Tehran and Ankara have started the first phase of negotiations to renew a natural gas contract that expires in 2026, the head of dispatching operations at the National Iranian Gas Company said.
“The two sides are hopeful of reaching a win-win agreement, but given the nature of long-term international contracts, such talks normally are interconnected with foreign policy issues and geopolitical considerations,” Mohammad Reza Joulaei was also quoted as saying by ILNA.
The National Iranian Gas Company (NIGC) officials met with Botas, Turkey's state oil and gas company, last week in Turkey and more meetings are expected to be arranged, he said.
Referring to Zangezur Corridor, a strategic transportation route that extends from Azerbaijan’s Baku to Turkey’s Kars Province and passes through Armenia, he noted that the development plan has nothing to do with the talks and both nations are determined to renew the deal.
Nonetheless, other experts, including Amirhossein Zamaninia, the deputy oil minister for international affairs, believe that securing a long-term deal will not be as easy as the one signed in 2001 because now Ankara has a larger range of suppliers to choose from. Turkey is emerging as a more adept gas consumer and negotiator.
Economic experts and analysts have said energy diplomacy and a coherent foreign policy should be at the forefront of Tehran’s gas export strategy.
Grappling with financial problems and lack of advanced technology, it is crucial for Iran to adopt a balanced approach to its gas strategy that includes geopolitical considerations and market realities.
As per the 25-year deal, NIGC started selling gas to Turkey in 2001 and is the second largest gas supplier to the neighbor after Russia.
Cordial Relations
Cordial political relations with neighbors, reducing the bloated bureaucracy, putting in place a functioning regulatory body and a responsive legal framework can help Iran boost its gas export.
Turning to obstacles that could hamper the two-way talks, Zamaninia said in addition to high domestic consumption that restricts exports, the rising gas production in Qatar, the US and Russia can impact the new agreement with the Turks.
Natural gas makes up 70% of the energy mix in Iran. The residential sector is the largest consumer followed by power plants, petrochemical companies and industrial units.
With a population of 82 million, Iran consumes more than 140 billion cubic meters of gas annually, not far from China, the world’s second-largest economy and the most populous country in the world.
Of the total 850 mcm of gas produced daily, 650 mcm are used by households in winter.
Last winter, gas consumption reached 730 mcm per day.
Iraq, the deputy oil minister recalled, has embarked on flare gas recovery projects from its oil and gas fields.
“The more associated petroleum gases they [Iraq] collect, the less bargaining power NIGC will have as the Arab neighbor is likely to emerge as a strong competitor,” he added.
Not denying the fact that the recovery of new sources of energy has always impacted energy geopolitics, Zamaninia said Turkey’s discovery of 320 billion cubic meters of natural gas reserves in the Black Sea will not affect the terms of the new contract because it will be difficult for Turkey to explore gas from the new field and supply it to the domestic market in the short term.
“It will need billions of dollars and 10 years to complete such projects,” he said.
NIGC uses IGAT-9 that stretches over 2,000 km to transfer gas from Asalouyeh, Bushehr Province, to Bazargan district in the northwestern province of West Azarbaijan, which extends into Turkish territory.
IGAT is a series of nine large diameter pipelines built to supply gas from refineries in the south (Khuzestan and Bushehr provinces).
