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    Iran Gas Consumption Forecast


    May 23, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Iran Gas Consumption Forecast

      • 23 May 2022
      • Iran
      • Oil & Gas

      Key View: The launch of new South Pars phases has increased the availability of natural gas, meeting pent-up demand and supporting gas power generation. Over the long term, better economic growth, infrastructure build out and efforts to boost natural gas use over oil will support greater residential and industrial demand.

      Latest Updates
      • We estimate that Iranian natural gas demand rose by 4.0% y-o-y in 2021 and forecast further gains of 3.5% in both 2022 and 2023.
      • Growth will be led by rising demand from the power sector. Our Power team estimates that gas-fired generation rose by 10.0% in 2021 and forecast further gains of 9.8% and 8.6% this year and next.
      • The government is continuing to invest in expanding its gas transmission network. In February 2022, the Iran Gas Engineering and Development Company (IGEDC) announced that it was completing 12 to boost pressure and increased gas transmission capacity.
      • The IGEDC also announced plans to increase capacity at the Shurijeh gas storage facility to 40mcm/d, from 20mcm/d currently. The additional capacity will improve the sector's resilience during times of peak demand.
      • In December 2021, the National Iranian Gas Company announced that domestic gas consumption in the residential and commercial sectors was up by 15% y-o-y, leading to reduced availability of supply to power and industry. The increased demand was due to a cold snap in the country.
      • In the same month, the National Iranian Oil Refining and Distribution Company announced that it planned to increase the share of CNG in the vehicle fuel mix to 25% in 2025, up from 21.2% currently. The government is supporting the widescale conversion of vehicles for the purpose.
      Structural Trends

      Low state-set gas prices, strong growth in domestic production and increased access to the grid have all spurred strong growth in Iranian natural gas demand over the past decade. Over the 10 years to 2021, demand rose by 71.5bcm, with annual growth averaging 3.7% y-o-y. We hold a positive outlook on gas demand, forecasting annual average growth of 2.8% over the 10 years to 2031. Growth will be supported by an expanding population, continued economic expansion and the rising role for gas in the domestic power mix.

      Domestic Consumers Set To Soak Up New Supply
      Iran - Gas Production & Consumption Forecast (2020-2031)

      e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

      The main uses of gas in Iran are:

      • Residential: Household demand accounts the largest share of consumption in Iran, fluctuating between around 40.0-45.0% of the total over the past decade. While we expect that residential demand will continue to rise over the forecast period, its contribution to growth will slow. In 2020, the National Iranian Gas Company estimated that round 95% of the population was already connected to the gas grid, limiting the scope for further additions. Iranian population growth is set to decelerate, with the UN forecasting 0.9% y-o-y growth over 2022-2031, compared with 1.3% over 2012-2021.
      • Power Generation: The power sector is the second largest source of demand, although its contribution varies substantially year by year, generally ranging between 20.0-30.0%. Oil products burnt at power stations have been progressively substituted with gas, reducing direct crude burn and domestic fuel oil and diesel consumption. The combination of continued oil-to-gas switching and a rise in overall energy demand will render the power sector a key driver of growth over the 10 years to 2031. Our Power team forecasts gas-fired generation to rise from 244.7TWh in 2021 to 334.9TWh in 2031, growing its share of the total generation mix from 76.6% to 84.4%.
      • Industrial: Industrial use has trended higher over the past decade, rising from around 10.0% to 15.0% of total demand. Industrial demand will continue to rise, as the economy recovers from US sanctions and gas-based industries grow.
      • Refining And Petrochemicals: Combined, refining and petrochemicals users account for around 5.0% of total consumption. However, its share has steadily shrunk over the past decade, falling from around 8.0% in 2010. Limited forecast growth in refining capacity suggest that this sector will be a small contributor to gas demand growth over the 10-year forecast period. However, a number of petrochemicals projects under development and plans for wider refining capacity expansions could hold upside to the outlook.
      • Transport: Compressed natural gas (CNG) is a small but growing fuel in the Iranian transport sector. Currently, transport demand accounts for less than 5.0% of the total, although we expect this share to rise over the forecast period. The government continues to invest in infrastructural buildouts and vehicle conversions. In 2020, the government estimated that around 2.3mn vehicles had been converted to CNG and announced plans to convert a further 1.5mn.
      • Reinjection: Over the past 10 years, around 10.0-15.0% of gross production has been reinjected into oil reservoirs to maintain production. Reinjection needs are currently towards the low end of the range, due to the impact of US secondary sanctions. That said, the anticipated rollback of these sanctions will not affect our outlook, given that reinjected volumes are not captured within final consumption.
      Gas Consumption (Iran 2020-2025)
      Indicator 2020 2021e 2022f 2023f 2024f 2025f
      Dry natural gas consumption, bcm 233.0 242.3 250.8 259.6 267.4 275.4
      Dry natural gas consumption, % y-o-y 0.8 4.0 3.5 3.5 3.0 3.0
      e/f = Fitch Solutions estimate/forecast. Source: EIA, IEA, OPEC, Fitch Solutions
      Gas Consumption (Iran 2026-2031)
      Indicator 2026f 2027f 2028f 2029f 2030f 2031f
      Dry natural gas consumption, bcm 283.6 290.7 298.0 305.5 311.6 317.8
      Dry natural gas consumption, % y-o-y 3.0 2.5 2.5 2.5 2.0 2.0
      f = Fitch Solutions forecast. Source: EIA, IEA, OPEC, Fitch Solutions
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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