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Iran, Turkmenistan, Turkey’s new gas talks

Commentary Materials 10 September 2012 22:37
Iran has announced that it has made agreements for transiting gas from Turkmenistan to Turkey as well as exporting gas to Europe via Turkey.
Iran, Turkmenistan, Turkey’s new gas talks

Dalga Khatinoglu, Trend Agency's Iran service department chief

Iran has announced that it has made agreements for transiting gas from Turkmenistan to Turkey as well as exporting gas to Europe via Turkey.

National Iranian Gas Company's managing director Javad Owji told the Mehr news agency on Saturday that Iran and Turkey have recently come to terms on transiting Iranian gas to Europe. According to the agreement, Iran will export gas to Europe via Turkey, and will transit the same amount of Turkmen gas to Turkey, instead.

Meanwhile, no official from Turkmenistan, Turkey, and the EU has confirmed Iran's claimed agreement.

Before, Iranian Oil Minister Rostam Qasemi said on September 1 that his talks with Turkish Development Minister Cevdet Yilmaz that took place on the sidelines of the Non-Alignment Movement Summit in Tehran had positive results for increasing gas exports from Iran to Turkey as well as transiting Iranian gas to Europe via Turkey, although neither Turkish media nor officials commented on the issue of gas talks with Iran.

History of Iran-Turkey gas transition talks

Iran and Turkey inked a memorandum in November 2008 to transit Iranian gas via Turkey to European Union member states. According to the agreement, the privately-owned Turang Transt Company of Turkey was planned to invest $12 billion to build a pipeline dubbed as "Iran-Turkey-Europe".

During the visit of Turkish Prime Minister Recep Tayyip Erdogan in the late December 2010 to Tehran, the Turkish TPAO Company signed an agreement for transiting Turkmen gas via Iran to Turkey as well as exporting Iranian gas to Europe via Turkey, but according to Turkish Energy Minister Taner Yildiz the two sides decided to negotiate on pricing terms and conditions in the future.

However, during the recent months Mr. Yildiz has not spoken about boosting the volume of Iranian gas imports and transiting Iranian gas to Europe. He has just put forwarded the two issues of complaining from Iran at international courts for the non-commitment of Iran to export 10 billion cubic meters of gas to Turkey based on their 1996 agreement, and the dissatisfaction of Turkey with the pricing of Iranian gas exports to Turkey. According to BP, Iran exported just 8.4 billion cubic meters of gas to Turkey in 2011.

Economic Advisor in Europe, Mehrdad Emadi said Trend Iran has held talks with companies from Spain, Cyprus, Greece, and Switzerland as well as the European branch of Russian Lukoil during the past one and a half years regarding gas exports. "The negotiations were not fruitful, so that no European company is after buying Iranian gas".

He pointed out that the recent talks among Iran, Turkey, and Turkmenistan were aimed to find a way to compensate the shortage of Iranian gas exports to Turkey using Turkmen gas, not transiting Turkmen gas via Iran to Turkey and Europe.

Iran sells gas to Turkey at $500 per one thousand cubic meters. Russia and Azerbaijan export gas to Turkey at $400 and $300, respectively.

Iran-Europe gas transit routes

There are two potential routes for transiting Iranian gas to Europe via Turkey according to proposed projects which have yet to be started: The Nabucco West gas pipeline and the Trans Adriatic Pipeline (TAP). One of the two pipelines is projected to join the The Trans-Anatolian gas pipeline (TANAP), which extends from Turkey's eastern border at Georgia to Turkey's western border at Bulgaria.

TANAP is aimed to transfer 16 billion cubic meters of gas from Azerbaijan to Turkey and EU countries in first phase. The project will be inaugurated by 2018. Natural gas will be injected from Azerbaijan's Shah Deniz field to the pipeline. The final transfer capacity of the pipeline will be increased in two phases to 31 billion cubic meters by 2026.

Both TAP and Nabucco have rejected transiting Iranian gas to EU.

Turkmenistan's gas export policies

Turkmenistan pursues the policy of delivering gas to buyers at borders. Although Turkmenistan is exporting gas to Russia, China, and Iran, it neither participates in building gas transfer pipelines, nor does it take the responsibility of probable disruptions overseas.

Within the framework of this fundamental policy, the transit of gas from Turkmenistan to Turkey via Iran means buying Turkmen gas from Iran and selling the same amount to Turkey.

According to BP, Turkmenistan holds 24.3 trillion cubic meters of natural gas (the fourth largest natural gas reserves) and produces some 60 billion cubic meters of gas annually.

Domestic consumption of gas amounts to 25 billion cubic meters. Moreover, it exports 10.1 billion cubic meters of gas to Russia, 10.2 billion cubic meters of gas to Iran, and 14.3 billion cubic meters of gas to China per year.

According to statistics, Iran totally exported about 9 billion cubic meters of gas in 2011 to Turkey and Armenia. In other words, Iran faced a negative balance in gas trade.

Iran's natural gas output stood at 152 billion cubic meters last year, while the domestic consumption exceeded 153 billion cubic meters. This issue is seemingly the main reason for the non-commitment of Iran to sell 10 billion cubic meters of gas to Turkey per year.

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