Turkey and Iran’s Natural Gas
Turkey signed eight memorandum of understandings with Iran during President Receb Tayyip Erdogan's visit to Tehran on April 7th.
Howver, no energy-related agreements were concluded, despite the presence of Natural Resources and Energy Minister Taner Yildiz as part of the Turkish delegation team.
Speaking to the press, Erdogan said Ankara hopes that Iran will provide Turkey with a discount on the gas supplied to the country. He also added that Ankara is ready to increase the level of it Iranian gas imports.
Iran increased gas deliveries to Turkey by one billion cubic meters of gas per annum (bcm/a) during last year. Iran, Russia and Azerbaijan export about 10 bcm/a, 27 bcm/a and 6.6 bcm/a to Turkey respectively. Turkey purchases 1000 cubic meters of Iranian gas at $490, which is much higher than Russian gas (at $425) and Azerbaijani gas (at $335).
The two nations have been in a dispute over natural gas pricing with Turkey filing a complaint with the International Court of Arbitration accusing Iran of overcharging. Minister Taner Yıldız said on Monday that the court is set to issue its final verdict on the dispute in May.
Although the Tuesday visit did not see relationship progress in the energy sphere, Erdogan said that Turkey is ready to further increase Iranian gas imports, if Tehran is prepared to provide a discount.
Iran's state agency IRNA also reported that Turkey is considering the discussion of the prospect of transferring Iran’s gas to Europe. The most viable method of undetaking this this would be the Trans-Anatolia Pipeline (TANAP).
TANAP is expected to transit annually 16 bcm/a gas from Phase Two of Azerbaijan’s Shah Deniz gas field to Turkey and Europe by 2019. Naftiran Intertrade Company (NICO) has a 10 percent share in the Shah Deniz gas field.
The President of Azerbaijan’s State Oil Company (SOCAR) Rovnag Abdullayev said on 4 April that Iran is interested in purchasing a stake in the TANAP. He said SOCAR stands ready to consider the offers for the sale of a part of its share in TANAP.
The EU banned the purchase of Iranian oil or gas in 2012, but a reaching of a comprehensive deal on Tehran's nuclear program targeted for 30 June would see suspension of sanctions.
Iran has already considered delivering its gas to the EU via several routes including Turkey. Iran planned to complete the 9th cross-country gas pipeline to transfer 100 mcm/d of gas towards the north-western borders in neighboring with Turkey. The 1,863-kilometers long pipeline is expected to cost $6 billion.
Gas could also flow to Europe via the Tran-Anatolian Pipeline (TANAP) project, which connects to the Trans Adriatic Pipeline. BP (the operator of Shah Deniz gas field project) and the TANAP consortium signed a share holder agreement on March 13, according to which BP will become one of the shareholders of TANAP.
Iran increased its gas production by 100 mcm/d in 2014. It is expected to have another 100 mcm/a increase in 2015. The country also has planned to boost its gas production level to 1,100 mcm/d until 2020. Iran currently produces about 660 mcm/d.
Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service.