16 January 2023 - 16:37
  • News ID: 467476
Focus on Caspian Sea Oil/Gas Swap

TEHRAN (Shana) -- Iran enjoys great potential for delivering oil, gas and petroleum products to regional and global markets, due to its geographical position and potential energy and mining reserves. Having such potential in mind, efforts have started to put the country on the path to becoming the energy hub of the region. The first step was the signing a gas swap agreement for the delivery of Turkmenistan’s gas to Azerbaijan via Iran’s territory. Now, as the 13th administration is in its second year in office, the focus is on exporting products, bartering and swapping via the Caspian Sea, in which case, cooperation is planned with foreign firms including Russian companies. 

Negotiations with international companies and Caspian Sea littoral states, such as Russia, Turkmenistan, Kazakhstan, and the Republic of Azerbaijan, is still ongoing for increasing crude oil swap. In the past, major oil companies active in the northern part of the Caspian Sea, such as Swiss Vitol and British Petroleum (BP) have expressed their interest in cooperating with Iran in swap.

Kazakhstan, First Swap Partner

Following the collapse of the Soviet Union and the independence of Central Asian countries, oil swap; with Iran took up added significance. These countries needed to export their oil for their economic development, while their means to deliver their oil to consumers in Europe, Asia, and America were very limited. Therefore, an agreement was signed between Iran and Kazakhstan in 1996, according to which 40,000 b/d of light crude oil was delivered from Kazakhstan to Tabriz and Tehran refineries, and in return, the same amount of Iranian light crude oil was delivered to Kazakhstan's business partners in the Persian Gulf.

In this way, Iran's first oil swap was formed and continued until 2009 with new contracts. In August of the same year, based on the instruction of the then minister of petroleum, due to the low swap rate and the possibility of Iran becoming a crude oil importing country, this transit trade was stopped. Until August 2009, Iran was swapping oil for 13 years, and in this way, it was able to sign contracts with a large number of oil companies and swappers. During this period, more than 254 million barrels of oil had been transported from the Caspian Sea basin to Neka and from there on to Tehran and Rey refineries.

Since 2017, after a gap of several years, Iran has resumed swapping crude oil with the countries along the Caspian Sea, such as Kazakhstan, and is now thinking of increasing this amount of swap and expanding it.

In the oil swap operation, Iran receives a certain amount of oil from the Caspian littoral countries, or their oil customers, and delivers the same amount of oil to them in the Persian Gulf, and receives a swap fee for each barrel of oil swap.

Currently, crude oil swap is carried out using pipelines and telecommunication facilities in the northern district and through 272 kilometers of 30 and 32 inch pipelines. In this way, imported crude oil, after blending and storage in Neka oil terminal tanks, is pumped by Neka, Sari, Gol Pol and Urim oil transfer centers through a 32-inch pipeline, passing through the forested and difficult mountainous areas of Mazandaran and Tehran provinces. After traveling a distance of 220 km, it will be delivered to the Tehran region at the Moghanak pressure breaker station.

By benefitingfromthis large national plan, every month on average about 81. 67 ml of products in Golestan province and also 181 ml of products in Mazandaran province will be delivered to National Oil Products Distribution Company (NIOPDC) to prevent 876 tankers from traveling across the country.

Energy Hub

Iran's long-term goal of implementing oil swap is to become the energy hub of the region. On the other hand, Iran does not merelylook at swap as an economic activity; rather, Iran's view is strategic and long-term. Experts believe that it would bring Iran closer to its goal of becoming the energy hub of the region. In addition to the fact that the transit and swap of oil and gas from Russia brings Iran closer to the goal of becoming an energy hub in the region, it would earn the country good revenue.

Morteza Behrouzifar, faculty member of the Institute for International Energy Studies (IIES), says it would be important for Iran to tie its economy to the economy of other countries.

He described as “complicated” energy sector interactions, saying: “Moving in line with expanding the energy sector interactions would serve the country both politically and economically.”

Russia Keen for Swap with Iran

Iran and Russia have both very good potential in the oil, gas and petrochemical sectors. Due to such potential, Iran’s minister of petroleum has said in the last one year the two countries have signed$4 billion of contracts for developingfields and $40 billion of memorandums on constructing gas export pipelines and LNG plants. In other words, interactions with Russia will go beyond energy exchange, swap and export of gas, oil and petroleum products.

Iranian and Russian officials recently talked about oil and gas swap. Minister of Petroleum Javad Owji said Iran and Russia could swap up to 10 million tonnes of oil and non-oil products, adding infrastructure was ready for that purpose. He said Iran’s cooperation with the Caspian littoral states in the oil and gas sector was strategic.

