Journal of Turkish Weekly, Turkey
March 26 2007
Iran’s chances are getting slimmer for controlling future energy markets
by Ahmet Türker
Sunday , 25 March 2007
The troubles surrounding Iran is not ending. With mass reserves of
gas and oil, the ambition to develop nuclear technology is leaving
the Iranian industry handcuffed. While Iran is following the
footsteps of North Korea, Russia is using the gas to build an energy
empire.
Iran is currently only exporting gas to Turkey. Although not
officially accepted, most of the business circles in Turkey is
claiming that Iranian gas is not the most economical one. In terms of
energy security, it is far away from being reliable.
Iran has the world’s second biggest gas reserves. But because of
years of underinvestment and growing domestic consumption only a
fraction of the gas production is to be exported. During peak
consumption periods, as in the winter times, the reliability of
supply becomes a headache for Turkey.
The importance of Iranian gas lies in its importance of being an
alternative to Russian gas. But due to international sanctions and
growing international problems, Iran is finding it hard to attract
foreign investors. With the latest sanctions and the crises resulted
with the seizure of 15 British soldiers, the road ahead for Iran is
rather dimmed.
In this doomed times, Iran may be losing its only gas customer Turkey
and future customers. Although Iran has started the construction of a
Armenia-Iran pipeline, the Armenian side which has also suffered from
lack of investment, is rumoured to have lost the full control of
pipeline after a discount from Gasprom for 2007.
Turkey on the other hand has already tighting her schedule for LNG
exportations to backup unreliable Iranian gas supply. During the
winter, Iran is diverting the gas to its domestic market. This is
harming the Turkish-Iranian relations and Turkey’s perception of Iran
as a reliable and secure supplier.
Turkey-Iran gas relations have received another blow from US Senate.
According to Turkish Daily news, during the hearings Senator Jack
Reed asked the Undersecretary of State Nick Burns whether Turkey is
`still’ buying gas directly from Iran. After Burns said he believed
so, Reed then requestioned whether US involved in an effort to
persuade `our NATO ally not to do that’
Burns also said : `A number of our allies -Turkey is a prominent one-
a partner like India is another – have long term oil and gas
relationships [with Iran] and we are trying to suggest that there are
alternatives for the future.’.
The alternative routes, Burns mentioned is either Azerbaijan or LNG
market. Last year Turkey has exported 5.7 billion cubic meters(bcm)
of gas from Iran and 4.2 billion cubic meters of gas from Algeria. In
the first two monts of 2007, Turkey has exported a total of 6.65 bcm
of gas, where Russia has the lion’s share with around 4.4 bcm where
Algeria has 0.817 bcm and Iran has 0.84 bcm.
Azerbaijan gas however will be a good but not very sufficient
alternative. Therefore Turkey is expected to increase her interest in
the southern pipeline extension from Egypt-Syria pipeline. This route
will be advantegous due to different peak periods rather than
parallel peaks as happening in Iran.
With the seizure of British soldiers, Iranian tension is expected to
continue. The Iranian politicians firm belief in the exceptionality
of Iran is harming the relations with Iran. But the road ahead is not
bright for Iran.
There are several factors affecting Turkey’s decision to undermine
Iranian gas. Iranian unreliability in gas supply every winter,
Iranian-Armenian gas pipeline and growing underinvestment coupled
with growing domestic consumption are all factors dimming Turkey’s
outlook to Iran.
After some years, Iranian will look back and see what they have lost.
It is not because American’s asked it, but due to their own
understanding of playing political games. Although Iran will still
have the same second biggest gas reserves of the world even 5 years
from now on, the diplomacy and market side might be more under the
influence of Russia and LNG exporting countries. Then, Iran’s only
option could be to leave the development and operation of her gas
fields to foreign giants to compete in an energy market of
monopolists.
Ahmet Türker, USAK Energy Review
This commentary is from USAK’s Energy Review Newsletter