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IRAN STRIVES TO JOIN "NABUCCO"
Ajdar Kurtov
en.fondsk.ru
28.01.2009
Many countries have decided to benefit from the recent Russia-Ukraine
gas row. Tehran was not an exception. During his visit to the European
Parliament Deputy Foreign Minister of Iran Mahdi Safari announced
Iran's intention to join the "Nabucco" project. The diplomat said
Iran was ready for trading gas to Europe as well as to provide
transportation services.
Over the past few years "Nabucco" has been supported by Europe not for
economic but for political reasons. But plans to lay a new branch of
the gas pipe bypassing the Russian territory were broken since the
potential supplying countries did not have enough of free gas. No
matter how often the delegations from the EU and US visited Baku,
they would fail to make gas out of nothing.
None of the serious investing companies could have viewed Azerbaijan,
possessing the only one big gas field Shakh Deniz in the Caspian
Sea, as a reliable partner in the "Nabucco" project. Today Azeri gas
exports are far from that required for the foreign investments. The new
"Nabucco" pipeline could have become cost-effective only if it pumped
no less than 30 billion cubic meters of gas. Although Azerbaijan
promises to commission the second line of the Shakh Deniz main by
2013 and thus increase production to 8-12 billion cubic meters,
investo rs are still risking their billions.
Even if Baku succeeds, the investing companies still will be doubtful
about the issue. There is also little hope for Turkmenistan, Uzbekistan
and Kazakhstan to join the "Nabucco" project. At the recent talks with
the Russian President Dmitry Medvedev, the Uzbek leader Islam Karimov
confirmed that the gas form Uzbekistan would be sold to Russia. The
sides had already signed the corresponding agreements. Moreover,
Moscow may even fail to receive all the gas from Uzbekistan due to
some technical restriction on its gas transit capacities.
Kazakhstan and Turkmenistan also have long-term deals with
Moscow. Since the sides had agreed on the price last year, foreign
companies have no chances to poach Moscow's partners in Astana,
Ashkhabad and Tashkent.
However, the whole situation is good for Iran. Some experts believe
that without Iran the "Nabucco" project will remain unimplemented,
while its participation could give an impulse to the process. Iran
has the second largest gas reserves in the world after Russia (27,5
trillion cubic meters, or 18% of the world's gas reserves and 33%
of that of the OPEC).
Still there are some difficulties. In the meantime Iran produces
only 460 million cubic meters of gas per 24 hours and thus is not
listed among the world's leading gas suppliers. Besides, Iran has
never been a leading natural gas exporting country. Currently it s
exports do not exceed 15 million cubic meters. And we may name at
least two reasons for that.
First, Iran uses the lion's share of produced gas (360 million cubic
meters daily) for civil purposes. By the year 2014 Tehran plans to
provide gas to 93% of the population of 630 cities and to 18% of the
rural population in more than 4,000 villages. Iran's factories and
electric power plants also need much gas. Another share of the produced
gas Iran has to inject into its reserves to keep oil production at a
high level (experts say this help Iran increase output by more than
30%). Iran has long been enjoying infrastructure for oil exports but
yet has not such for exporting gas.
Secondly, most of the Iranian gas fields are located in the south-
on the coast of the Persian Gulf and on its shelf, which is quite
far from the operating gas pipes and those being under construction,
including the "Nabucco". South Pars, the largest offshore gas field in
the world, located on the Iran-Qatar border in the Persian Gulf with
its 13,1 trillion cubic meters and 19 million barrels of condensate
is the most illustrative example. Apart from South Pars, Iranian
gas output is provided by Nar, Cangan, Shanun, Varui, Homa, Tanbak
fields. It is worth mentioning that more than 60% of the Iranian gas
reserves are located in non-associated fields.
That is why Iran currently has to focus more on importing gas from
Turkmenistan and sometimes form Azerbaijan. According to BP estimates
(London stock exchange) Iran traditionally consumes more gas than it
can produce.
