28 February 2023 - 13:25
  • News ID: 469712
Gas, Iran Bargaining Chip

TEHRAN (Shana) -- Iran's gas export and equations for the transfer of theclean energy to its neighboring countries is a program that is being pursued more and more by the PetroleumMinistry. In the latest move, Iran's Minister of Petroleum Javad Owji has held intensive negotiations with senior Turkish officials to extend the gas and energy trade agreement, which seems to be a very important issue in the economic relations between the two countries.

The present articleis aimed at reviewing Iran’s gas exports to neighboring countries and its transformation into the regional gas hub.

Holding 18% of the world's gas reserves, Iran is ranked second in terms of this valuable and environmentally friendly energy resource. Iran's gas reserves is estimated to be around 32 tcm, 5 tcm less than Russia’s. In terms of production, Iran comes second after the United States with 914 bcm in 2020, and Russia with 638 bcm. Iran is the third gas producing country in the world with 250 bcm, far from the top producers.

Iran's policy is to expand cooperation with neighboring countries and the main strategy of the PetroleumMinistry is to cooperate with other countries in the field of energy. Iran has considerable gas resources and reserves in the Persian Gulf, which could be fruitful through constructive and progressive cooperation and a win-win formula. Hossein-Ali Mohammad-Hosseini, director of corporate planning at National Iranian Gas Company (NIGC), has said more than 287 bcm of rich gas was produced and delivered to refineries last calendar year. He said Iran’s five-month gas exports in the current calendar year was 20% higher year-on-year.

Maziar Sayyahnejad, head of supervision, measurement and control of gas quality at NIGC Directorate of Dispatching, said Iran exports 6% of its gas production to Turkey, Iraq, Armenia, Nakhichevan and Azerbaijan. That is a meagre share of Iran’s output, which is blamed on unbridled domestic consumption.

9bcm Delivered to Turkey

Based on a 25-year contract, Iran has been exporting gas to Turkey since 2001. This contract remains in effect until 2026. Based on the terms and conditionsof the contract, the maximum volume of gas sent from Iran to Turkey is 10 bcm and the minimum volume is 8.5 bcm a year. This gas is sent from Tabriz to Ankara through a 2,577 km pipeline. Last year, according to Majid Chegeni, CEO of NIGC, more than 9 bcm of gas was exported to Turkey.

There are two gas export contracts with Iraq. The first one is the gas export contract to Baghdad, which was signed in 2013, and the second one is the gas export contract to Basra, which was signed in 2015. Both contracts are in effect and Iraq is one of the buyers of Iran's gas. Meantime, good plans have been prepared for Iraq in the PetroleumMinistry. Mohammad Reza Jolaei, NIGC dispatching director, says, Iran's relationship with Iraq is a strategic relationship and Iran would raise its gas exports to Iraq.

Talks for Contract Extension

According to Sayyahnejad,Iran's gas production has increased by 4 bcm in the first half of the current calendar year. Therefore, Iran’s PetroleumMinistry is considering extension of the gas export agreement with Turkey as it is close to expiration. During his visit to Turkey in October, Minister Owji discussed the extension of the gas contract and energy trade in a meeting with the Turkey’s energy and economic officials.

One of the most important topics discussed was the extension of Iran's gas export contract to Turkey, the principles of which are agreed upon by both parties, and it was decided to form a joint working group to work on the issue of contract extension. In this trip, they also discussed the issue of increasing the volume of Iran's gas exports to Turkey and building a new gas export pipeline to enhance the capacity of gas transmission through this route.During Owji’s visit to Turkey, two scenarios of increasing gas exports through a new contract or in the form of an extension of the previous contract were discussed.

Jolaei has also referred to a meeting with Turkey’s Botas officials. He has said that proper agreement wasmadeon Iran’s gas export to Turkey. He said that over the coming six months, the two sides would go ahead with repair, cathodic protection and coating of Iran-Turkey pipelines and renovation of the Bazargan station among other plans.

Caspian Energy

Iran and the four countries bordering the Caspian Sea, as the world’slargest gas reservesholders, gathered last month at the second Caspian Economic Conference in Moscow, while the hard winter of Europe is coming and the crisis between Russia and Ukraine is very effective in this difficulty. Therefore, Iranian negotiators tried to create the greatest cooperation in the field of energy between the countries during various talks and speeches in this conference. Today, it is clear that the geopolitical region of the Caspian Sea is the most important region in the world energy market in terms of hydrocarbon reserves.

