Tehran and Baku have signed a memorandum of understanding to increase the volume of gas swap from Turkmenistan to the Republic of Azerbaijan via Iran.
Iranian Oil Minister Javad Owji signed the MoU during a meeting with Azerbaijan’s Economic Minister Mikayil Jabbarov in Baku at the weekend, the Oil Ministry’s news agency Shana reported.
Iran, Azerbaijan and Turkmenistan had struck a deal last December to swap 1.5 to 2 billion cubic meters of Turkmen gas to Azerbaijan annually.
The deal, which was signed after a five-year suspension in Iran-Turkmenistan gas trade, will help ensure sustainable gas flow in Iran’s northeastern gas network and pave the way to turn Iran into an energy hub in the region.
The swap volume is expected to increase more in the future as well.
Owji had indicated in January that Iran had the capacity and the required infrastructure to increase the volume of gas swapped with Turkmenistan to 40 mcm per day or 10-15 billion cubic meters per year.
Experts say the deal has allowed Iran to deepen its economic ties with the two neighbors. Reports say Iranian state and private firms have signed major deals with counterparts in Turkmenistan and Azerbaijan in recent months.
During the meeting, economic issues pertaining to energy, transportation, bilateral trade and other issues were also discussed.
Development of Joint Fields
While in Baku, Owji also met with Azerbaijan’s Deputy Prime Minister Shahin Mustafayev and reached agreements on the development of joint energy fields in the Caspian Sea following the formation of a joint committee.
Pointing to the Iranian companies’ ability in exporting energy technology and engineering services, Owji said the capacity of Iranian contractors is going to be used in the development of joint oil and gas fields.
Mustafayev, referred to the successful trilateral gas cooperation among Iran, Turkmenistan and Azerbaijan, and said cooperation in the energy sector could help promote sustainable development in the region.
He then announced the formation of a joint study taskforce between the two countries’ energy sectors.
In a meeting with Azerbaijan’s Energy Minister Parviz Shahbazov, Owji said the development of energy relations between the two countries will pave the way for the development of relations in other areas as well.
Owji stressed Iran’s policy of developing relations with neighbors, saying Iran-Azerbaijan partnership in Shah Deniz gas field is a good experience and can pave the way for defining joint cooperation in Caspian Sea oil and gas blocks.
Azerbaijan shares land and maritime borders with Iran, as well as a number of undeveloped Caspian oil and gas fields subject to a joint development agreement. Its main gas field, Shah Deniz, is being developed by a consortium led by UK oil giant BP, but in which the National Iranian Oil Company holds a 10% stake.
Discovered in 199, Shah Deniz is one of the world’s largest gas-condensate fields. It is located on the deep water shelf of the Caspian Sea, 70 km southeast of Baku. The field has an estimated 1.2 trillion cubic meters of gas and 240 million tons of condensate.
Speaking at the meeting, Shahbazov said there are many commonalities between Iran and Azerbaijan, and appropriate cooperation has been created between the two countries in international organizations such as OPEC Plus.
“The presidents of the two countries are greatly determined to develop ties and this can help facilitate relations,” he said.
“I am grateful that Iran is ready and has the necessary infrastructure to increase gas swap volume.”
During the meeting, both sides discussed and signed some MoUs in various areas, including the integrated development of joint blocks and fields in the Caspian Sea, and power exchange, among others.
The two crude producers have been developing oil and gas cooperation over the past decade. The two states signed a memorandum of understanding in 2018 for joint work on an oilfield located in the waters of Caspian Sea.
Caspian Sea Resources
In 2011, Iran announced the discovery of 1.5 trillion cubic meters of gas in the Caspian Sea called Sardar-e-Jangal off Gilan Province, whose oil-in-place was estimated at 2 billion barrels.
Numerous disputes have hampered the development of oil and gas production and infrastructure projects in the Caspian Sea since the collapse of the Soviet Union in 1991.
Despite making significant headways in exploiting oil and gas resources in the south, energy development in Iran's northern regions have been unimpressive in the past several years.
In 2018, the five littoral states of the Caspian Sea - Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan - signed a convention providing a legal framework for sharing access to the sea and its resources.
Azerbaijan expects to increase gas production to 47.5 billion cubic meters by 2025. Azerbaijan is keen to hike its gas production for both domestic use and future exports.
The Caspian region is one of the oldest oil-producing areas in the world and is an increasingly important source of global energy production. It holds an estimated 48 billion barrels of oil and more than 8 trillion cubic meters of natural gas in proven and probable reserves.
