Turkmen Gas Halt No Big Deal
Iran has seen its gas processing, transmission and distribution capacity rise to 700 mcm/d over the past three years. That is why Iran has not faced any problem with gas supply in cold season even after Turkmenistan halted its gas delivery to Iran.
Hamid-Reza Araqi, managing director of National Iranian Gas Company (NIGC), says Turkmenistan is emerging loser. He added that in case negotiations fail, the dispute between Iran and Turkmenistan would go to international arbitration.
Turkmenistan recently moved to unilaterally cut its gas delivery to Iran, regardless of its agreements.
"Turkmenistan supplied 1.5 to 2% of Iran's gas supply that was destined to northern provinces," Araqi said at a press conference.
Iran signed an agreement to import gas from Turkmenistan in 1995 when Akbar Hashemi Rafsanjani was president of Iran and Gholam-Reza Aqazadeh was serving as Iran's minister of petroleum. In Turkmenistan, Saparmurat Niyazov was president of the breakaway ex-Soviet republic.
Araqi recalled Turkmenistan's suspension of gas supply to Iran in winter 2008, saying: "At that time, the Turkmens held talks with NIGC and demanded that prices be multiplied and they even halted gas exports to Iran. Following talks, gas sales to Iran was subjected to a formula."
He said that during years of sanctions, NIGC used to send gold bars to dispatch cash to Turkmenistan to pay for gas imports.
"Dealers also received their commissions for the transfer of money to Turkmenistan, but after the removal of sanctions we settled with them through banking system," said Araqi.
He said that Iran paid 100 million euros to Turkmengaz just before gas deliveries to Iran were halted.
Araqi said the Turkmens were demanding the payment of their debts after President Hassan Rouhani took office.
"After the [removal of the] sanctions we managed to settle our debts partly through the banking system. We also reached agreement with them to settle the rest of our debt by barter and through Iranian companies' export of commodity and services to Turkmenistan, for a value of $2 billion," he added.
Araqi said: "Turkmens had announced that NIGC should pay back its debt within 6 months and we told them that we couldn't. We said that we could repay it within a year."
He touched on NIGC's negotiations with Turkmenistan in the past one month, saying: "Throughout talks with the Turkmens we told them that in case they cut their gas exports Iran will face no problem with gas supply, but the course of negotiations will definitely change. Therefore, continuation of talks depends on the persistence of gas supply."
Araqi said the Turkmens initially accepted Iran's condition, but "they unilaterally cut their gas exports to Iran."
"They imagined that if they do so, gas supply to northern provinces will face problems. But that did not happen," he said.
Araqi said that due to the export of commodities and services by Iranian manufacturers to Turkmenistan, the amount of Iran's debt to Turkmengaz remained unclear. "All these issues must be examined and then we can talk about it," he added.
"The procedure has started for Iran to file its gas complaint with court of arbitration against Turkmenistan. In case negotiations with Turkmenistan yield results, the complaint will not be lodged. Otherwise, we will take the case to the Switzerland-based court of arbitration," he said.
Araqi said Iran's increased gas production over the past three years gave the country a bargaining chip in its negotiations with the Turkmen side. "They imagined that we will run into difficulties after gas export halt, but they were mistaken and Iran faced no problem in this regard," he added.
After gas production hike in South Pars gas field, Iran's gas production capacity has exceeded 700 mcm/d. Furthermore, Iran recently launched Rasht-Sangar trunkline in a bid to supply gas to northern provinces. Next year, Damghan-Neka trunkline is to come on-stream and then we will have no problems with gas supply in this region.
Talks Continue on Gas Swap with Turkmenistan
Iran's geopolitical position and its access to high seas have made the country an important destination for oil and gas swap. The Turkmens have been attentive to benefit from this opportunity.
"Turkmenistan's gas swap with Azerbaijan via Iran's soil will remain in effect," said Araqi.
He said Turkmenistan would continue to swap 6 mcm/d of gas to Azerbaijan, noting that Iran would abide by its international obligations.
Iran-Turkey Gas Dispute
Araqi also referred to Iran-Turkey gas dispute, saying: "Turkey wanted Iran to cut the price of gas sale to this country. They also claimed that Iran has been unable to deliver gas to this country since 2005 and demanded $35 billion in penalties."
Noting that Iran has never shirked from its responsibility for gas delivery to Turkey, he said: "We did not accept this claim of turkey, at all. Even in winter an international arbitrator visited gas pressure booster stations and Iran's gas delivery. In the end, the court of arbitration ruled in favor of Iran."
"On the other hand, Turkey claims that the price of gas exports to this country from 2011 to 2016 must be reduced by 25%. Iran rejected this request and they finally limited the issue to the year 2013. The two companies agreed to reach a figure between 13.3 and 16%," Araqi said.
He said the Iranian and the Turkish sides were given six months to continue talks, adding: "In the end, on the strength of sufficient and documented evidence by Iran, this sum has reached its minimum; i.e. 13.3% which equals $900 million."
Araqi said Turkey was willing to receive this sum totally in cash, adding: "Following our talks with them this sum was agreed to be included in financial statements through delivery of gas."
JCPOA Benefits for NIGC
Araqi also touched on Iran's nuclear agreement with six world powers, known as the Joint Comprehensive Plan of Action (JCPOA), adding: "Before the JCPOA implementation, due to sanctions we had to purchase our needed commodities through intermediaries at much higher prices, but now we are buying directly from the source as intermediaries have been eliminated."
When Iran was under sanctions, Iran had to sell liquefied petroleum gas (LPG) and sulfur at a low price to buyers, said Araqi. "Now with the implementation of the JCPOA and the facility of navigation of international shipping lines in Iran, LPG and sulfur produced at refineries are being sold at a much higher price than during the time of sanctions."
He referred to transfer of technical knowhow as another achievement of the JCPOA, saying: "Currently hi-tech foreign companies are seeking more than ever to have partnership with Iranian companies."
70% of Energy Needs Met
Araqi said domestic capacity has been boosted for the manufacturing of commodities needed in the gas industry. "Soon, a national 25-Megawatt turbine manufactured by domestic companies will be unveiled," he added.
He also said that NIGC has so for managed to meet 70% of Iran's energy needs.
"Currently we have nearly 300,000 kilometers of trunkline and 21 million gas subscribers in the countr