So to join the "Nabucco" project Tehran should have a lot of luck-
at least find investors ready to pay not only for the construction
of the pipe 1500 kilometers longer than "Nabucco" but also for the
exploration of other Iranian fields. Several European energy companies
have long been working in Iran, Italian ENI and AGIP being among
them. France, Denmark, Malaysia, the Koreas and Russian Gazprom also
take part in the development of Iranian gas deposits. But since the
US had imposed sanctions to prevent the flow of foreign investments
into Iran, other countries do not dare to join in.
However, we should take into consideration that originally "Nabucco"
was meant for Iranian gas and not for that from Azerbaijan or
Central Asia.
In January of 2004 the Austrian oil and gas giant OMV and the National
Iranian Gas Company signed a memorandum on the exports of the Iranian
gas to Europe through the "Nabucco" via Turkey, Bulgaria, Romania,
Hungary to Austria. But later in view of the aforesaid political
reasons Austria focused on other supplying countries.
That is why we should expect some changes. For Russia it appears to be
of special importance that recently Iran has been actively supported
by Turkey.
Turkish Prime Mi nister Recep Tayyip Erdogan insists there won`t be
enough gas for "Nabucco" without participation of Iran. Here Turkey
acts on its own and does not depend on US. Iran is Turkey's closest
neighbor. More than 5,000 Turkish firms are operating in Iran, their
total capital being 7 billion dollars. By 2010 it is expected to
reach 10 billion. Turkey had long been buying Iran's gas (more than
10 billion cubic meters per 24 hours).
Ankara will benefit both economically and politically from Iran's
participation in the "Nabucco" project. It may help Turkey increase
its geopolitical presence in Europe and maybe even join the EU. From
the economical perspective, thanks to the transit of the Iranian gas
via Turkey, the both countries could improve their trade balance. In
early July 2007 Turkey agreed to invest $3,5 billion in modernization
of Iran's gas capacities and construction of a 2,000 kilometer long
gas pipe. Here we see the establishment of a new Turkish-Iranian
gas alliance.
Though the world financial crisis nipped these initiatives in the
bud, in a mid-term perspective all the projects appear to be quite
manageable.
Everything might change when Iran receives an opportunity to become
a large natural gas exporter. By 2015 Tehran expects to deliver more
than 60 billion cubic meters of gas per year. However, we should not
blindly believe Iran.
Some of the country's experts say Iran's annual gas output will reach
210 billion cubic meters, the third part of which is said to be spent
on home gas consumption, while two other parts- on exports through
the pipelines and in liquid form.
Anyway, Tehran yet has no plans to integrate into the European
markets. Iran plans to supply 20 billion cubic meters to India, and
7 and 2,3 billion to Pakistan and Armenia respectively. Tehran also
reached deals with some of its Arab neighbors: with the United Arab
Emirates (for 14 million cubic meters), with Kuwait (for 8 million
cubic meters). But if Europe accepts the idea of Iran's participation
in the "Nabucco" project, Tehran will eagerly focus on cooperation
with the EU.
Strictly speaking, Iran has a card up sleeve. If Iran decides to
develop its liquefied gas production technologies (the issue is
already under discussion between Tehran and British Gas, NIOC and
Royal Dutch/Shell companies), this may become a good alternative
to gas deliveries through pipelines. Actually, this will boost its
capacities up to 20,2 million tons of liquefied natural gas per
year. Iranian experts sometimes talks about 43,7 million tons. Like
Qatar, Iran thus might diversify its exports and not depend on US
sanctions against transit countries.
Yet it is difficult to predict what market Tehran will choose for
exports.
>From the one hand, by supplying gas to Pakistan, India and Arab states,
Tehran can reduce its tr ansportation expenditures, but from the
other hand, Europe, Japan and South Korea are able to buy Iranian gas
at a higher price. Apart from this, those will have more rights who
will build liquefied gas factories in Iran and develop all necessary
technologies. And here Russia has a chance to decide on the routes
through which hypothetical gas from Iran would flow. Though Russia
cannot boast perfect gas-to-liquid technologies...
Not long time ago energy ministers from at least 11 gas exporting
countries met in Moscow as part of the so-called "gas OPEC'
summit. However, they say this organization should not be viewed as
analog to real OPEC as the participants have no plans to decide on the
gas prices or gas production quotas for the members of this new gas
cartel since there is no global unified gas market. But members of the
"gas OPEC' could discuss measures to avoid unnecessary competition for
market outlets and achieve a compromise on the issue. And here Moscow
has something to offer Tehran. It is not necessary arms deliveries
or equipment for the atomic power plants.
