Liquefied natural gas (LNG) has become the world’s most sought-after emergency energy source following Russia’s invasion of Ukraine on 24 February 2022. This is because it is readily available in the spot markets and can be moved quickly to anywhere required, unlike gas or oil sent through pipelines.

Unlike pipelined energy as well, the movement of LNG does not require the build-out of a vast acreage of pipelines across varying terrains and the associated heavy infrastructure that supports it.

Iran is still largest gas producer in West Asia, having tripled production over the past decade to around 1 billion cubic meters (bcm/d). It also holds the second-largest gas reserves on the planet after Russia, at about 34 trillion cubic meters (tcm). It is little wonder that the Islamic Republic has long planned to become a global LNG superpower through a variety of methods, including one that involves longstanding ally Oman.

Iran’s plan to use Oman in its LNG plans was part of the broader cooperation deal made between Oman and Iran in 2013, extended in scope in 2014, and fully ratified in August 2015. It was centered on the Sultanate’s importing at least 10 billion cubic meters of natural gas per year (bcm/y) from Iran for 25 years. The deal was to have begun in 2017, valued at roughly $60 billion at that time. The target was then changed to 43 bcm/y to be imported for 15 years, and then finally altered to at least 28 bcm/y for a minimum period of 15 years.

According to a statement at the signing of the 2014 deal from the then-managing director of the National Iranian Gas Export Company (NIGEC), Mehran Amir-Moeini, the Iranian company was already working on the different contract mechanisms for the key phases of the project. Specifically, the land section of the project would comprise around 200 kilometers of 56-inch pipeline (to be constructed in Iran), to run from Rudan to Mobarak Mount in the southern Hormozgan province. The sea section would include a 192-kilometre section of 36-inch pipeline along the bed of the Oman Sea at depths of up to 1,340 meters, from Iran to Sohar Port in Oman. In broad terms, this deal was intended to allow for the completely free movement of Iranian gas (and later oil) via Oman through the Gulf of Oman and out into the world oil and gas markets. The route was designed to allow Iran the same sanctions-free flows that it was operating via Iraq at that time, and to this day. From Oman’s side, all the preliminary work related to seabed surveys, design of the pipeline and its accessories and the compressor stations was completed some time ago. The depth of the subsea pipeline had been increased in August 2016 due to the heightened political tensions between Saudi Arabia and Iran resulting in a plan modified to avoid the territorial waters of the then-U.S. ally, the United Arab Emirates (U.A.E.).

Once the gas had made its way to Oman, the technicalities of Iran becoming an LNG producer were extremely straightforward. The original plan, according to Alireza Kameli, managing director of the National Iranian Gas Export Company (NIGEC), would have entailed Tehran utilizing about 25 percent of Oman’s then-total 1.5 million tons per year LNG production capacity to produce Iranian LNG. This would then have been loaded on to the specialized LNG transport vessels for export to European and Asian markets, in return for commission payments to Oman. Overall, the Islamic Republic’s plan was to become the largest exporter of gas – including that in LNG and liquefied petroleum gas (LPG) forms – to Europe and Western Asia, with a focus on China, South Korea and Pakistan.

Prior to the withdrawal of the U.S. from the Joint Comprehensive Plan of Action (‘JCPOA’, or colloquially ‘the nuclear deal’) in May 2018, there had been no shortage of international oil and gas firms companies looking to take part in the Iran-Oman pipeline. France’s Total, Germany’s Uniper and E.ON, South Korea’s KOGAS, Japan’s Mitsui, and Shell had all expressed serious interest in being involved, among others. Given the potentially sanctions-busting nature of the project, though, the U.S. included the Iran-Oman LNG project in its efforts to prevent Iran from meaningfully expanding its hydrocarbons export routes into the booming market of Asia. Before the dispute between Saudi and Qatar erupted again, Washington’s main alternative for Oman was that it increased its uptake of gas from Qatar, via the existing Dolphin Pipeline that runs from Qatar to Oman through the U.A.E., or in LNG form, but it refused. Oman’s desire to re-energize the plans for the Iran-Oman gas pipeline was fanned by the U.A.E.’s demands for an increasingly large fee for allowing the transit of gas from Iran through its waters, again part of the U.S. strategy to persuade Oman to take its gas from Qatar.

With U.S. sanctions firmly back in place in 2018, though, Oman backed away from the plan, to be replaced by Russia’s Gazprom in Iran’s LNG program, which duly signed two memoranda of understanding with the NIOC concerning the rollout of a two-fold joint strategy regarding gas. The first part concerned a gas cooperation roadmap between the two companies, and the second part detailed the construction of Iranian LNG facilities in partnership with Iran’s Oil Industry Pension Fund. Initially, this would allow Gazprom to effectively take over from Germany’s Linde on its own then-60 percent complete Iran LNG complex, and later to be integral in the construction of mini-LNG complexes. Gazprom would take payment for its work from the sale of gas both from this complex and from part of the output from fields feeding gas into it. These plans, though, were again put on hold due to increased U.S. sanctions against both Iran and Russia, and a relatively poor global LNG price outlook at the time. Additionally, China was again interested in taking part in the LNG project as part of its wider 25-year deal with Iran.

That said, the middle of April last year saw Oman Energy Minister, Salim al-Aufi, state that the long-stalled Iran-Oman pipeline was finally progressing once again, with expectations that it will commence operations late this year or early 2025. Additionally, less than a month ago Oman announced the construction of a new LNG plant in Qalhat, with an annual production capacity estimated at 3.8 million metric tons, raising the Sultanate’s LNG production to 15.2 million metric tons per year. It is expected to be fully operational by 2029.

Beneficially for Iran, and China, is that the Iran-Oman gas route and adjunct infrastructure will complement Iran’s sanctions-busting Goreh-Jask pipeline, which has the capacity to transport at least 1 million bpd of oil from Iran’s major oil fields and runs from Goreh in the Shoaybiyeh-ye Gharbi Rural District of Khuzestan Province 1100 kilometres to the port of Jask in Hormozgan province on the Gulf of Oman. According to Oman’s Rumhy, Muscat is happy to be a conduit for the gas pipeline that would begin in Iran’s supergiant South Pars gas field and run to Sohar in the north of Oman. This pipeline would then link up to the existing pipeline that runs from there to Salalah near the Yemeni border.