Gas Export to Iraq in Early 2016

Gas Export to Iraq  in Early 2016Gas Export to Iraq  in Early 2016

The pricing formula of the Iran-Iraq gas deal is based on the same framework used for setting the price of crude oil and petroleum products, Deputy Oil Minister Hamidreza Araqi said without elaboration.

He said gas supply to Basra will begin in 18 months, with export to the Iraqi capital expected by early 2016, Fars News Agency reported.

As per the contract signed on Wednesday, Iran will supply 20-35 million cubic meters of gas per day to three power plants in the southern Iraqi city of Basra near the Iranian border. The volume will reach 45-60 mcm/d, once gas supply to Baghdad goes underway.

The two sides extended the term of the contract from four to six years, Fars News Agency reported.

Officials have been discreet about financial terms of the contract in the past. In August, Azizollah Ramezani, deputy for international affairs at the National Iranian Gas Company, said the value of the deal was a confidential issue, stressing that it would be competitive and "serve both sides' national interests".

"Gas supply to Iraq will boost bilateral trade," Araqi said on the sidelines of a meeting between Iranian officials and Iraq's Deputy Electricity Minister Khaled Hassan al-Samarrai on Wednesday.

The two sides signed a draft deal in 2013, which is estimated to be worth $4-6 billion.

The National Iranian Gas Company will supply 7 mcm/d of natural gas to Basra within the first six months of the contract and 14-18 mcm/d in the following year, with exports expected to reach 20-35 mcm/d in the third year.

Gas supply to Iraq is estimated to total 40 billion cubic meters over six years.

The Iraqi official also described the contract as mutually benefitial, referring to Iraq's increasing electricity demand next summer and Iran's demand for natural gas during the cold winter.

Gas supply to Basra will peak at 35 mcm/d between May and September, and will settle at around 20 mcm/d during the cold season.

Other parts of the contract include engineering and technical services, including finance, technical and executive training courses, for the Iraqi side.

War-ravaged Iraq, struggling to recover from the US invasion in 2003 that toppled Saddam Hussein and grappling with the onslaught of the Islamic State militant group, is in dire need of natural gas to feed its power plants.

Iran first announced a delay in gas exports in September 2014, shortly after IS militants seized large swaths of territory in Iraq. In March, Iranian officials said exports could begin within the following two months if security conditions improved.  

However, officials blamed technical and financial issues for the delay in gas supply to western neighbor.

Gas Export to North Incessant

The launch of gas booster facilities in Tabriz in East Azarbaijan Province will help ensure a steady and uninterrupted supply of Iranian natural gas to neighboring Turkey and Armenia, an NIGC official said.

Referring to a pause in Tehran's gas export to Ankara last year, Mohammad Ali Emam said the infrastructure is there to maintain the steady supply of Iranian gas to northern neighbors, but that will depend on production capacity from the country's rich gas fields in the south.

Iran holds the world’s biggest natural gas reserves overtaking Russia's. The country's largest natural gas field, South Pars, is estimated to hold roughly 40% of the country's total gas reserves.

Iran is the second biggest gas exporter to Turkey after Russia and supplies natural gas to Armenia in exchange for electricity.