Tehran, Baku Agree to Increase Gas Swap

Tehran, Baku Agree to Increase Gas SwapTehran, Baku Agree to Increase Gas Swap

Iran and Azerbaijan have agreed to increase the volume of gas swap.

This was decided in a recent meeting held between the officials of National Iranian Oil Company and their counterparts in the state oil company of Azerbaijan Republic—aka SOCAR.

However, no agreement has been reached on new prices, which will depend on Azerbaijan's gas production capacity, sources with the knowledge of the matter told Fars News Agency.

The two countries signed a 25-year-old contract in 2005 based on which Iran swaps 200,000 cubic meters of Azerbaijan's gas to Nakhchivan at Astara border in northern Iran.

The negotiations held two weeks ago revolved around increasing Iran's gas production capacity, which will make Iran a major energy supplier in the region.

As Azeri officials are aware that transferring Iranian gas to Europe is not economically viable, they have suggested Iran join the Trans-Adriatic Pipeline, in which case there will be no worries in supplying gas to Europe.

TAP is an 870-km pipeline project to transport natural gas from Azerbaijan, starting from Greece via Albania and the Adriatic Sea to Italy and further to Western Europe. The shareholders are BP, SOCAR, Total and Fluxys.

The project will transfer gas from Shah Deniz gas field's Phase 2 by the end of 2020. The pipeline will be connected to the Trans-Anatolian Natural Gas Pipeline—TANAP— near the Turkey-Greece border.

TANAP is a natural gas pipeline from Azerbaijan through Georgia and Turkey to Europe. It will be a central part of the Southern Gas Corridor, which will connect the giant Shah Deniz Gas Field in Azerbaijan to Europe through TAP. Construction of the pipeline began in March 2015 and is expected to be completed in 2018.

The transfer of Iran's gas to Asia has already been given priority over European destinations due to financial issues. However, according to Rovnag Abdullayev, the CEO of SOCAR, joining TAP is the most practical option for Iran to export gas to international markets.

In an exclusive interview with Trend earlier this week, Swiss holding Axpo announced it did not need any gas from Iran and fully counted on gas from Azerbaijan, said Tobias Kistner, the Axpo media spokesperson.

Following Axpo, Greek and Italian companies are also planning to hold negotiations with Azeri officials to import gas from this country. Accordingly, Iran's joining TAP can help this country play an effective role in transferring gas to Europe indirectly through Azerbaijan.

Iran holds the world’s biggest natural gas reserves and the fourth-largest proven crude oil reserves.  Iran holds 17% of the world's proven natural gas reserves and more than one-third of OPEC's reserves.