Armenia approves plan for Turkmenistani gas transits via Iran

Nov 20, 2001 01:00 AM

The government of Armenia decided on November 15 to approve a draft agreement providing for cooperation with Iran on transport of gas from Turkmenistan. The document is due to be signed and finalized in late December during Armenian President Robert Kocharian's official visit to Tehran.
The agreement provides for Iran to send natural gas received from Turkmenistan via the Korpedje-Kord-Kuy pipeline to Armenia. Ashgabat has indicated that it is willing to supply the Armenian market with an initial 1 bn cmpy of gas, with volumes rising later to 3 bn cmpy.
Turkmenistan wants the gas to be transported to Armenia via an extension of the Korpedje-Kord-Kuy pipeline. The cost of building the 140 km extension is estimated at $ 120 mm.

Iran and Armenia had originally agreed on the construction of a 140 km north-south pipeline capable of carrying 1 bn cmpy of gas. The cost of that project would also have been about $ 120 mm. However, the two sides have had difficulty securing financing for pipelineconstruction, despite expressions of interest from European companies and statements of support from the European Union and some international financial institutions.
Yerevan also responded negatively to Tehran's offer to sell its gas at around $ 84-90 per 1,000 cm, close to the world market rate. Cash-strapped Armenia would be hard-pressed to pay for natural gas at this price. However, Turkmenistan has indicated its willingness to provide gas at the rate of $ 42-45 per 1,000 cm.
Armenia and Iran seemed to be in agreement with respect to gas prices and transit fees. Approval of the Turkmenistani gas transit deal might also make plans for the extension of the Iran-Armenia pipeline to Ukraine by way of Georgia more attractive to investors. Ukraine has expressed interest in the project for some time but has balked at paying for gas at the price originally demanded by Iran. With Turkmenistan ready to supply gas at a lower rate, Ukraine may get on board.

It is still too early to say whether these plans will come to fruition. Tbilisi has responded negatively to proposals for the construction of a pipeline for Iranian gas through Georgian territory. Since the Georgian government has signed an agreement with Turkey and Azerbaijan on the construction of a pipeline for gas from the Shah-Deniz field, it is hardly keen on playing host to an Iranian gas conduit.
And if Georgia nixes the project, neither the EU nor financial institutions will be quick to offer funding for a pipeline ending in Armenia. Even the European companies that have shown willingness to chance American displeasure over energy projects involving Iran have displayed little interest in Armenia's small and not terribly lucrative gas market.

Source: NewsBase
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