Israel strikes Iran's gas fields: Why is South Pars indispensable for Tehran?
Iran's South Pars gas field, which it shares with Qatar, was on fire after Israel's precision strikes. The fire was extinguished. However, the attack shows that Israel will go for Iran's economic backbone if the conflict escalates further.
The South Pars field is located offshore in Iran's southern Bushehr province.
Iran is the world's third-largest gas producer after the US and Russia. It produces around 275 billion cubic meters (bcm) of gas per year, or some 6.5% of global gas output. However, because of the US sanctions on exports, it is forced to consume the fuel domestically. It shares the field with Qatar, which produces 77 million tonnes of liquefied gas; it supplies the gas to several nations in Europe and Asia.
The attack can potentially disturb the global oil pricing. The attack heightens the risk to oil infrastructure in Iran, OPEC's third-biggest producer, and to shipments from elsewhere in the region.
South Pars provides roughly two-thirds of the country's supplies.
'It's going to be pretty significant,' Richard Bronze, head of geopolitics at consultant Energy Aspects Ltd., said of Saturday's attacks. 'We appear to be in an escalatory cycle,' and there will be 'questions about whether Israel is going to target more Iranian energy infrastructure,' he added.
Iran has been facing an energy crisis for a long time, with some areas facing the worst power outages in decades. The Iran Chamber of Commerce, Industries, Mines and Agriculture estimated that these blackouts cost the cippled economy about $250 million a day.
'This is a significant escalation,' said Jorge Leon, an analyst at Rystad Energy A/S who previously worked at the OPEC secretariat, said of the onslaught on Saturday.'This is probably the most important attack on oil and gas infrastructure since Abqaiq,' Leon said, referring to the 2019 strike that briefly crippled one of Saudi Arabia's key oil-processing plants.
Also read: Iran Israel war news live updates: 'We can easily get a deal done, end this bloody conflict' says Trump amid strikes
In the 1970s, Iran's oil production was at its peak, with the nation accounting for 10 per cent of the world's output at the time. However, after the 1979 revolution, the US crippled the Iranian economy by announcing sweeping sanctions on Tehran.
The United States tightened sanctions in 2018 after Trump exited a nuclear accord during his first presidential term. Iran's oil exports fell to nearly zero for some months.
China is the biggest importer of Iranian oil. It says it does not recognise sanctions against its trade partners. The main buyers of Iranian oil are Chinese private refiners, some of whom have recently been placed in the US Treasury sanctions list.
If Israel attacks Iran's oil and gas production, it may also impact China, the United States' biggest strategic and economic rival.
Analysts, however, say Saudi Arabia and other OPEC members could compensate for the drop of Iranian supply by using their spare capacity to pump more.
With inputs from Bloomberg, Reuters
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