Iran’s Interest in Turkmen Gas

Via Energy Daily, a report of Iran’s increasing efforts to establish itself as a major friend to its oil- and gas-rich neighbors, despite the strength of its more dominant competitors and the international sanctions in place, specifically Turkmenistan.  As the article notes:

“…Since the death of Turkmenistan’s Saparmurat “Turkmenbashi” (President for Life) Niyazov in December 2006, the struggle for the Caspian’s last significant post-Soviet natural gas reserves has intensified. The U.S. Energy Information Administration estimates Turkmenistan’s natural gas reserves in 2007 as 2.83 trillion cubic meters.

Niyazov’s successor, Gurbanguly Berdimuhamedov, is comfortable talking trade with Iran, which could well wind up siphoning off a significant portion of Turkmenistan’s future production.

He arrived in Tehran Feb. 13 for a two-day state visit, his third  trip to Iran since becoming president. The latest was a show of force for Iran, as Berdimuhamedov was accompanied by his entire Cabinet. The last high-level Iranian-Turkmen meetings were held in summer 2007, but following Berdimuhamedov’s visits, last year the two countries signed agreements providing for judicial cooperation and extradition of criminals along with a memorandum on consular, customs and border issues.

The two countries already have close energy ties, hardly surprising as they share a 782-mile border. After Russia, which purchases 50 billion cubic meters of Turkmen gas annually, Iran is the largest buyer of Turkmen gas, with the daily volume of Turkmen gas going to Iran’s northern provinces now running at about 23 million cubic meters.

“Our countries are capable of mutually beneficial cooperation in various spheres,” Iran’s supreme leader, Grand Ayatollah Ali Khamenei, said following the meeting Feb. 14 with Berdimuhamedov, which President Mahmoud Ahmadinejad also attended. “Iran has a powerful scientific and industrial potential, which may be used for the benefit of Turkmenistan.”

According to the Turkmen Foreign Ministry, since establishing diplomatic relations in 1992, the two countries have signed more than 170 documents. The Ashgabat-based Russian-language newspaper Neitralnyi Turkmenistan reports that bilateral trade between Iran and Turkmenistan in 2008 reached $3 billion. Turkmenistan exports fuel and energy, textiles, chemicals, agricultural goods and food products to Iran, receiving in return engineering materials and chemicals, construction materials, electrical goods and food products.

“During the talks some very good proposals were made, which we hope will be implemented in due time,” Berdimuhamedov told reporters. He said his government had agreed to cooperate with Iran in the development of new gas fields, as well as increasing the capacity of the two nations’ gas pipeline network.

The two presidents also signed a joint statement on bilateral cooperation, while their foreign ministers signed several memoranda of understanding on political and economic cooperation.

Oil patch officials from Washington to Moscow surely noted that that Iranian Minister of Petroleum Gholamhossein Nozari and Turkmen Deputy Prime Minister Tachberdy Tagiyev signed an agreement on natural gas cooperation. Tehran has expressed interest in nearly doubling its imports of Turkmen gas, from 8 bcm to 14 bcm annually. Under terms of the document, Iranian companies would develop Turkmenistan’s Yoloten natural gas field and be allowed in return to export its gas to Iran.

Iran clearly regards the agreement as a triumph, since the new field’s output and attendant pipeline, once online, will more than double the Korpezhe-Kurt Kui pipeline’s current 8.4 bcm annual exports.

“According to this agreement, 10 billion cubic meters of gas will be exported to Iran per year from the Yoloten gas field,” Nozari said.

The Yoloten gas field is part of Turkmenistan’s southern Yoloten-Osman massive deposit near the Turkmen-Iranian border. Last October an independent audit by the British firm Gaffney, Cline & Associates confirmed that the South Yoloten-Osman gas field ranks among the world’s five biggest, with possible reserves of 4 tcm to 14 tcm of gas.

GCA Business Development Manager Jim Gillett noted last autumn, “Production at South Yoloten-Osman can be built up gradually to 70 billion cubic meters a year.”

Antipathy toward Russian policies over the past decade brought Turkmenistan increasingly closer to its Caspian southern neighbor. Both before the 1991 dissolution of the Soviet Union and now, the majority of Turkmenistan’s natural gas is exported through Gazprom’s Central Asia-Center pipelines to Russia.

Following the Soviet Union’s collapse, Niyazov grew increasingly angered that Moscow refused to export Turkmen gas to markets outside the Commonwealth of Independent States.

The Kremlin’s isolationist policy, along with Russia’s tightfisted low prices, led Niyazov in March 1997 to halt gas exports and to remind the Kremlin of Ashgabat’s other options: Later that year he opened the $195 million, 124-mile, 8.4 bcm Korpezhe-Kurt Kui pipeline to Iran, Central Asia’s first gas export pipeline to bypass Russia.

Further thumbing his neutralist nose at his former Russian masters, Niyazov concluded a 25-year natural gas delivery contract with Tehran. Despite Washington having passed the 1996 Iran and Libya Sanctions Act, threatening sanctions against any entity investing more than $20 million in Iran’s hydrocarbon industry, in the case of Turkmenistan there was nothing the United States could do but quietly fume, as it had no pressure points against Niyazov.

The new agreement marks yet another hole that Iran has managed to poke in U.S. sanctions. Given the U.S. and EU interest in entering the Turkmen energy market, Washington is unlikely to threaten Ashgabat with punitive measures.

“My country and the European community on the whole are highly interested in stable supplies of hydrocarbons,” Berdimuhamedov told reporters, “which Turkmenistan, pursuing the policy of diversification of energy supplies to global markets, is so rich in.”

Ahmadinejad invited Berdimuhamedov to attend as an honored guest the upcoming Economic Cooperation Organization summit, which will be held in Tehran on March 11, solidifying the energy diplomacy ties of the two countries.”

This entry was posted on Monday, February 23rd, 2009 at 5:43 am and is filed under Iran, Turkmenistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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