Liquefied natural gas (LNG) has emerged as the world’s most sought-after energy source following geopolitical tensions in Europe. Unlike oil and gas which are transported through pipelines, LNG is readily available on spot markets and can be rapidly shipped to any location in need.
This flexibility makes it a vital resource, as it bypasses the need for extensive pipeline networks and the heavy infrastructure required to support them. Iran, the Middle East’s largest gas producer, has tripled its production over the past decade to approximately 1 billion cubic meters per day (bcm/d) and holds the world’s second-largest gas reserves, at around 34 trillion cubic meters (tcm). Given this significant resource base, Iran has long sought to become a global LNG superpower, employing various strategies, including leveraging its longstanding alliance with Oman.
Iran’s strategy to involve Oman in its LNG ambitions was formalised through a broader cooperation agreement between the two nations in 2013, expanded in 2014, and fully ratified in August 2015. Earlier in 2003, Iran and Oman had signed a memorandum of understanding (MoU) to construct a 200-kilometer pipeline from Iran’s Kuh-e Mobarak to Oman’s Sohar port, with an estimated cost of $1.2 billion at the time.
Under the agreement, Iran was expected to begin delivering 10 billion cubic meters per year (bcm/yr) of gas to Oman starting in 2008, continuing for 25 years. However, the plan never came to fruition due to escalating tensions between Iran and the West, reports emerged in 2022 that it might be revived but it did not materialise
According to the 2014 plan, Iran was already working on the contract mechanisms for key phases of a significant project. This included the construction of a 200-kilometre land section of a 56-inch pipeline from Rudan to Mobarak Mount in southern Iran, and a 192-kilometre sea section of a 36-inch pipeline on the bed of the Oman Sea, extending to Sohar Port in Oman at depths of up to 1,340 metres. The deal aimed to enable the unrestricted movement of Iranian gas (and later oil) through Oman and into global markets.
From Oman’s side, seabed surveys, pipeline design, and compressor station planning had been completed. Once the gas reached Oman, the process of Iran becoming an LNG producer would have been straightforward. Iran planned to use about 25 percent of Oman’s LNG production capacity (1.5 million tons per year) to produce Iranian LNG, which would then be exported to European and Asian markets, with Oman receiving commission payments. Iran’s broader goal was to become the largest exporter of gas, including LNG and liquefied petroleum gas (LPG), to Europe and Western Asia, particularly targeting China, South Korea, and Pakistan.
LNG in Oman
Earlier this year, in January 2024, reports said that a longstanding plan to establish a renewables-powered LNG project at the Port of Sohar on Oman’s North Al Batinah coast is set to proceed, with French engineering firm Technip Energies expected to handle the construction of the estimated $1 billion project. The project, known as Marsa LNG, is being developed by a partnership between TotalEnergies (80%) and Almuzn LNG LLC, a subsidiary of Omani energy group OQ (20%).
The project, which will have a capacity of 1 million tonnes, is intended primarily as a bunkering and export terminal. This low-emission LNG bunkering plant, the first of its kind in the Middle East, will be built on 44.5 hectares of reclaimed land near the industrial port.
The plant will receive approximately 150 million standard cubic feet per day (MMSCFD) of gas, corresponding to Marsa LNG’s gas equity from Block 10 in central Oman, which is operated by Shell Development Oman in partnership with Marsa LNG and OQ.
Main construction activities are expected to begin in the third quarter of this year, with start-up scheduled for mid-2027. Phase 1 will include civil works, building construction, and mechanical and electrical works. The entire construction process, including pre-commissioning and commissioning, is expected to take around 34 months. The project will be powered by green energy, with electricity supplied by a solar PV project located some distance from Sohar Port.
The Way Ahead
In mid-2023 reports emerged that Oman’s Energy Minister, Salim al-Aufi, announced that the long-delayed Iran-Oman pipeline is finally making progress, with operations expected to begin either late this year or in early 2025. This development is advantageous for both Iran and China, as the Iran-Oman gas route and its associated infrastructure will complement Iran’s sanctions-busting Goreh-Jask pipeline.
According to reports, this pipeline can transport at least 1 million bpd of oil from Iran’s major oil fields, and extends 1,100 kilometres from Goreh in Khuzestan Province to the port of Jask in Hormozgan Province on the Gulf of Oman. Oman’s Minister, Mohammed bin Hamad al-Rumhy, has expressed Muscat’s willingness to serve as a conduit for the gas pipeline, which would originate in Iran’s supergiant South Pars gas field and extend to Sohar in northern Oman. From there, it would connect to the existing pipeline running to Salalah.
“I am optimistic that, if not the later part of this year, maybe soon we will be talking about bringing life to that project again,” Rumhy said of the Iran-Oman pipeline, in an interview. “There are many opportunities to make good use of that project from Oman’s point of view.”
Omani LNG exports operated at near full capacity between 2018 and 2020, averaging approximately 12 Bcm per year. Over the past 24 months, Oman has been carrying out debottlenecking operations at its Oman LNG facility, which will enable an increase in LNG exports by around 2 Bcm per year. Platts Analytics anticipates that Omani LNG exports will reach approximately 14 Bcm per year over the next five years.
