Iran Plays Down Concern Over Likely Gas Shortage

There is no difficulty in meeting the demand for natural gas in the northern regions this winter, a top energy official said, playing down concerns over a shortage of gas for heating homes and for power plants after Turkmenistan said this week it may unilaterally terminate its gas export contract with Iran.

"Turkmenistan has threatened to cut gas supplies over unpaid dues for the gas it sold to Iran during the tenure of the previous Iranian government. But we won't allow a gas crisis in the northern provinces," Hamidreza Araqi, the managing director of National Iranian Gas Company (NIGC) said, ISNA reported.

"We will reassess our trade relations with Turkmenistan if they suspend gas exports. They will eventually suffer (economically)," said Araqi, who reportedly traveled to Ashgabat earlier in the week to discuss and settle the dispute.

IRNA cited an unknown source at Iran's Oil Ministry as saying on Friday that the two sides had reached a preliminary agreement to sign a new gas deal. Demand for natural gas significantly rose in Iran in 2007 as the country was gripped by unseasonably cold temperatures that year. Taking advantage of the conundrum, Turkmenistan jacked up the price of gas it sold to Iran from $40 per 1,000 cubic meters to $360.

The government of former president Mahmoud Ahmadinejad capitulated to the price hike for obvious reasons. But the incumbent administration says the agreement was unreasonable and unacceptable and called for international arbitration, according to state news agency  IRNA.

Araqi says Turkmenistan has been fully remunerated for its gas supplies over the past three years, adding that "other debts should be reevaluated".

Iran's daily gas consumption in winter is around 700 million cubic meters, some two-thirds of which comes from the giant South Pars Gas Field in the Persian Gulf. The country also imports around 12 million cubic meters of gas per day from Turkmenistan to meet part of its demand in the northern regions.

Araqi said that Iran may expedite the construction of gas infrastructure from the south to the north in the face of a supply cut in Turkmen gas.

"Our gas intake from Turkmenistan is insignificant. Nevertheless it provides part of our needs in the north. We have the capacity to raise imports (from Turkmenistan) and will try to settle the issue in a way that serves the interests of both countries," the senior gas official said without elaboration.  

  Rise in Gas Consumption

The dispute comes as officials forecast a 10% increase in Iran's gas consumption in the current fiscal year that ends in March. Saeed Momeni, NIGC's gas supply director said Iran's annual gas consumption is expected to reach 191 billion cubic meters from 171 bcm in the previous year. He added that any possible shortage of gas can be avoided if consumption nationwide is reduced by 10%.

An estimated 27% of natural gas in Iran is consumed by households, according to the official, who said that the residential sector will be in priority to receive gas.

The move to meet the rising winter demand from households could mean less supplies of gas feedstock to power plants which will then be forced to burn more polluting fuels such as mazut. Some officials and analysts have warned that power plants near Tehran could be affected by gas supply shortage, stressing that using mazut in the power plants will exacerbate air pollution in the sprawling capital that is choking under a thick blanket of smog almost every day.