has ambitious goals for gas production and exports, including selling to Europe and completing its LNG export facilities. “The lifting of sanctions will enable them to access the technology and perhaps unlock the investment to help develop more gas reserves because Iran’s challenge has been to increase domestic production to meeting rising demand,” he said.

Energy Aspects said that the real prize to the sanctions relief was attracting the western companies to invest in the energy sector. The country estimates that it needs about US$200bn of financing across the upstream and downstream sectors, and has already identified 50 oil and gas projects to offer for auction.

However, the firm warned that while many companies are showing interest in various opportunities on offer, it does not mean that a substantial amount of investment would flow in immediately.

“For Europe, there’s a real question mark whether Iranian gas is necessary or that attractive,” said Mr Mallison pointing to the collapse of LNG prices as a result of a rise in exports from the US and Australia.

He said that those countries were a simpler option for Europe over the next few years as the continent already has LNG import terminals that aren’t fully being used.

“Why go to the trouble of building a pipeline from Iran to Europe when as European importers you already have LNG available at lower prices, increasingly from the US as well as traditional exporters?”

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