Tehran Targets Ashgabat Gas Market in Winter

Tehran Targets Ashgabat Gas Market in WinterTehran Targets Ashgabat Gas Market in Winter

With a majority of Turkmenistan's natural gas refineries undergoing an overhaul and the cold season fast approaching, Iran has an excellent opportunity to raise the export of liquefied natural gas to the eastern neighbor in winter, the chairman of Iran-Afghanistan Chamber of Commerce said.

"The Oil Ministry should make LNG export to Turkmenistan a top priority, given the [temporary] closure of Turkmen refineries due to overhaul, rising gas prices in winter and the country's gas export limitations," Mahmoud Siadat was quoted as saying by ISNA on Monday.

Tehran-Ashgabat fuel trade has been sporadic over the years, with a local diesel market running at the border with Turkmenistan over the past decade. But Iran wants to seize this short-term opportunity and start LNG shipment to Turkmenistan in different volumes.

"But the biggest hurdle against expanding fuel trade with Turkmenistan is the customs duty of $200 per ton levied on Iranian fuel cargoes, with shipments from other countries such as Russia exempted from the toll," Siadat said.

Turkmenistan is a gas-rich country, possessing the world's fourth largest natural gas reserves. With an estimated 21 trillion cubic meters in gas reserves, the country's Galkynysh Gas Field holds the second-largest gas reserve in the world, after South Pars in the Persian Gulf.

South Pars is the world's largest gas field, shared between Iran and Qatar, covering an area of 3,700 square kilometers of Iran's territorial waters in the Persian Gulf. It adjoins Qatar’s North Field, which measures 6,000 square kilometers.

According to reports, Turkmenistan produced over 76 billion cubic meters of natural gas and exported roughly 60% of it. The country's gas output is expected to reach 230 bcm per year.

The official called on the government to have a more active diplomatic engagement with Turkmenistan to lift the heavy taxes on Iranian cargoes and gain a foothold in the country's energy market. Siadat also described Afghanistan as a lucrative energy market and urged Iranian contractors to initiate oil exploration in the country ahead of western companies.

Iran exports natural gas via pipelines to three neighboring countries, namely Turkey, Armenia and Azerbaijan. Ankara receives more than 90% of Iran’s gas exports under a long-term contract, and Yerevan and Baku receive around 6% and 3% of Iran’s gas export respectively under swap agreements.

  Gas Pipeline to Europe Ruled Out

Iran has currently no plans to lay thousands of kilometers of pipeline to supply its natural gas to Europe due to the hefty cost involved and the complications of involving several countries in such a project, National Iranian Gas Export Company's Managing Director Alireza Kameli said on Monday.

"There are far closer markets that demand Iranian gas," he said, pointing to India, China, Japan and South Korea as the top gas export destinations.

But the landmark July 14 nuclear accord between Iran and six world powers and the looming prospect of an end to trade and financial sanctions by early 2016 has spurred Tehran to negotiate LNG trade with several EU member-states.

In September, Oil Minister Bijan Namdar Zanganeh discussed LNG supply to Spanish terminals and from there to other European destinations. Later that month, LNG exports were discussed with a Polish delegation in Tehran. Iran is also in talks with Belgium to deploy the country's floating LNG production facilities near Kharg Island in the Persian Gulf.

Speculations suggest Iran has the capacity to supply 25-30 billion cubic meters of gas a year to Europe in the post-sanctions period. Iranian officials say gas exports, including LNG, should rise to 80 billion cubic meters per year by 2021.

  $20b Investment Potential

Iran's gas projects have the potential to attract $20 billion in foreign investment, including for the construction of refineries and gas storage facilities, laying the 9th and 11th national gas pipelines and the transfer of technical and engineering services to the Persian Gulf country, Deputy Oil Minister Hamidreza Araqi said in an interview.

Araqi added that Chinese companies are negotiating with NIOC to carry out gas projects in Iran under build-own-operate and build-operate-transfer contracts.

"The government's policies necessitate the import of advanced foreign technology in the energy sector, a major U-turn from the import of end-products in the past," he said.

"We have made it clear for foreign investors that the policy of buying end-products belongs to the past decade … We look forward to acquiring knowhow and technology."

In related news, an official at NIGC warned that in view of the current trend of energy consumption, Iran can turn into a major importer of natural gas in the near future despite sitting on some of the world's richest hydrocarbon reserves.

NIGC's deputy for health safety and environment, Mohammad Reza Yousefi, said Iran's energy consumption is above global standards, calling for judicious consumption of energy in residential and commercial sectors.

Natural gas in Iran is still among the cheapest in the world and analysts partly blame energy subsidies for gas overconsumption nationwide.