14 February 2022 - 16:27
  • News Code: 453441
No Surrender to Gas Rivals

TEHRAN (Shana) -- A three-nation gas swap contract signed by Iran, Turkmenistan and Azerbaijan recently took effect in late December. The contract signed on 28 November 2021 on the sidelines of the 15th ECO Summit calls for the supply of 1.5-2 bcm a year of Turkmen gas to Azerbaijan via Iran’s soil.

Mehran Amir-Moeini, marketing director at the Office of Deputy CEO of National Iranian Oil Company (NIOC) for International Affairs, has said the contract would set a record in Iran’s contractual negotiations. Although some believe that the contract volume is small, Amir Moeini says: "The important thing is that we are in the gas trade; although small in size; "We should not worry that by signing this contract, we have handed over the market to our competitors," he said. Because we did not do that; it is important that in gas export contracts we need to move forward benefitting from strategy and policy.

The following is the full text of the “Iran Petroleum” interview with Mehran Amir-Moeini:

The tripartite gas transit agreement between Iran, Turkmenistan and Azerbaijan has recently entered the implementation phase. Some believe that the agreement is not significant because it involves a low volume of gas, while some others evaluate it from the standpoint of Iran entering gas trade. What do you think of that?

First of all, I would like to point out that it is not our first gas export of swap project, and from gas trade point of view, any activity that leads to generating income, even though small, is a positive step for the country. The interesting point is that the negotiations on this contract have been completed in less than three months, and as far as I can remember, this is a record in the contract negotiations, which is a positive point. But in signing this contract, what is much more important and less considered is “trade”. The volume of this contract may not be very important in the first place, but we should keep in mind that especially in the case of gas exports through the pipeline, the relationship between the countries becomes more intertwined and stronger, because the pipeline creates some sort of cooperation and an interdependence. In this way, better relationship with neighboring countries is established, as if during the sanctions period, Iranian gas was almost exempted, because the Iranian gas buyers requested that sanctions not be applied to gas, and this happened. Iran's gas exports to Turkey and Iraq is still continuing and are excluded from sanctions. So the spirit of the contract is positive, but in case in future we intend to expand that business, it is another issue.

Azerbaijan Republic and Turkmenistan are our gas competitors in the region. By signing this contract, have we created a rival for ourselves and facilitated their gas exports?

As far as this contract is concerned, we have to look at the volume of swap, which is not worrying to insinuate that we have given up the market to our rivals. The key point is that we are involved in the gas trade. Although this competition creates a connection between us (Iran), Azerbaijan Republic and Turkmenistan, but because of its small volume, we should not feel threatened. Relationships like this enhance the entanglement of countries, in my view everything is not limited to economics; rather it is a give and take system. These are complex games that must be approached with more precision and applying precise strategies when geopolitical issues are involved. On the other hand, one has to note that it is true that we like to have our own market, but importers do not like to depend on just one single exporter either. They also want to diversify their gas import mix. If we want to prevent the diversity of gas sellers, buyers will find their markets in another way. I am confident even if gas buyers want to leave their markets to you, they do not leave their whole market to you. So I’m not so worried, as we have not created rivals for ourselves. Another point is that given the volume of our reserves, we need a strategy in this area to see where our optimized gas export point is or whether we should also pay attention to geopolitical issues and take into account their costs and benefits. It is hard, but it is possible.

You mean they will not become our rivals in the European market?

As I mentioned, these are strategic discussions, we need to have a strategy to enter any market. Of course, studies have indicated that the European market is not very profitable for us, because it has to go a long way and there are so many countries that the pipeline has to go through, so this is a problem by itself. However, the European market could be a strategic market for us. These are the issues that decision-makers need to decide upon, and we provide them with the costs and benefits of that decision with the calculations we make. It's up to them to decide upon it.

How much does the swap deal affect the revival of our relations with Turkmenistan?

It will be definitely effective. Sometimes the two sides may be stubborn and not talk to each other. But this contract paves the ground for the parties to talk, and many issues will be definitely resolved. Overall, I think it’s a good movement.

Can this trade be extended to neighboring countries?

Why not! We may also be able to establish such ties with other neighbors. For instance, we may deliver Qatari gas to Pakistan through swap, or we may swap Turkmen or Azerbaijani Republic gas to Kuwait. I mean, there are many ways to activate the gas trade through swap, and all of them could be assessed.

Is it possible at all?

Whether it is possible or not; in my view, it definitely is. Manner of doing it depends on the interests of both parties. In case the interests of both parties are secured, it will normally lead to signing contracts.

As far as swap is concerned, you may have an economic bridge with any country that has reserves and any country that consumes. I remember about three years ago, the Kuwaitis proposed gas swap through Iran. They said that in light of sanctions, they proposed Iran to receive Turkmenistan gas and to deliver our own gas from the south to Kuwait, the gas specifications and quality can be calculated. Whereas we have extensive gas pipelines in Iran there was no need to build a pipeline for that purpose. At that time, we did not reject the Kuwaitis’ offer. But we were so passive that we could not make it happen. Of course, sanctions, had significant impact.

Under the present circumstances which option do you see as more appropriate?

As I mentioned, strategy is of great importance, and we need to look at the issue both in terms of security of demand and security of supply. We cannot merely supply all our resources and trade through swap or pipelines. In my view we should have a combination of all the methods of gas export and gas trade. It could be ok to have LNG exports along with pipeline? LNG exports may not be lucrative enough now, but we can export partly through this option. We’d better be present in all markets, and not to limit ourselves to a single market. Of course, all these discussions are raised regardless of sanctions.

Taking into account all these developments, how do you see the future of gas exports?

Two issues are involved in this case. Do we have the necessary resources? Yes we have. Our first task is to get these reserves out of the reservoirs with high investment. The next issue is that we need to see what our strategy is in exporting gas. For instance, if we want to deal with Europe, undoubtedly we must resolve our political problems. We also have Iraq and Turkey in the gas export market with neighboring countries, and at least we should not lose our market in these countries. These two countries are our first and second priority, we also have a contract with Pakistan that is coming to an end, and today we must start our negotiations with the Pakistanis in earnest. Now, apart from these neighbors, there are more distant markets like China or India to be taken into account.

Given the high consumption of gas in Iran, is it a cause of concern for exports?

The first question that arises in any gas export negotiation is to know where our gas lies. It lies underground. We do not have any problems with gas reserves, there is potential for that, but we need investment, as well as absorbing financial and human resources. All these are possible, we may train human resources and receive financial resources from international markets. Even assuming there are no sanctions, our domestic financial resources do not cover the investment costs of developing gas fields, so we need to attract foreign investment. We may attract investors through signing any contracts that does not contradict with our national laws and regulations.

Negar sadeqi-

Courtesy of Iran Petroleum

News Code 453441

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