Majedi Reflects on Pak Pipeline, India LNG, Turkey Dispute

Majedi Reflects on Pak Pipeline, India LNG, Turkey Dispute
Majedi Reflects on Pak Pipeline, India LNG, Turkey Dispute

In an interview with Shana news agency, Ali Majedi, deputy oil minister for international and commercial affairs, highlighted the ministry's priorities, which include the Iran-Pakistan gas pipeline, deals with India, and Turkey's complaint against Iran.

Pakistan Pipeline

It has been 13 years since the beginning of the negotiations to export gas to Pakistan, yet many aspects of the agreement remain unclear.

Pakistan blames the lack of progress on the sanctions, which have created obstacles in funding the project, but Iran does not accept this as an explanation, Majedi said.  Iran is ready to commence exporting gas to Pakistan, but cannot do so until the pipeline on the Pakistani side has been completed.  To date there has not been the slightest progress, he continued.

On whether Pakistan should pay Iran the $200 million in compensation for the delays, Majedi said Pakistan will not be able to pay this amount any time soon.

He raised the possibility of resorting to arbitration, similar to the gas export deal with Turkey, stating that this case could also be sent to arbitration. "But it is not Iran's priority to do so, since Iran prefers Pakistan to find the required financial resources and resume the work."

"Despite an earlier agreement between the former Iranian government and Pakistan for Iran to provide the required funds, Iran is not able to help with the financing of the project, given the country's [economic] circumstances."

Speaking of the reasons why Iran moved forward with laying the pipeline ahead of the other side, while it faces difficulties with funding its own crucial South Pars projects, Majedi said the previous government should be held responsible for this. Regardless, Iran had to commence the work in advance of Pakistan, as Iran had to complete 1250 km, while Pakistan only had 780 km.

 "If Pakistan was to completely relinquish the project, it would be possible to use the pipeline for other purposes; although it is primarily designed to export gas."

While in Pakistan only five percent of the work has been carried out during all these years, the pipeline is 80 percent complete on the Iranian side, Majedi noted. "There is a huge difference between the performance on each side, and Iran's progress is not comparable to theirs."

Given the limited financial resources, Majedi stressed that it is crucial to prioritize the projects. He regretted that in the previous government there has been no prioritization.

Exports to India

On whether gas export to India is on hold, Majedi said India is still discussing the option but the easiest route will be through Pakistan, which is now off the table.

"Indians are interested in liquefied natural gas (LNG) imports from Iran, which is always available," Majedi said.

India is investigating option to lay pipelines under the sea, but no extensive work has been undertaken in this regard.""

Gas to Turkey

The gas export is far reaching.  Plans on whether to increase gas exports to Turkey and Europe in the form of LNG or via a pipeline should be considered in tandem. Iran's strategic and geographic location allows it to have many alternatives for export, the official said.

Domestic surplus capacity can be exported in different ways. Considering the country's gas storage capacity, there is no worry over the gas not being sold.

Majedi said that increasing production capacity will strengthen Iran's negotiation power, and flexibility.

"Arbitration is not about being convicted," Majedi said in reference to Turkey's complaint concerning the price and volume of gas exported from Iran.

"Turkey claims that Iran is not to be trusted in certain respects regarding to the gas that was delivered in amounts smaller than stipulated in the contract, [a matter] which pertains to the previous government." At the previous session the arbitration did not accept Turkey's claim of Iran under selling, said Majedi adding that the only issue remaining now is over the price of gas.

Replying on whether he agrees that the price Iran offered to Turkey was higher than Russia and Azerbaijan, Majedi said: "Gas price depends on the market and the share in the market, when the market share is low, than obviously the price is higher. Furthermore, price is also linked to quantity, so if gas is exported in larger quantities, the price will be lower."

Further Dealings

The contract length is also an important consideration. "Iraq is a good market after Turkey, but Iraqi law does not allow for long term contracts. Currently Iran has a four year contract with Iraq, with a preliminary agreement to extend it to 10 years."

"When considering Europe as a priority after Turkey, we must consider whether importing gas from Iran is also a priority for the Europeans." The prioritization needs to be bilateral.

Majedi said he will encourage Germany to participate in Iran's oil and gas projects, in his upcoming visit to the country. "I have plans regarding oil sales or gas exports to Germany," he said noting that "Iran's industry is dependent on Germany in some sectors."