SHANA – In the second half-century of its work, National Iranian Gas Company (NIGC) has shifted its strategy from domestic development to international trading of gas.
In the second half-century of its work, National Iranian Gas Company (NIGC) has shifted its strategy from domestic development to international trading of gas. According to its Vision Plan 2025, it eyes a 10% share of global gas trading. To that end, the company has started intensive talks with neighboring countries for gas delivery to them. Iraq is set to receive Iran’s gas and more countries would be getting Iran’s gas in the future.
There are complaints that Iran’s price of gas is high, but director for international affairs of NIGC, Behzad Babazadeh, insists that the price of Iran’s gas is realistic. In an interview with “Iran Petroleum“, he said that Iran would not export its gas below its real price.
The following is the full text of the interview with Mr. Babazadeh.
Q: Iran has signed two gas export agreements with Iraq to pump gas to Basra and Baghdad. At what stage are these two agreements now?
A: A 6-year agreement for exporting gas to Basra was signed in 2015 with the objective of supplying up to 35 mcm/d of gas to that area [of Iraq]. Under the agreement, Iran would be supplying 20 mcm/d of gas to Basra in cold seasons of the year and 35 mcm/d in hot seasons.
The final agreement for Iran’s gas exports to Baghdad’s power plant via Iran Gas Trunkline 1 (IGAT-1) was signed in 2013.
Both agreements are at a good stage of progress. We expect the agreement for gas export to Baghdad to become operational soon and exports to Basra would start in six months.
Q: Therefore, construction operation for gas export to Baghdad is over on the Iranian side, isn’t it?
A: Yes, that’s so. As you know under the six-year agreement for gas export to Baghdad, Iran would be delivering gas to Iraqi power plants. At present, construction operations on the Iranian and Iraqi sides are over. The preliminary gas for the pre-commissioning of measurement systems and pipe test has been injected.
Q: How should the bills be footed for these agreements?
A: In the agreement, it has been mentioned that through opening an LC, the monthly sum would be paid in favor of NIGC. The LC issued by the Iraqi Ministry of Electricity in favor of NIGC must be renewable and certified.
Q: How much gas will Iran be exporting to Baghdad?
A: Gas delivery to Baghdad will start from 7 mcm/d, which will reach 14 mcm/d to 18 mcm/d in the second year, and will finally reach 25 mcm/d to 35 mcm/d.
Q: Has any price revision clause included in this agreement?
A: In all long-term agreements for natural gas selling and buying, a precise revision clause is included. But since the agreement with Iraq is initially valid for six years before being renewed conditionally such a clause is not included now, but it will be decided upon in a long-term agreement.
Q: In the wake of Turkmenistan’s suspension of gas supply to Iran, NIGC demanded gas swap with Turkmenistan. Do you swap Turkmenistan’s gas now?
A: As you know after Turkmenistan halted its gas exports to Iran, Iran has managed to supply gas to Northern provinces without any problem. But after that, since Iran and Turkmenistan are trading partners we suggested that Iran could swap Turkmenistan’s gas. They agreed to send the same volume of gas they used to export to Iran before halting it for swap and we charge them for delivering their gas to other countries.
Q: You had also negotiations for gas delivery to Europe via Turkey. At what stage are those talks now?
A: Turkey had offered to transfer Iran’s gas to Europe via its territory, but NIGC would sign a trilateral agreement provided that Iran’s gas would directly go to Europe without being consumed in Turkey. We are currently in talks with influential Turkish companies, but we have yet to reach a conclusion.
Q: Has the volume of gas received from the Republic of Azerbaijan to be swapped to Nakhichevan changed?
A: No, it hasn’t. The agreement for swapping the Republic of Azerbaijan’s gas to the autonomous republic of Nakhichevan was signed on 5August 2004 for 22 years between National Iranian Gas Export Company (NIGEC) and the Azeri side. The agreement took effect in 2005. Iran receives Azerbaijan’s gas via the border city of Astara and swaps it to Nakhichevan via Jolfa. In 2013 and 2014, some 400 mcm of natural gas was delivered each year from Azerbaijan to the autonomous Republic of Nakhichevan via Iran.
Q: Regarding Iran’s plan to barter gas with electricity from Armenia, the latter has demanded more gas. Have any talks been held in this regard?
