Iran has put multi-billion dollar plans to create a liquefied natural gas industry on hold, the government has said, as new sanctions against Tehran's nuclear programme start to bite in crucial economic areas.

Deputy Oil Minister Ahmad Ghalebani made no mention of sanctions when he announced the policy shift in a recent interview with the ministry's news website Shana, saying that exporting via pipeline made better sense for Iran "in the current situation".

"Regarding Iran's relative advantage of gas transfer, gas exports through pipeline has priority over LNG," he said.

"Right now exporting gas through the country's national pipeline is more feasible, more convenient and faster while exporting LNG requires huge investments and sophisticated technology and needs a long process."    

Iran has the second biggest gas reserves in the world after Russia but sanctions over its nuclear energy programme and other factors have hampered its development and it has no major net exports.

It shares the South Pars field -- the world's largest known gas reservoir not associated with oil production -- with Qatar, its neighbour on the other side of the Gulf.   

In what it calls the North Field., Qatar has become the world's largest exporter of liquefied natural gas (LNG), gas cooled to liquid form and exported on tankers.
 But sanctions, aimed at pressuring Tehran over its nuclear programme, have pushed Western companies -- which have the necessary expertise and capital -- out of projects where they would otherwise have been major players.

Spain's Repsol said on June 28 it had pulled out of a contract it won with Royal Dutch Shell to develop phases 13 and 14 of South Pars. The project covered development of production and exports of LNG.

"At the moment, some of the country's gas schemes, like South Pars 13 and 14 development phases, have been phased out from producing LNG and the gas produced will only be dedicated to sweetening and then injecting into the national network," said Ghalebani who is also head of the National Iranian Oil Company.   

As recently as August 1, another deputy oil minister, Mohsen Khojasteh Mehr, said Iran aimed to produce 40 million tonnes of LNG a year. But Ghalebani said that Iran's long borders, good relations with its neighbours and substantial pipeline network meant transporting gas that way made sense.

Oil Minister Massoud Mirkazemi said in May that Iran needed to invest $200 billion in its energy sector in the 2010-15 period but that it faced a "liquidity shortage".
 It is unclear to what extent Asian countries will move in to fill the gap created by exiting European companies.    

Washington has increased diplomatic efforts in the region to persuade other countries to isolate Iran economically, beyond the UN sanctions which do not in themselves preclude oil sector investment. -Reuters