DUBAI: If Iranian President Hassan Rouhani’s dream of reaching a deal with world powers on Tehran’s nuclear program in six months comes true, Oman, an important intermediary in the dispute, could be a big winner.
There have been too many false dawns in Iran’s decade-old standoff with the West over Tehran’s nuclear programme to bank on Rowhani’s call in New York last week for a deal within 3-6 months.
But in the weeks leading up to Rowhani’s first foreign trip since he became president in August, Omani officials have been visiting Tehran in a bid to buy Iranian gas in the hope that some day sanctions on Iran will be lifted and Oman can finally get the supplies it desperately needs over the Strait of Hormuz.
Iran sits on the world’s largest reserves of gas and Oman has been trying to buy some of it since 2005 to feed energy intensive industries and liquefied natural gas (LNG) export plants planned before it cut its own reserves estimate.
Price disagreements, Western sanctions that have stunted Iranian energy projects and US pressure on Oman to find other suppliers have prevented any real progress with the pipeline project since then.
But Oman is ahead in a queue like that which formed at Myanmar’s door as sanctions against the southeast Asian state were eased.
Muscat has moved quickly to cement ties since the election of moderate Iranian President Hassan Rowhani improved long-term trade prospects, with Oman’s HM Sultan Qaboos bin Said the first head of state to meet Rowhani after his inauguration in early August.
On that trip, the two countries’ energy ministers signed a gas supply agreement that Iran’s energy minister valued at $60bn over 25 years, which would be by far the biggest trade deal between the two neighbours, if any gas ever flows between them.
“The new government of Iran has a different approach. We are very optimistic that all the political issues between Iran and the West, particularly, will be resolved,” Oman Energy Minister Mohammed bin Hamad Al Rumhy said in early September after signing the gas deal in late August.
“This is our wish in Oman and we’re working towards it... The feeling in Oman is that things are changing.”
US officials have been warning that building a gas pipeline to Iran would likely be in violation of sanctions since an early trade deal was signed in 2007, according to US Embassy cables published by Wikileaks.
The US ambassador to Oman wrote in a September 15, 2008 cable published by Wikileaks that his office would “continue to remind relevant officials as appropriate of the potential applicability of the Iran Sanctions Act,” but noted that “Oman’s urgent need for new gas supplies and dearth of potential suppliers severely limits receptivity to our message”.
Oman started importing Qatari gas through a pipeline across the United Arab Emirates in 2007. But it was not enough. A US embassy cable dated May 6, 2009, quoted Minister Rumhy saying gas imports from Iran were “necessary and inevitable” because Qatar and Saudi Arabia had turned down his supply requests.
The US embassy and Oman energy ministry in Muscat declined to comment on the latest gas deal but the Western diplomatic source said it had not been done with US approval, despite a brighter outlook on relations with Tehran. A US official in Washington said: “US concerns have been conveyed to Oman,” but did not elaborate.
Oman’s ever-growing gas appetite has already taken a bite out of its potential LNG exports and unless it can find a lot more feedstock those exports could dry up altogether over the next decade, analysts say.
Iranian officials have said they expect gas exports to Oman to start in under two years, but Rumhy has said it is unlikely construction of the physically challenging subsea pipeline could even start in that time.
His talks with Iran coincide with continuing negotiations to finalise British energy company BP’s Khazzan project to extract hard-to-reach gas in Oman that could supply around 1 billion cubic feet a day by 2018.
Oman will still need more imports in the longer term, so it makes strategic sense to do the political groundwork even if sanctions hold back progress.
“Given the recent changes in the political leadership in Iran, this is good time to start working towards a mutually beneficial agreement,” Richard Quin, Lead Analyst Middle East & North Africa Upstream Research at consultants Wood Mackenzie in Edinburgh, said.
Reuters
