The natural gas swap deal between Iran and Turkmenistan has become operational.
Iran’s Oil Ministry has announced that the gas swap agreement for up to 2 billion cubic meters per year took effect on Jan. 2, IRNA reported.
The contract was finalized on the sidelines of the Economic Cooperation Organization summit meeting in Dushanbe, Tajikistan, on Nov. 28, 2021.
“Under the swap deal, the National Iranian Oil Company will receive gas from Turkmenistan and deliver an equivalent amount to Azerbaijan at the Astara border,” Iran’s Oil Minister Javad Owji said.
“Turkmenistan will sell 5-6 million cubic meters of gas per day to Azerbaijan under the trilateral agreement signed in Turkmenistan.”
Turkmenistan has been exploring options on gas swap deals with Iran to export its fuel to markets further afield. Because of economic challenges, Turkmenistan has been seeking more buyers for its natural gas riches other than China.
However, since January 2017, Ashgabat has been embroiled in a row with Iran over allegedly unpaid gas bills.
Turkmenistan used to send nearly 6 million cubic meters of gas to Azerbaijan through Iran up until 2017 when it was brought to a temporary halt due to a row with Iran over unpaid gas bills.
The two nations managed to settle the row out of court, as officials in Tehran signaled willingness to put aside differences with the neighboring state.
Oil and gas swap can be an important source of revenue, as the northern neighbors with abundant hydrocarbon resources need access to the sea in the south
Owji said Iran was moving to resolve a lingering gas debt dispute with Turkmenistan that said in late 2017 it was owed $1.8 billion in payments for gas delivered to Tehran.
"We will soon pay the first instalment to clear the gas debt owed to the Turkmen side," he said, without disclosing the amount.
Iran has major natural gas fields in the south, but has imported gas from Turkmenistan since 1997 for distribution in northern provinces, especially during the winter.
Oil and gas swap can be an important source of revenue, as the northern neighbors with abundant hydrocarbon resources need access to the sea in the south.
Pointing to large-scale access to equipment and pipelines in the country, the Iranian Oil Ministry has made it clear that the government is keen on resuming swap operations with northern neighbors.
According to the ministry’s website, Iran is willing to start swapping oil and gas from Caspian Sea littoral states, provided Russia, Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan cooperate with Iran in this regard.
Peace Pipeline
Fereydoun Barkeshli, an oil, gas and energy analyst, believes the transfer of Turkmenistan's gas to Pakistan via Iran-Pakistan gas pipeline, aka Peace Pipeline, will also benefit both neighboring states.
"Concluding swap deals can help Iran consolidate its position in the international gas markets," he said.
According to the expert, the National Iranian Gas Company is able to transfer Turkmenistan's gas not only to Pakistan but also to far-flung destinations such as India.
"The joint venture can benefit both countries," he said, adding that such operations can stabilize both states' status in foreign markets.
The Peace Pipeline is an under-construction 2,800-kilometer pipeline to deliver natural gas from Iran to Pakistan. The two countries signed an agreement in 2009 to implement the project.
Because of its geopolitical advantage, Iran has signed several swap deals in different sectors of energy with its neighbors.
According to Barkeshli, now that Iran has started swapping natural gas from Turkmenistan to Azerbaijan, it can have a stronger presence in the region.
Referring to the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, the official said the pipeline is unlikely to become operational and pose a challenge to Peace Pipeline.
He added that even if the project is completed, there remain several obstacles, including security of the pipeline, which undermines its implementation.
TAPI is a planned 1,800-kilometer stretch of pipeline aimed at transferring natural gas from Turkmenistan to India.
