Kazakh president backs pipeline through Iran

Jul 05, 1999 02:00 AM

Kazakh President Nursultan Nazarbayev commented on potential oil export routes on July 3, while attending the World Economic Forum in Salzburg.
Kazakhstan, which has huge oil reserves but few export options, is eager to see new transport corridors created so that Central Asian oil can be exported to Europe and South Asia, Nazarbayev said. He said he wanted foreign investors to participate in Kazakh oil development projects and help establish these new transport corridors.
He also said that Astana and Moscow were discussing the construction of a new pipeline to connect Central Asia with the Baltic Pipeline System (BPS), a network of oil conduits that will terminate on the Baltic Sea. The new pipeline, to be built through central Russia, would allow Kazakhstan to export up to 20 million metric tons of crude per year through the BPS, Nazarbayev said.
The Kazakh president also stated that he saw a proposed export route through Iran as the most economical option for Central Asian oil. The Baku-Ceyhan transport route favoured by the United States and Turkey will prove about four times as expensive as a southward pipeline through Turkmenistan and Iran to the Persian Gulf, he claimed.
Nazarbayev's words are likely to be hailed in Tehran, which has for some time been pushing for the establishment of an Iranian route for Caspian oil transports. However, it is far from certain that Kazakhstan can resolve all of its oil export-related difficulties by looking to Iran. So far, Iran has been a less than ideal partner -- at least with regard to the swap deal signed in 1996.
Kazakh President Nursultan Nazarbayev signed the deal in the hope that it would allow his country to export 2-6 million metric tons of crude oil per year via Iran. The Iranian government, for its part, agreed to carry out the swap; Iran was to take delivery of the oil, refine and distribute it in Tehran and Tabriz and then make an equivalent amount available at the Kharg Island terminal on the Persian Gulf.
The deal has never lived up to Nazarbayev's vision. Trial shipments were slow to start. Then they were halted after Iranian experts discovered that refineries in Tehran and Tabriz could not handle Kazakh oil because it contained too high a concentration of mercaptans (ill-smelling sulphur compounds). Swap shipments have never been regular, and Kazakh officials rarely comment on the subject.
This lack of success has not discouraged other companies working in Central Asia from seeking out swap deals of their own. Several companies working in Turkmenistan -- notably, Monument Oil & Gas of Great Britain and Dragon Oil of Ireland -- have arranged to export part of their output via Iran. (Mobil of the United States has sought permission to cut a swap deal of its own, but its request was denied by the U.S. government in late April of this year.)
However, it is not clear that these Iranian export deals are all that beneficial. Dragon has had such a hard time finding markets for its Turkmen production -- which it exports exclusively via Iran -- that it had to write off $ 46.1 million of its Asian assets last year.

Source: NewsBase
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