Agency WPS
The Russian Oil and Gas Report (Russia)
July 27, 2005, Wednesday
UKRAINE PROPOSES A PROJECT FOR CONSTRUCTION OF IRAN-EUROPE GAS
PIPELINE TO IRAN
Ukraine proposes Iran to start bilateral preparation for construction
of the Iran-Europe gas pipeline. Ukrainian Prime Minister Yulia
Timoshenko states that the project has priority for her country and
can be developed in the near future. On July 24, Ukrainian Fuel and
Energy Ministry and Oil Ministry of Iran signed a memorandum implying
choice of one of the two routes for the future gas pipeline in
September with acceleration of beginning of pipeline construction.
Kyiv has already worked out a project of a gas pipeline bypassing
Russia. Representatives of Gazprom object to its construction without
a permit of Russia.
Iran owns 16% of the global natural gas reserves located on the
seabed of the Persian Gulf and in the Northeast of the country.
Large-scale export of fuel will begin after 2010, when gas production
in Iran reaches 290 billion cubic meters a year. Now Iran supplies 7
billion cubic meters of gas a year to Turkey, is building a gas
pipeline from the South Pars to the natural gas liquefaction plan on
the Kish Island in the Persian Gulf and is discussing construction of
the Iran-Pakistan-India gas pipeline.
For export of gas, Iran may try to restore the gas pipeline network
IGAT. The IGAT-1 gas pipeline with capacity of 9.6 billion cubic
meters a year was built in 1970, and delivered gas to Armenia and
Azerbaijan. Construction of the IGAT-2 with capacity of 27 billion
cubic meters along the same route was interrupted in 1979, literally
on the eve of its accomplishment because of the Islamic revolution in
Iran. Both gas pipelines have been conserved but need reconstruction.
Their reconstruction and putting into operation may enable Iran to
supply gas via Ukraine to the European Union. Extension of the
currently active gas pipeline from Iran to Turkey to Greece may serve
as an alternative to this project. In this case, the Iranian national
gas company NIGEC will become a competitor of Gazprom in Turkey and
in the Balkans and this will threaten pay back of the Blue Stream
pipeline project.
On July 25, Naftogaz Ukrainy announced officially that it was going
to take part in construction of the transit gas pipeline from Iran to
Western Europe probably bypassing Russia. On July 24, CEO of Naftogaz
Alexei Ivchenko proposed Deputy Oil Minister of Iran Hadi Nejad
Hoseinian consider two options for the route for construction of the
gas pipeline: Iran-Armenia-Georgia-Russia-Ukraine-Europe and
Iran-Armenia-Georgia-Black Sea-Ukraine-Europe. These routes have been
discussed for a few years. On July 24, a memorandum of understanding
“on issues of cooperation between the Fuel and Energy Ministry of
Ukraine and Oil Ministry of Iran” was signed in Tehran. The
memorandum implies that until the end of September, the parties will
hold “a five-lateral meeting (with participation of Russia) in the
framework of preparation for implementation of one of the options of
transit of Iranian gas, will create expert groups, exchange
information and determine powers of the companies that will
participate in the project.” The press release also said that, “the
parties also determined the volumes of gas to be supplied to Ukraine
and to Europe.”
A week ago, Timoshenko announced that this project was extremely
important “for the country and should be implemented in the near
future because only thus we will be able to achieve real
diversification of energy supplies.” Vladimir Demekhin, deputy chair
of the industrial policy committee of the Ukrainian parliament,
confirms that “today this is project number one in Ukraine and the
authorities will do their best to implement it.”
Representatives of Gazprom stated that they did not receive proposals
from the Ukrainian party regarding participation in the choice of the
aforementioned routes of the Iran-Europe gas pipeline. Without a
permit of Gazprom, neither of these routes can be used because the
first route implies construction of the pipeline via the territory of
Russia and the second route implies construction of a pipeline on the
floor of the Black Sea crossing the existing Blue Stream pipeline,
which is impossible without permission of Russia. In response,
representatives of Naftogaz said that all interested parties
including Gazprom would be able to participate in the negotiations in
September. However, Deputy Fuel and Energy Minister Sergei Titenko
explained, “It is planned that the pipeline will be built along the
route Iran-Armenia-Georgia-Ukraine-Europe with laying of 550
kilometers of pipe on the floor of the Black Sea from the Georgian
port of Supsa to Feodosia. The pipeline will have throughput capacity
of 60 billion cubic meters a year and Ukraine will be ready to buy 15
billion cubic meters of this quantity from Iran annually. Our
ministry estimates the project at $5 billion. The project was
developed in 2000, by Kyiv-based VNIPITransgaz institute.
The memorandum of the Ukrainian Fuel and Energy Ministry and Iranian
Oil Ministry may have a negative impact on negotiations of Gazprom
with Total on establishment of consortiums for entrance of Gazprom
into the already existing projects of the French company at early
stages of development of projects in South Pars in Iran. In 2004,
National Iranian Oil Company (50%), Total (30%) and Malaysian
Petronas (20%) signed an agreement on establishment of Pars LNG joint
venture. The project makes provisions for production of liquefied
natural gas in the framework of the 11th phase of development of the
South Pars gas field. However, the Ukrainian memorandum reduces the
chances of Gazprom for obtaining access to sales of the gas produced
at the South Pars field.
If worsening of relations between Ukraine and Russia in the area of
gas policy is taken into account, there are no doubts that Ukrainian
government will attempt not only to seek alternative sources of gas
supplies but will also try to pressurize Gazprom with a view to
receive additional quantities of gas that might be re-exported in the
near future.
Source: Kommersant, July 26, 2005