Prospects of regional gas exports brighten

The recent agreement between Iran and six world powers regarding the former’s nuclear program has numerous ramifications, especially for strategic natural gas issues between Russia and Turkey, with the likely introduction of Iranian gas into the European Union via Turkey being a crucial consideration.

“Turkey is seriously considering transferring westwards not only Russian gas but also from Iran, apart from its already established deals with the Azeris,” head of Russia’s National Energy Security Fund Organization, Konstantin Simonov, was quoted as saying by Natural Gas Europe.

The Turkish Stream project is being held up with the Russian side blaming Turkey for obstructing the development.

Russian Energy Minister Alexander Novak announced that Gazprom and Turkey’s Botas have agreed in principle to a 10.25% reduction in gas pricing for future deliveries made by Gazprom to Botas.

Nonetheless, Moscow is also dragging its heels on announcing a formal agreement opting to wait for Ankara to conclude the Turkish Stream. In the meantime, the security and political climate in Turkey has gradually deteriorated, thus shifting the government’s priorities.

All available information suggests Turkey is being pressured by Washington not to proceed with the Turkish Stream project, despite diplomatic moves between Gazprom and the Turkish Energy Ministry.

Details are being worked out and observers anticipate a formal announcement at a meeting between Russian President Vladimir Putin and his Turkish counterpart Recep Tayyip Erdogan in late September.

The main obstacle has little to do with technicalities or even Washington’s opposition, but the stance of Iran regarding its own gas export preparations and how they fit into the Turkish Stream plan.

Iran to Play a Major Role
The Greek Embassy in Baku recently drafted a study on the opportunities of importing Iranian gas. However, Greek diplomats relayed that no such imports should be expected before 2023, if the TANAP-TAP system of pipelines is to be used.

On the other hand, Iranian LNG may flow into international markets by 2020, but it will mostly be directed to non-European markets. This export route is costly and would involve western multinationals such as Shell.

Iran has made plans to supply Pakistan, India, Iraq, Syria and Lebanon with natural gas. That, along with the need for Iran to upgrade its infrastructure and increase domestic gas consumption, is another factor to be taken into consideration.

The domino effect of the above scenarios may lead to the materialization of the North Stream 2 pipeline project agreed to recently between Russia and EU gas companies. Shell has expressed a strong interest in participating in the project and its CEO, Ben van Beurden, recently confirmed this to the Russian TASS press agency.

In June, Gazprom, Shell, E.ON, OMV and Wintershall announced North Stream 2 in June. The project is an upgrade of the route with as much as 55 bcm capacity per annum, comparable to the first Nord Stream pipeline.

If the proposal goes ahead, Turk Stream would become irrelevant since the bulk of Russian gas delivered to major EU markets would be shifted to North Stream 2.
In a nutshell, gas policies related to Central Europe, Black Sea, and the Middle East have become more complicated with the Iranian breakthrough.

By Financial Tribune