Gazprom could co-invest in the pipelines to connect the biggest
Iranian gas fields with Pakistan and India.
In any case, Iran's position should be kept a close eye on. It was
not by chance that the abovementioned Iranian diplomat talked about
Iran as a transit country. Which gas Iran wants to let through its
te rritory? Apparently, the gas from Turkmenistan and Central Asia.
The idea had been actively discussed 10 years ago. In December, 1997,
"Shell" reached a deal with the Turkmen government on preparing reports
on technical and economical details of the project to deliver gas from
Turkmenistan via Iran to Europe. From the "Dovletabad" deposit in
southern Turkmenistan through the Iranian cities of Meshed, Gorgan,
Resht and Tabriz and further on to Turkey. Then the cost of the
project was reported $7,6 billion.
In 1998 the Turkmen government and "Shell" signed a deal on the
"Turkmenistan-Iran-Turkey-Europe" pipe line. Under the deal, 'Shell'
was responsible for the construction. Experts predicted the pipe's
capacity at 23 billion of cubic meters by 2005 and 30 billion cubic
meters by 2010. But soon the project was halted, among other reasons
due to the US-initiated D'Amato Act, which allowed the government to
withhold U.S. financing and contracts from foreign companies that
traded with Libya and Iran. Since then the project has not been
considered by Ashkhabad as a perspective one. And now we see Iran
ready to revive the project.
To sum up, I should say that today neither Azerbaijan nor Turkmenistan
are able to compete with Russia in terms of natural gas deliveries from
Asia to Europe. They are likely to give way to Iran. And here we should
remember that "Nabucco" is a shortened name of the Babylonian King
Nebuchadnezzar and an opera of the same name by Giuseppe Verdi. And
Babylon fell to Cyrus the Great, king of Persia, the one who forged
the Achaemenid Empire. That is why for Moscow Iran should be a partner
and in no way a competitor or a rival.
From: Emil Lazarian | Ararat NewsPress
Ajdar Kurtov
en.fondsk.ru
28.01.2009
Many countries have decided to benefit from the recent Russia-Ukraine
gas row. Tehran was not an exception. During his visit to the European
Parliament Deputy Foreign Minister of Iran Mahdi Safari announced
Iran's intention to join the "Nabucco" project. The diplomat said
Iran was ready for trading gas to Europe as well as to provide
transportation services.
Over the past few years "Nabucco" has been supported by Europe not for
economic but for political reasons. But plans to lay a new branch of
the gas pipe bypassing the Russian territory were broken since the
potential supplying countries did not have enough of free gas. No
matter how often the delegations from the EU and US visited Baku,
they would fail to make gas out of nothing.
None of the serious investing companies could have viewed Azerbaijan,
possessing the only one big gas field Shakh Deniz in the Caspian
Sea, as a reliable partner in the "Nabucco" project. Today Azeri gas
exports are far from that required for the foreign investments. The new
"Nabucco" pipeline could have become cost-effective only if it pumped
no less than 30 billion cubic meters of gas. Although Azerbaijan
promises to commission the second line of the Shakh Deniz main by
2013 and thus increase production to 8-12 billion cubic meters,
investo rs are still risking their billions.
Even if Baku succeeds, the investing companies still will be doubtful
about the issue. There is also little hope for Turkmenistan, Uzbekistan
and Kazakhstan to join the "Nabucco" project. At the recent talks with
the Russian President Dmitry Medvedev, the Uzbek leader Islam Karimov
confirmed that the gas form Uzbekistan would be sold to Russia. The
sides had already signed the corresponding agreements. Moreover,
Moscow may even fail to receive all the gas from Uzbekistan due to
some technical restriction on its gas transit capacities.
Kazakhstan and Turkmenistan also have long-term deals with
Moscow. Since the sides had agreed on the price last year, foreign
companies have no chances to poach Moscow's partners in Astana,
Ashkhabad and Tashkent.
