"Phases 11, 12 and 13 of the South Pars gas fields will be developed with the aim of providing enough natural gas to produce 27 million tons of liquefied natural gas per year."

Iran has the second largest gas deposits in the world but attempts at constructing LNG tanker vessels within the country have only recently been made as parts of the South Pars gas deposits are allocated for export. Around 75% of the world’s gas reserves are concentrated in the Commonwealth of Independent States (CIS) and the Middle East. Such exceptional circumstances has allowed the countries in the region to offer liquefied natural gas (LNG) at international level and subsequently overtake the markets in the world currently relying on piped-gas.

Today, there are two recognized methods for the transfer of gas: the first is transfer via pipelines and the second is the process of converting gas into liquid form, known as Liquefied Natural Gas (LNG). It is interesting to note that the efficiency of both methods is dependent on the distance between production and consumption. The transfer of gas through pipelines is not economical for distances of over three thousand kilometers due to the drop in pressure within the pipes. On the other hand, special maritime tankers are needed to carry LNG and only a few countries in the world possess the ability to build such vessels.

The problems of gas transfer from the source to the consumer have constantly been a subject of study by the experts in the gas industry. The encouraging element for those trying and making more concerted efforts to tackle the problem and find a solution, is the constant increase in the consumption of gas worldwide. The advancement of technology of gas resource identification, excavation, exploration, extraction, distribution and consumption alongside increases in demand due to a population boom plus industrialization of developing countries has brought much attention to the highly valued resource.

In 1993 identified gas deposits in the entire globe were estimated at 146 trillion cubic meters, in 2000 the figure stood at 158 trillion, in 2001 at 168 trillion m³ and it is probable that this figure will continue to climb due to continual improvements in identification, excavation and exploration methods. Russia possesses 30% of world reserves, Iran is in second place with 15% and Qatar is third with only 5% to its name. Despite this fact Iran occupies the eighth place in the world with regards to production of gas with Russia topping the list. The U.S., Canada, the U.K., Algiers, Indonesia and Holland are second to seventh respectively.

56 trillion m³ of the world deposits belongs to the CIS countries, 52 trillion to the Middle East, 11 trillion to Africa, 10 trillion to South West Asia and only 7 trillion m³ is located in South America. The natural gas energy demands from the year 2005 to 2020 are estimated to increase by 25% overall even though gas consumption in the year 2020 has been predicted to rise to double the year 2000 figure.

It is interesting to note that the biggest importers of LNG, namely Japan, South Korea, Finland, France, Spain and Italy are at the same time the major builders of LNG carriers in the world. China is also gradually beginning to join the club. At present about 130 LNG carriers are active worldwide and another 50 orders have been placed for the vessels. By building the vessels locally, the countries that are LNG importers compensate for the high cost of gas imports. The cost for construction of one LNG carrier in 1999 was less than $300 million. The figure stabilized at the end of the 90’s and it is now in the range of $160-170 million.

It should be noted that there is no specific working relationship between the countries possessing the greatest deposits of gas and the biggest exporters of LNG. Despite the fact that Indonesia is not even ranked among the top ten countries with the largest world gas deposits, it manages to export 28% of the LNG to the globe and stands first in the world. Algiers, Malaysia and Qatar are in second to fourth places respectively and each has shares of 19%, 15% and 10% of LNG exports. Australia, Brunei, the UAE, Nigeria, Thailand, Oman and Libya each have less than 10% shares in sales abroad.

Japan boasts 50% of total LNG imports in the world and South Korea claims a further 15% of this share. France, Spain and the U.S. each import 8%, 7% and 5% in that order. Less than 5% of the LNG purchase figures belong to Taiwan, Turkey, Belgium and Italy. The recent policy changes in the utilization of fuel in Japan and South Korea that consume about 70% of the LNG in the world market and the efforts by China to develop its own port facilities to receive the gas earlier than originally predicted, may all be positive indications of the opportunity presented to the gas-rich countries in the region, like Iran, to develop their facilities and compete with nations like Malaysia and Indonesia for existing LNG demand.

At the same time the local shipbuilders have begun an all-out effort to receive orders for the production of LNG tanker transporters. There has been much expert research to find the reason for Iran’s inability to build ships considering the fact that the country possesses 2700 kilometers of shoreline. Orders put to local sources for the building of goods transporters and passenger vessels has increased in recent years and many of those who consent to the constructions of LNG tankers locally also believe that such orders must be placed with local companies to help the industry grow in Iran. They are also of the opinion that countries such as Japan and South Korea achieved success by relying on orders from their local industries before capturing the international market.

Employment opportunities, improvement in ship building capacity within Iran, and attracting international orders are the best reasons offered for the building of LNG vessels locally by those in support of the project. According to Mohammad Soori, Managing Director of Iran’s Oil Tankers Company (IOTC), the export of LNG to China will begin from 2007. Soori expects 10 million tons of gas will be sold to China annually from then on. Iran also aims to target other markets in Asia including India, South Korea, Japan as well as Spain and England in Europe.

Local shipbuilding companies in Iran are presently trying very hard to receive the necessary state sponsored facilities for maritime construction. The Managing Director of Fara Sahel Iran Ship building and Industries Complex, Karbalaei, said recently, "The approval by the State for the provision of 90% of the expenses required by local shipbuilding companies has paved the way for active participation by shipbuilders on LNG vessels. In view of stiff global competition for transport of LNG and the facilities called for by ship builders, we asked the State Supervisory board to provide the industry with 90% of the cost of the ships to be built locally".

Karbalaei went on to say, "preliminary approval has been received from Iran’s Oil Tankers Company and if the matter is fully approved the IOTC will place its first order for five LNG tanker vessels with Fara Sahel Company. The possible joint venture partners considered for this project are France, Spain, Japan and South Korea. Having made the final choice of the partner, the building of the first ship will take place on the premises of the foreign company partner and in the next stage; the rest of the project will be completed in Iran." The Board of Directors in charge of the foreign currency deposit account for this purpose has already become active in support of local Iranian ship builders. The support offered will be in the form of loans from the account according to international rates to be repaid within ten years.

The other area of difficulty faced by the local companies involved in ship building is the hardship suffered by the banking and administrative systems in Iran, the existence of complicated and restrictive rules and regulations such as those pertaining to customs, construction of machinery and arrival\ departure of foreign experts. On the other hand, the merits of transfer of technology and training of the labor force within the local companies involved in the projects must be taken into consideration as positive aspects. Many critics believe that the building of seagoing vessels and more specifically LNG carriers must be conducted according to the strictest international and environmental standards. They express also that any delay in the conclusion of fleet orders because of local order priorities will greatly harm the gas industry status at international level.