Iran faces gas shortage despite vast reserves

In early September 2022, Iranian Petroleum Minister Javad Owji warned of a cold winter and potential gas shortages. But he was addressing Europeans instead of his fellow citizens. "You are being badly governed," the minister said in a televised interview, citing Europe's worries that its industrial production and households would suffer due to reduced gas supplies from Russia due to sanctions in response to its invasion of Ukraine.

At the time, Iran offered itself as an alternative source of natural gas and saw its position strengthened in international talks to limit its nuclear program. "We have the world's second-largest gas reserves and can supply Europe," Foreign Ministry spokesman Nasser Kanaani said in early September. But before that could happen, US economic sanctions against Iran would have to be lifted.

Iran, however, would not respond to negotiators' demands for closer cooperation with the International Atomic Energy Agency, and Tehran's plan failed to work. In the meantime, the energy crisis in Europe has eased. Authorities say that supplies are now stable in Germany, which was particularly dependent on Russian gas before the war in Ukraine began.

On top of that, some three months later a familiar problem has returned in Iran: gas shortages due to ailing infrastructure.

'Dress warmer at home'

The country is experiencing technical problems with gas production, the Petroleum Ministry has confirmed. Earlier this week, the oil minister warned people to conserve supplies.

In an interview with the official Shana news agency, which covers the industry, he advised citizens to "dress warmer at home and reduce consumption: Those who use too much gas can expect to have their supply cut off.”

"No one can say, 'I'll pay what I consume,'" Owji added.

By Thursday, government authorities in one northeastern province had closed all offices until Sunday to save electricity and gas.

"Outrageous!" one young mother from Tehran told DW in response to the announcement. "In the last three or four years, we see the same theater every time there is a cold snap. Every snowfall paralyzes the country, when authorities and schools are closed to save energy."

This winter has been no exception: Since mid-December, government offices and schools in various provinces across the country of 84 million people have been closed for weeks at a time to save gas. Still, dressing warmer at home is unusual for the 37-year-old mother, as it is for many other Iranians, who are accustomed to having warm homes heated with cheap gas. Iran may have huge energy reserves, but it tends to use them inefficiently.

"Iran is suffering from an overconsumption of natural gas and other energy sources as a result of extremely poor energy efficiency," said David Jalilvand, who leads the Berlin-based policy consulting firm Orient Matters. "Subsidies, which are intended to alleviate the economic hardship of the population and stimulate the economy, are an important factor here,” he told DW. "Several attempts to cut subsidies failed because of the precarious situation of many Iranian households."

High industry consumption

Iran also struggles with high energy consumption in almost all industrial sectors, especially the iron, steel and cement industries. According to the German Federal Institute for Geosciences and Natural Resources, Iran ranked fourth on the list of countries with the highest gas consumption worldwide in 2020, trailing only the US, Russia and China.

"Over the last two decades, Iran has been able to significantly expand its natural gas production," Jalilvand said. "But production remains underdeveloped in terms of the size of Iran's reserves. Lack of access to key technologies due to US sanctions also plays a role. For the foreseeable future, Iran will not have significant capacity to increase its gas exports."

Competition or cooperation with Russia?

Tehran and Moscow plan to cooperate more closely in response to the US sanctions that both countries face. In July 2022, Russian energy company Gazprom signed a $40 billion (€36.8 billion) cooperation agreement with Iranian oil company NIOC to help it develop two gas fields and six oil fields.

Jalilvand takes a skeptical view of this agreement: "After all, Moscow has no interest in building a powerful rival on global markets, especially since Russia's sales markets have become considerably smaller due to sanctions."

Russia has been offering oil and gas at significant discounts to countries such as China, India and Turkey — all traditional customers of Iran. Turkey, for example, had until recently imported gas from Iran, but is now negotiating a 25% discount on gas from Russia. Bloomberg news agency also reported in December that the Turkish government wants to extract a retroactive discount for gas imports already paid for this fall.

This article originally appeared in German.