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IHS Global Insight Perspective
Turkish Energy and Natural Resources Minister Taner Yildiz joined the presidents of Turkmenistan and Iran at last week's pipeline launch, holding talks on the sidelines with Gurbanguly Berdymukhammedov and Mahmoud Ahmadinejad to discuss the prospect of Turkmen gas supplies being routed via Iran onward to Turkey and even to Europe.
Turkey is keen to implement a 30-bcm/y gas purchase and re-export deal signed with Turkmenistan since Turkmen gas imports could provide Turkey with additional flexibility in achieving its multi-vector gas transit strategy.
Iran's own gas industry woes, together with U.S. opposition to Turkmen gas flowing via Iran to Turkey (potentially opening the door to Iranian gas exports via the Nabucco pipeline to Europe), are likely to prevent the ambitious Turkish plan from being realised any time soon.
A Grand Transit Plan
Last week's launch of the Dauletabad-Sarakhs-Khangiran gas pipeline, the second link between Turkmenistan and Iran, was not merely important to the energy security of both of those countries (see "Related Articles" below). Aside from allowing Turkmenistan to better balance its gas export portfolio and providing needed gas supplies for the domestic Iranian market, the new pipeline—which has an initial capacity of 6 bcm/y, eventually rising to 12 bcm/y—also has the potential to have an impact further down the pipeline chain, specifically in Turkey.
Together with the existing Korpezhe-Kurt Kui pipeline, the new Turkmenistan-Iran gas pipeline will boost the Central Asian state's total gas export capacity to Iran to 20 bcm/y. Iran's domestic gas industry woes—exacerbated by shifting government priorities and years of under-funding due to international sanctions against the country—mean that the extra Turkmen gas is intended first and foremost to meet the needs of north-eastern Iran and nearby rural areas. However, the invitation to Turkey's minister of Energy and Natural Resources Taner Yildiz to attend last week's pipeline launch on the Turkmen-Iran border was a clear signal that the ultimate goal is for some of this additional Turkmen gas to be transported via Iran to Turkey.
Indeed, Iran's president Mahmoud Ahmadinejad said following the pipeline ceremony that Iran could eventually deliver Turkmen gas via its territory to Turkey. Yildiz held discussions while in Turkmenistan with Ahmadinejad and Turkmen president Gurbanguly Berdymukhammedov about the potential for the new pipeline to deliver Turkmen gas to Turkey, from where the Central Asian gas could, in theory, even be sent on to Europe. These talks followed an earlier agreement in October 2009 between Turkey and Iran according to which the two countries mapped out a plan to purchase gas from Turkmenistan, both for domestic use and for re-export to Europe, potentially via the Nabucco pipeline. Turkey's import of gas from Turkmenistan could provide more gas for Turkey's own needs, thereby freeing up more gas from Azerbaijan or Iran to flow via Nabucco into Europe.
Managing a Complicated Strategy
Turkey's plan to become the key "energy bridge" linking Caspian, Middle Eastern, and Central Asian gas to Europe is certainly ambitious and—as the country's strained relations with traditional ally Azerbaijan over the past four months have demonstrated—not without problems. Nonetheless, Turkey's state-run pipeline firm BOTAS already has in hand a signed gas purchase and re-export agreement with Turkmenistan, although the 1999 deal has never been implemented, due to the lack of infrastructure under which supplies could be delivered. The 30-bcm/y deal envisions 16 bcm of gas to be supplied to the Turkish market, with another 14 bcm for re-export by Turkey to Europe (see table).
Turkey’s Gas Import Contracts
Russia (through Bulgaria)
Russia (through Bulgaria)
Russia (Blue Stream)
30 years from start date
Outlook and Implications
In theory, the new Turkmen-Iran gas pipeline brings Turkey one step closer to being able to implement this deal and achieve its "bridge" goal as new infrastructure to carry gas supplies towards Turkey is put into operation. In practice, however, Turkey still faces an uphill battle to achieve its objectives. For one, Iran currently lacks the capacity to transport this additional Turkmen gas across the country for onward delivery to Turkey. Gas supplies via the new pipeline are intended primarily for Iran's own consumption in its north-eastern regions, and while these new volumes will free up Iran from having to use its own gas production for this purpose, the country's gas woes are such that it is continuing to experience difficulties even in exporting gas under its own supply contract with BOTAS. Construction of new transit infrastructure to connect the Turkmen gas to Turkey will cost major sums of money that Iran simply does not have.
Indeed, international sanctions on Iran (due to the country's nuclear programme) are continuing to put a strain on the government's finances, forcing Iran to choose carefully its energy sector priorities. Iran has scaled back its focus from gas exports to meeting the domestic market's needs. Iran's participation in the Nabucco project as a potential gas supplier has been fiercely opposed by the United States, so on the face of it, the Turkmen-Iran-Turkey gas transit corridor seems a clever way round this, particularly since this could earn Iran important transit revenue as well as allow Turkmen gas to be supplied to Europe via Nabucco. Nevertheless, any involvement by Iran in Nabucco—even indirect—is sure to be strongly opposed by the United States.
Hence, the prospect of a Turkmenistan-Iran-Turkey gas supply route seems fairly dim in the current international environment. Similarly, implementation of the decade-old Turkmenistan-Turkey gas purchase and re-export deal seems unlikely in the medium term—unless there are separate breakthroughs in the current stalemates between Turkey and Azerbaijan (over gas prices and transit) and between Turkmenistan and Azerbaijan (over their Caspian Sea maritime border). Resolution of these disputes is needed for the West's "alternative" vision of a transport corridor—envisioning a trans-Caspian pipeline running from Turkmenistan to Azerbaijan, connecting to Nabucco in Turkey, and ultimately allowing Turkmen gas to flow all the way to Europe—to be realised. Turkey is not the only one with an ambitious plan.