However, the whole situation is good for Iran. Some experts believe
that without Iran the "Nabucco" project will remain unimplemented,
while its participation could give an impulse to the process. Iran
has the second largest gas reserves in the world after Russia (27,5
trillion cubic meters, or 18% of the world's gas reserves and 33%
of that of the OPEC).
Still there are some difficulties. In the meantime Iran produces
only 460 million cubic meters of gas per 24 hours and thus is not
listed among the world's leading gas suppliers. Besides, Iran has
never been a leading natural gas exporting country. Currently it s
exports do not exceed 15 million cubic meters. And we may name at
least two reasons for that.
First, Iran uses the lion's share of produced gas (360 million cubic
meters daily) for civil purposes. By the year 2014 Tehran plans to
provide gas to 93% of the population of 630 cities and to 18% of the
rural population in more than 4,000 villages. Iran's factories and
electric power plants also need much gas. Another share of the produced
gas Iran has to inject into its reserves to keep oil production at a
high level (experts say this help Iran increase output by more than
30%). Iran has long been enjoying infrastructure for oil exports but
yet has not such for exporting gas.
Secondly, most of the Iranian gas fields are located in the south-
on the coast of the Persian Gulf and on its shelf, which is quite
far from the operating gas pipes and those being under construction,
including the "Nabucco". South Pars, the largest offshore gas field in
the world, located on the Iran-Qatar border in the Persian Gulf with
its 13,1 trillion cubic meters and 19 million barrels of condensate
is the most illustrative example. Apart from South Pars, Iranian
gas output is provided by Nar, Cangan, Shanun, Varui, Homa, Tanbak
fields. It is worth mentioning that more than 60% of the Iranian gas
reserves are located in non-associated fields.
That is why Iran currently has to focus more on importing gas from
Turkmenistan and sometimes form Azerbaijan. According to BP estimates
(London stock exchange) Iran traditionally consumes more gas than it
can produce.
So to join the "Nabucco" project Tehran should have a lot of luck-
at least find investors ready to pay not only for the construction
of the pipe 1500 kilometers longer than "Nabucco" but also for the
exploration of other Iranian fields. Several European energy companies
have long been working in Iran, Italian ENI and AGIP being among
them. France, Denmark, Malaysia, the Koreas and Russian Gazprom also
take part in the development of Iranian gas deposits. But since the
US had imposed sanctions to prevent the flow of foreign investments
into Iran, other countries do not dare to join in.
However, we should take into consideration that originally "Nabucco"
was meant for Iranian gas and not for that from Azerbaijan or
Central Asia.
In January of 2004 the Austrian oil and gas giant OMV and the National
Iranian Gas Company signed a memorandum on the exports of the Iranian
gas to Europe through the "Nabucco" via Turkey, Bulgaria, Romania,
Hungary to Austria. But later in view of the aforesaid political
reasons Austria focused on other supplying countries.
That is why we should expect some changes. For Russia it appears to be
of special importance that recently Iran has been actively supported
by Turkey.
Turkish Prime Mi nister Recep Tayyip Erdogan insists there won`t be
enough gas for "Nabucco" without participation of Iran. Here Turkey
acts on its own and does not depend on US. Iran is Turkey's closest
neighbor. More than 5,000 Turkish firms are operating in Iran, their
total capital being 7 billion dollars. By 2010 it is expected to
reach 10 billion. Turkey had long been buying Iran's gas (more than
10 billion cubic meters per 24 hours).
Ankara will benefit both economically and politically from Iran's
participation in the "Nabucco" project. It may help Turkey increase
its geopolitical presence in Europe and maybe even join the EU. From
the economical perspective, thanks to the transit of the Iranian gas
via Turkey, the both countries could improve their trade balance. In
early July 2007 Turkey agreed to invest $3,5 billion in modernization
of Iran's gas capacities and construction of a 2,000 kilometer long
gas pipe. Here we see the establishment of a new Turkish-Iranian
gas alliance.
Though the world financial crisis nipped these initiatives in the
bud, in a mid-term perspective all the projects appear to be quite
manageable.
Everything might change when Iran receives an opportunity to become
a large natural gas exporter. By 2015 Tehran expects to deliver more
than 60 billion cubic meters of gas per year. However, we should not
blindly believe Iran.