The Caspian Sea, with its abundant hydrocarbon reserves, is among the three most energy-consuming regions in the world out of four regions, along with China, Europe, and India, and the fact that Iran today is determined to develop activities and operations in the South Caspian region shows that Iran's correct policy and investment in creating infrastructure are essential. After the Persian Gulf and Siberia, the Caspian Sea is the world's third source of energy, which shows that the Caspian Sea, in addition to its geopolitical location, is of crucial importance to the countries bordering the Caspian Sea in terms of oil and gas reserves.

In line with the foreign policy of the 13thadministration, the Islamic Republic of Iran seeks to expand all-round cooperation with neighboring countries, especially with the coastal countries of the Caspian Sea, and considering its geopolitical and geoeconomic position as the connection point of the Caspian Sea to the southern shores and warm waters of the Persian Gulf, the Gulf of Oman and the Indian Ocean is determined to create momentum in economic and trade cooperation between the coastal countries of the Caspian Sea.

According to Owji, the transit and swap of oil and gas from Russia will turn Iran into the energypole in region, and the country will receive a lot of foreign currency income. As gas exporting countries, Iran and Russia have cooperated a lot in the field of energy swap. The planning of the two sides to cooperate in the development of the North Pars and Kish fields and the creation of pressure boosting facilities in the South Pars field is an important issue for Iran.

In the field of gas export to Pakistan and Oman, memorandums have been signed and the construction of the export pipeline to this neighboring country will be done jointly by Iran and Russia.

Owji, who traveled to Russia with the First Vice President and the Iranian delegation to participate in the second Caspian Economic Forum, on the sidelines of this forum, referring to the cooperation between Iran and Russia in the field of energy, said: “By transit and swap of oil and gas from Russia, Iran turns it into energy pole inthe region and the country receives a lot of foreign currency income.”

Iran's cooperation with the countries of the Caspian basin will be strategic as far as oil, gas and energy is concerned, and it seems that the swap agreement and the purchase of 15 bcm of gas through Turkmenistan will be completed within the next few weeks.

Regional Gas Hub

Undoubtedly, the cutoff of Russian gas exports to Europe and the change in international conditions have made Iran able to be the bridge for the transmission of Russian oil and gas products to other countries and become the gas hub of the region. According to Ahmad Assadzadeh, deputy minister of petroleum for international affairs, Tehran expresses hope that Moscow and Turkmenistan will reach an agreement regarding the transit of Russian gas to Iran within swapframework, in which case, the gas swap agreement between the two countries will be implemented by the end of the year. The agreement between Russia and Turkmenistan, the swap agreement and the purchase of Russian gas by Iran will be implemented by the end of this year.

Currently, there is an infrastructure for the annual import of 30 bcm of Russian gas from Azerbaijan and Turkmenistan. By buying this gas at a "reasonable price" and using it in the Northern provinces, Iran may export its gas from the south (place of production) at a higher price to its neighbors such as Pakistan and Oman, instead of saving money and transferring it to the north. It could also increase the volume of gas exports to Iraq and Turkey.

In fact, buying gas from Russia, in addition to saving on transmission costs, helps Iran become the gas hub of the region.

Higher Gas Revenue

The export of natural gas to neighboring countries and the development of energy diplomacy in the last one year have provided a new chapter in the revival of energy diplomacy relations for Iran. In addition to the signing of the tripartite gas swap agreement with Turkmenistan and the Republic of Azerbaijan, the income from gas exports increased from one billion dollars in 2009 to $4 billion last calendar year, of which nearly $1 billion was related to arrears of the past years, which were finally received, but under the same conditions, in terms of volume, 1 bcm more gas was sold year-on-year, and Iran's obligations in the contracts were fulfilled.

Improving Iran's position in the field of gas trade by recording the highest sales volume of gas concentrates in the last 3 years, 64% increase in gas export revenues, 11% increase in the volume of gas exports to Turkey, continuing negotiations to increase gas exports, collecting about $1.6 billion. Regarding Iran's gas demand from Iraq, the 138% increase in gas swaps, the continuation of gas clearing with Armenia's electricity, and conducting negotiations with different countries with the priority of neighboring countries to increase Iran's share in the international gas market are among the gains from gas trade. It seems that Iran is the most favorable option for gas trade and becoming the gas hub of the region due to the existing gas transmission infrastructure and suitable geographical location.

Courtesy of Iran Petroleum

News ID 469712


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