The European Union (EU) leaders’ has signed the 6th sanctions package, which bans 90% of Russian oil exports by the end of 2022. In response to the EU leader’s decision, Russia has suspended natural gas supplies to countries such as Denmark, Germany and France. This leads to the evaluation of new players in the European energy market such as Iran and Turkmenistan. In this context, the energy potential of the Caspian Basin stands out as an alternative to Russian energy.
In this context, Ankara Center for Crisis and Policy Studies (ANKASAM) presents the views it received from Petrol, Natural Gas and Economy Analyst and Deutsche Welle Journalist Dalga Khatinoglu, to your attention.
- Is Iran willing to develop joint oil and natural gas fields with Azerbaijan and Turkmenistan in the Caspian?
The only joint field between Iran and Turkmenistan is Gonbadli, which started operation decades ago and currently produces only 0.7 mcm/d natural gas from this small reservoir. Iran and Azerbaijan have also a joint block, named Araz-Alov-Sharg, but hasn’t been explored yet. We don’t know whether there is any gas or oil in this block or not. Firstly seismic operations must be conducted and exploration wells should be drilled to see is there any reservoir there or not.
The other problem is that developing the Araz-Alov-Sharg block -placed in disputed waters – is not a priority neither for Iran nor Azerbaijan. Iran has tens of undeveloped onshore gas fields or offshore fields in the Persian Gulf shallow waters (10 times shallower than Caspian deep waters), with very fewer costs to develop. On the other hand, Azerbaijan has focused on several projects under development like the Total-led Absheron gas field, and developing the Araz-Alov-Sharg block is not a priority for Azerbaijan.
The other blockage is that establishing a joint-venture with Iran to develop the mentioned block has other obstacles like US sanctions, attracting foreign investors and companies, etc.
- What do you think about the trade of Turkmen gas to Turkey and Europe through Iran?
Firstly there are not any infrastructures including pipelines, connecting Turkmenistan to Turkey through Iran. Iran can receive Turkmen gas in a restricted amount in northeastern regions and deliver the same amount of its gas in northwestern regions to Turkey. Please notice that the majority of Turkmen’s gas reserves locate in eastern regions, about 1000 km away from Iran’s borders with Turkmenistan and delivering gas from Turkmenistan to Turkey needs at least 2000 km new pipeline and from there to the EU needs 1500-2000 km pipelines. It is very expensive.
The other obstacle is that Turkey uses the supplied gas from Iran in eastern regions and there is not any pipeline to connect Iranian gas to Turkey’s transit routes towards Europe like Tanap and TurkStream pipelines.
Currently, Iran receives 1.5 bcm/year gas from Turkmenistan and delivers to Nakhchivan and Azerbaijan. But as you see the amount is very low, because of poor infrastructures.
- Do you think it is possible for Azerbaijan and Turkmenistan to be connected by pipelines under the Caspian Sea and to start a joint oil-natural gas trade?
Indeed the realization of the Trans-Caspian pipeline is not expected, but Azerbaijan and Turkmenistan agreed last year to jointly develop a disputed oil and gas field, named Dostlug, last year. This field locates only 80 km away from Azerbaijan’s Azeri-Chirag-Guneshli offshore infrastructures and can easily supply about 2-3 bcm/yr gas through Azerbaijan to Turkey and Europe. Coming to the oil issue, currently, almost all of Turkmen’s oil and gas condensate is being transited through Baku-Tbilisi- Ceyhan (BTC) pipeline to the international markets.
- What are the steps Iran can take within the scope of the energy crisis experienced by Europe?
Unfortunately, despite its 33 trillion cubic meters of gas reserves (which ranks 2nd after Russia in the world), Iran has a gas shortage and deficit. Last winter the country faced with 250 mcm/d gas deficit, which equals Turkey’s total gas demand.
On the other hand, US sanctions on Iran are a challenge for western companies to involve in any energy-related project in Iran.
The other problem is that 80% of Iran’s active oil and gas fields are in their second half-life (they are very old) and these fields lose their production capacity each year. Iran needs at least a $70 billion investment by 2030 to only keep the production level unchanged. For increasing oil and gas production it needs a $200 billion investment. Please notice that during the last 4 years, Iran could only invest only $3.1 annually in upstream oil and gas projects (production sector). Therefore, Iran is not a reliable source for EU energy security.
- How do you interpret the repercussions of the crisis in question on the relations between Iran and Russia?
During the last three months, Russia’s offering of a 30% discount for oil has led to declining Iranian oil export from 840,000 barrels per day to 570,000 b/d. As you see, Russia is replacing Iran’s only oil market, China, rapidly. Russia and Iran are very hard rivals in energy markets.
