Oman’s Oil and Natural Gas Minister Mohammed bin Hamad Al Rumhi (R) signs a gas memorandum with Iran ‘s Oil Minister Bijan Namdar Zanganeh prior to the start of the Organisation of Petroleum Countries (OPEC ) Conference on March 15, 2005 in Isfahan, Iran.

Iran has the world’s largest proven natural gas reserves (second largest depending on the data source) – 18% of the world total – but has struggled to get its export program off the ground. Iran exports gas to Turkey via pipeline – 7.5 Bcm in 2012 – and negligible volumes to Azerbaijan and Armenia, also via pipeline. Tehran has had LNG export ambitions for decades, but western-imposed sanctions impede access to needed financing and technology, which leaves LNG a longer-term proposition.

However, Iran just announced an agreement that involves construction of a new 260 km (162 mile) pipeline built through Iran’s Hormuzgan Province to Oman’s Sohar port on the other side of the Gulf at an estimated $1 billion cost. Iran will supply up to 10 Bcm of gas per year to Oman, where the fuel will mostly feed domestic consumption. An option also reportedly exists to re-export a portion of the gas to other markets from Oman through a joint marketing company.

“Today after seven months, finally the agreement to export Iranian gas to Oman was sealed,” IRNA quoted Iranian oil minister Bijan Zanganeh as saying.

“We are entering the Omani retail market for the first time and contrary to other contracts, we have not agreed on a price,” Zanganeh said, according to IRNA. – Reuters via Gulf Business