WATCHING THE WORLD: Switzerland irks US with gas deal

March 24, 2008
Switzerland is not a household word for most people in the oil and gas industry.

Switzerland is not a household word for most people in the oil and gas industry. After all, how much can be said about a country that produces no oil of its own and consumes just 278,000 b/d?

Well, much has recently been said about Switzerland’s involvement in the petroleum industry. Consider US concerns about an agreement signed on Mar. 17 between Switzerland’s Elektrizitaets-Gesellschaft Laufenburg and National Iranian Gas Export Co.

“We have conveyed to the Swiss that major new oil and gas deals with Iran send precisely the wrong message at a time when Iran continues to defy UN Security Council resolutions,” the US embassy in Bern said in a statement.

The US embassy said it believes the deal “violates the spirit of the sanctions” imposed on Iran by the UN Security Council as part of an effort to try to force Iran to give up its program of uranium enrichment and cooperate further with the International Atomic Energy Agency.

No problem

But the Swiss see nothing wrong with the agreement. Joachim Conrad, member of EGL’s executive management and head of EGL’s gas division, said the agreement with NIGEC is a strategic milestone in the company’s gas business.

“Natural gas from Iran is necessary to the opening of a fourth gas transportation corridor to Europe,” Conrad said. “This corridor will ensure diversification and security of supply on the continent as Europe needs to tap into new gas sources in the immediate future, and EGL today made an important contribution to reaching this goal.”

Swiss Foreign Minister Micheline Calmy-Rey, who attended the signing ceremony between EGL and NIGEC, agreed with that assessment, saying the agreement did not violate UN sanctions and served only to secure uninterrupted energy supplies for Switzerland.

Strategic interests

“We have a strategic interest to secure our gas supplies and diversify our gas suppliers,” Calmy-Rey said. She said the agreement may even reduce Europe’s dependency on energy supplies from Russia. “We are decreasing our dependence, and the dependence of Europe, on Russian gas.”

The duration of EGL’s natural gas procurement contract with NIGEC is 25 years. The contracted gas quantities will allow EGL to cover its 50% share of transportation capacity of the Trans Adriatic Pipeline (TAP), which it will build with Norway’s StatoilHydro ASA (OGJ online, Feb. 14, 2008).

A first delivery of natural gas by NIGEC to EGL is planned for 2009, assuming that the necessary transport rights are in place by then. Larger gas volumes will follow in 2012, when the TAP project is expected to become operational, and gas deliveries from NIGEC will reach as much as 5.5 billion cu m/year in a second phase of the contract.

But the US won’t give up, declaring in its statement that, “We are disappointed and will continue our discussions with the Swiss regarding the need to maintain pressure on Iran to meet its international obligations.”