Caspian export routes

Patrick Crow
Washington, D.C.
[email protected]

Turkmenistan and Iran recently started up a $190 million pipeline and, in the process, broadened the larger controversy over gas exports from the Caspian region.

The 200-km pipeline will move gas from Korpedzhe field in southern Turkmenistan into the northern Iranian gas grid at Kord Kuy, offsetting deliveries from gas fields 1,500 km away in southern Iran.

Capacity of the 4 billion cu m/year line is expected to be doubled by 2006. Iran financed 80% of the project and signed a 25-year supply contract.

Iran hopes to become the route for several pipelines to move Caspian oil and gas to world markets-despite staunch U.S. opposition (see related story).

The producing nations around the Caspian Sea are receptive to using Iran if it will lessen their dependence on Russia's pipelines and tanker terminals.

Turkmenistan alone has about 21 trillion cu m of gas reserves it wants to move to western markets.

Shell pipeline

Meanwhile, Iran, Turkmenistan, and Turkey signed a protocol authorizing Royal Dutch/Shell to begin planning a $1.6 billion, 1,500 km gas pipeline.

The 30 billion cu m/year gas line would extend from Turkmenistan via Iran and Turkey to Europe.

Shell plans to submit a technical, commercial, and environmental feasibility study to the energy ministers of the three nations in 9 months.

The project could run afoul of the U.S. Iran-Libya Sanctions Act, which permits sanctions against a foreign oil company that invests more than $20 million in either nation.

A U.S. State Department spokesman said the Iran-Turkmenistan pipeline predated the law and thus is exempt. Regarding the Shell project, he said, "We would have to withhold judgment and see what actually was involved if it moved to the stage of execution. The U.S. opposes as a matter of policy the construction of pipelines across Iran."

In a related deal, Turkey signed a multibillion-dollar agreement with Turkmenistan to buy 15 billion cu m/year after 2000. It would import the gas via Iran, a pipeline across the Caspian Sea, or both.

That would supplement a $20 billion, 25-year pact Turkey recently signed with Russia to buy gas via a 1,200-km line crossing the Black Sea.

The $3 billion project would deliver 3 billion cu m/year when it starts up in 2000.

Russian talks

Turkmenistan's deals will place added pressure on Russia.

Russian Prime Minister Viktor Chernomyrdin is due to meet Turkmen leader Saparmurat Niyazov Jan. 14-15 to discuss energy issues, including the sensitive topic of moving Turkmen gas through Gazprom's system.

A who's-who delegation from the Russian oil sector will accompany Chernomyrdin, including the fuel and energy minister and the heads of Gazprom, Lukoil, and other major firms.

Turkmenistan relies on Gazprom to move most of its output to markets, but Gazprom has balked at yielding additional capacity.

Natural gas sales provide most of Turkmenistan's foreign currency earnings, but it was forced to sharply curtail production last year.

Gazprom also has a 10% interest in Unocal Corp.'s proposed $2 billion project to move Turkmen gas to Pakistan via northern Afghanistan.