A: The ceiling for Iran’s gas exports to Armenia in exchange for electricity is below 1 mcm/d. The Armenian side had demanded that Iran’s gas exports be increased to 2 or 2.5 mcm/d. NIGC is considering this request. Of course, NIGC prefers to sign a direct agreement with Armenia about increasing gas exports in order to be directly paid for gas exports.
Q: So you plan to sign a separate agreement with Armenia?
A: Yes, that’s it. We have had talks in this regard. Of course, Armenia favors the price of Russia’s gas sales, which is low and we do not accept it.
Q: Will Iran’s gas-for-electricity agreement with Armenia be annulled if talks reach conclusion?
A: No, the gas-for-electricity agreement has been signed by the governments of Iran and Armenia and will be respected. But in case Armenia expresses interest in receiving more gas from Iran; NIGC, as a gas trading entity, would like to sign a separate agreement with Armenia and we would receive money in return for gas exports.
Q: Do you give an acceptable account of NIGC’s gas trading record?
A: In the first half-century of its activity, NIGC was focusing on domestic development and it did not actively enter transaction with its neighbors. But over the past seven months, proper measures have been taken in this regard and there has been a good start. During this short period of time, we have signed profitable gas swap and exports agreements and we have respected our obligations. We are currently providing necessary infrastructure to get a 10% share of global gas trading by 2025.
Q: How many gas swap deals has Iran already signed?
A: We have two gas swap agreements; swapping Turkmenistan’s gas to Azerbaijan at 16 mcm/d and swapping gas from Astara to Nakhichevan.
Q: Have you had any talks about gas exports via pipeline?
A: Yes, we have entered talks with Georgia. We have also held talks with Turkey to use the idle capacity of Botas pipeline. An agreement had been signed for exporting gas to Georgia, but it has not been finalized. The reason is that gas must pass by Armenia to reach Georgia and Georgia-Armenia negotiations have not been finalized to that effect.
Q: Why is Iran’s gas exports deal to Georgia short-term?
A: The agreement was signed in August 2016 between Iran and a private Georgian company, Georgian International Energy Corporation (GIEC), for a four-month period at 40 mcm. The reason for signing a short-term agreement is that Iran is planning to deliver gas to a country farther than its neighbors for the first time and it has to assess all aspects of the project.
Q: Of course Georgia believes that the price of Iran’s gas is high.
A: Georgia compares the price of Iran’s gas with Russia’s. Russia is selling gas at a lower price than Iran’s proposed price. We believe that Iran’s gas price is reasonable and we see no reason to reduce the price of our gas delivery to Georgia.
Q: So you have no plan to reduce the price of gas export to Georgia.
A: We have no reason to do so. We have customers for the gas share we plan to export. Iran is currently exporting gas to Turkey, Armenia and Azerbaijan and it will soon start exporting gas to Iraq. We do not intend to export gas to Georgia at any price. It should be also noted that any price we agree upon in the contract will be the base for our negotiations and we would not be able to modify it too much. Of course, what I am saying does not mean that we are tough. But I insist that Iran’s gas price is not high but realistic. We favor negotiations but we will not export gas below its real price.
Q: As new development phases of South Pars gas field become operational, Iran’s gas production capacity has increased and the country will have more surplus gas for exports. Under such circumstances, it would be more important for Iran to gain a foothold in the market than insisting on its desired price. Will Iran lower its gas price then to win more buyers?
A: Half a century has passed since NIGC was established. In the second half-century period of this company we are concentrating on international interaction and exports. But it does not mean that we plan to export all our gas before being processed. We can use gas to create more value-added and reach this objective by delivering processed gas to petrochemical companies. Of course, reaching this objective would require petrochemical companies to reach agreement with NIGC to receive gas feedstock. These companies will be NIGC’s priority for gas delivery. Another priority for NIGC in gas exports is to deliver liquefied natural gas (LNG) to farther countries like Japan and South Korea. Therefore, we can say there are numerous horizons for selling our gas and we are planning to reach the objective.
Q: So you do not worry about Iran’s gas market?
A: No, we are not worried that Iran’s gas would not be sold. Of course, in case of excess gas supply we will have to show flexibility. But that does not mean selling gas at a low price.
Q: How much will be Iran’s share of global trade if gas export agreements take effect?
A: At present, Iran’s share of global gas trade is below one percent. But under objectives enshrined in Iran’s 6th Economic Development Plan, we expect this share to increase to 10%. Of course, this share will depend on political and economic efforts in favor of international interaction.