Some of the country's experts say Iran's annual gas output will reach
210 billion cubic meters, the third part of which is said to be spent
on home gas consumption, while two other parts- on exports through
the pipelines and in liquid form.
Anyway, Tehran yet has no plans to integrate into the European
markets. Iran plans to supply 20 billion cubic meters to India, and
7 and 2,3 billion to Pakistan and Armenia respectively. Tehran also
reached deals with some of its Arab neighbors: with the United Arab
Emirates (for 14 million cubic meters), with Kuwait (for 8 million
cubic meters). But if Europe accepts the idea of Iran's participation
in the "Nabucco" project, Tehran will eagerly focus on cooperation
with the EU.
Strictly speaking, Iran has a card up sleeve. If Iran decides to
develop its liquefied gas production technologies (the issue is
already under discussion between Tehran and British Gas, NIOC and
Royal Dutch/Shell companies), this may become a good alternative
to gas deliveries through pipelines. Actually, this will boost its
capacities up to 20,2 million tons of liquefied natural gas per
year. Iranian experts sometimes talks about 43,7 million tons. Like
Qatar, Iran thus might diversify its exports and not depend on US
sanctions against transit countries.
Yet it is difficult to predict what market Tehran will choose for
exports.
>From the one hand, by supplying gas to Pakistan, India and Arab states,
Tehran can reduce its tr ansportation expenditures, but from the
other hand, Europe, Japan and South Korea are able to buy Iranian gas
at a higher price. Apart from this, those will have more rights who
will build liquefied gas factories in Iran and develop all necessary
technologies. And here Russia has a chance to decide on the routes
through which hypothetical gas from Iran would flow. Though Russia
cannot boast perfect gas-to-liquid technologies...
Not long time ago energy ministers from at least 11 gas exporting
countries met in Moscow as part of the so-called "gas OPEC'
summit. However, they say this organization should not be viewed as
analog to real OPEC as the participants have no plans to decide on the
gas prices or gas production quotas for the members of this new gas
cartel since there is no global unified gas market. But members of the
"gas OPEC' could discuss measures to avoid unnecessary competition for
market outlets and achieve a compromise on the issue. And here Moscow
has something to offer Tehran. It is not necessary arms deliveries
or equipment for the atomic power plants.
Gazprom could co-invest in the pipelines to connect the biggest
Iranian gas fields with Pakistan and India.
In any case, Iran's position should be kept a close eye on. It was
not by chance that the abovementioned Iranian diplomat talked about
Iran as a transit country. Which gas Iran wants to let through its
te rritory? Apparently, the gas from Turkmenistan and Central Asia.
The idea had been actively discussed 10 years ago. In December, 1997,
"Shell" reached a deal with the Turkmen government on preparing reports
on technical and economical details of the project to deliver gas from
Turkmenistan via Iran to Europe. From the "Dovletabad" deposit in
southern Turkmenistan through the Iranian cities of Meshed, Gorgan,
Resht and Tabriz and further on to Turkey. Then the cost of the
project was reported $7,6 billion.
In 1998 the Turkmen government and "Shell" signed a deal on the
"Turkmenistan-Iran-Turkey-Europe" pipe line. Under the deal, 'Shell'
was responsible for the construction. Experts predicted the pipe's
capacity at 23 billion of cubic meters by 2005 and 30 billion cubic
meters by 2010. But soon the project was halted, among other reasons
due to the US-initiated D'Amato Act, which allowed the government to
withhold U.S. financing and contracts from foreign companies that
traded with Libya and Iran. Since then the project has not been
considered by Ashkhabad as a perspective one. And now we see Iran
ready to revive the project.
To sum up, I should say that today neither Azerbaijan nor Turkmenistan
are able to compete with Russia in terms of natural gas deliveries from
Asia to Europe. They are likely to give way to Iran. And here we should
remember that "Nabucco" is a shortened name of the Babylonian King
Nebuchadnezzar and an opera of the same name by Giuseppe Verdi. And
Babylon fell to Cyrus the Great, king of Persia, the one who forged
the Achaemenid Empire. That is why for Moscow Iran should be a partner
and in no way a competitor or a rival.
From: Emil Lazarian | Ararat NewsPress