“The cessation of Russian gas exports to Europe and the change in international conditions have enabled Iran to be a bridge for the transfer of Russian oil and gas products to other countries and become the gas hub of the region,” he said.

These interactions are not limited to export and swap of oil, gas and petroleum products. National Iranian Oil Company (NIOC) and Russia’s Gazprom struck a $40 billion memorandum of cooperation for the future development of Kish and North Pars gas fields and six oil fields as well as maintenance of pressure in the South Pars gas field. This MOU also covers natural gas and petroleum product swapping, LNG projects and gas pipeline construction.

“We unveiled a new model of oil contracts and off-take for the Russians for the development of fields, according to which prospective investors would be insured and supported by the Petroleum Ministry and the Islamic Republic. Such contracts are very sweet and attractive to Russian investors and in the light of the significance of energy today, a golden opportunity has been created for signing further contracts with the Russians in the energy sector,” said Owji.

New Chapter with Kazakhstan

Iran and Kazakhstan have swapped crude oil in the Caspian Sea and Persian Gulf waters for years, but last month, with the signing of a memorandum of understanding between the two countries to increase oil swaps, a new chapter in oil swaps between the two countries was opened. Of course, this is not a new issue and Iran had such contracts with the Caspian Sea States in the past.

Referring to the new chapter of Iran-Kazakhstan relations in the 13thadministration, Iran’s President Ebrahim Raisi said: “In the first step, the trade between the two countries was decided to reach $3 billion.”

Mohsen Khojasteh-Mehr, CEO of NIOC, has said: “The experts of the two countries are supposed to examine the fields of cooperation in the development of heavy oil fields, LNG, oil, gas and petroleum products swap, and export of technical and engineering services, and based on the results of the negotiations between the experts of the two countries, a memorandum of cooperation between Iran and Kazakhstan will be signed.”

Cooperation with Republic of Azerbaijan

Iran’s petroleum minister traveled to Baku in June headinga high-level economic and oil delegation in order to increase the level of relations between the two countries by negotiating with his counterparts in Baku. Of course, it goes without saying that the experience of cooperation between Iran and Republic of Azerbaijan in the Shah Deniz field is a good experience that could be the basis for defining joint work in Caspian oil and gas blocks and fields.

Since Iran has repeatedly announced that it is ready to increase the gas swap between Turkmenistan and Republic of Azerbaijan, in a meeting with the Minister of Energy of the Republic of Azerbaijan, Minister Owji discussed the executive rules of increasing the gas swap, integrated development of shared blocks and fields in the Caspian Basin, electricity exchange and common grounds of cooperation between the two countries and signed memorandums of understanding.

One of the most important memorandums of understanding between Iran and the Republic of Azerbaijan during Owji’s visit to Baku was the memorandum of understanding on doubling the transportation of Turkmenistan's gas from Iran to Republic of Azerbaijan. This contract is in the form of volume and Iran charges swap fee by taking gas.

In December last year, on the sidelines of the ECO Summit, the three countries: Iran, Turkmenistan and the Republic of Azerbaijan agreed to swap 1.5 to 2 bcm of gas from Turkmenistan to the Republic of Azerbaijan every year. This contract, which was signed after the five-year suspension of gas exchanges between Iran and Turkmenistan, has led to an increase in the stability of the gas network in the northeast of Iran and would further enable Iran to become an energy hub.

Caspian Meeting

Last month, the five Caspian Sea countries, as the world's largest holders of gas resources, gathered in Moscow, and all of them emphasized strengthening interactions and cooperation in the field of energy. Even at the Caspian Economic Conference, Iran presented its fourth proposal for the expansion of cooperation in the energy sector and put the option of forming the "Cooperation Committee for Oil, Gas and Petroleum Products of Caspian Sea Littoral States" on the table. Iran's cooperation with the Caspian littoral states in the energy sector is considered strategic.

The 13thadministration seeks to broaden comprehensive cooperation with neighboring countries, especially with the Caspian Sea littoral states, and considering its geopolitical and geo-economic position as the connection point of the Caspian Sea to the southern shores and warm waters of the Persian Gulf, the Oman Sea, and the Indian Ocean, to create mobility in economic and commercial cooperation between the littoral countries of the Caspian Sea, it is seriously determined.

During the first five months of the current calendar year, exports to Republic of Azerbaijan, RussiaandTurkmenistanincreased 84%, 40% and 40%, respectively.The export mix has also changed. Traditional exports which involved mainly farming products and fruits have given way to industrial commodities like catalysts, oil and gas equipment, turbine and compressor.

Courtesy of Iran Petroleum

News ID 467476


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