Turkey and Iran sign strategic deal to carry gas to Europe

Oct 29, 2009 01:00 AM

Iran and Turkey signed a number of deals to facilitate the efficient flow of gas through Turkey to Europe, including accords on allocating some of Iran's South Pars gas field to the Turkish Petroleum Corporation (TPAO), allowing Iranian gas to be transported via Turkey and allowing Turkmenistan's natural gas to be pumped to Turkey via Iran, during Turkish Prime Minister Recep Tayyip Erdogan's visit to Turkey's south-eastern neighbour.
Turkish Energy Minister Taner Yildiz said the deals provided advantages for Turkey in the use and the sale of some phases of the South Pars gas field.
"Its conditions and prices will be negotiated later," the minister added.

Iran, which has the world's second-largest natural gas reserves, is Turkey's second-biggest supplier of natural gas after Russia. Turkey had signed a preliminary deal in November 2008 for Iranian gas to be exported to Europe through Turkey and for Turkey to produce gas in the South Pars field.
The investment would amount to $ 3.5 bn. But this deal has been delayed by objections from the United States, which opposes new energy deals in Iran as part of Western efforts to isolate Tehran over its nuclear program.

Iranian media said earlier that Iran had agreed to a Turkish request for a three-month extension of a deadline to finalize the South Pars deal in order to clarify pricing and other details.
"We have more steps to take on the economy, trade, oil and gas to promote cooperation," Erdogan said. Iran is under US and UN sanctions over nuclear work Tehran says is for peaceful power generation but which the West suspects is aimed at making bombs.

Turkey has said that Iranian gas can help the planned Nabucco pipeline supply Europe and lessen the continent's dependence on Russian deliveries. The agreement, which was signed by Minister Yildiz and Iranian Oil Minister Masoud Mirkazemi under the supervision of Erdogan and Iran's vice president, Mohammad Reza Rahimi, also envisaged the establishment of a joint working group to study the possibilities of substituting fields in the South Pars region which were formerly allocated to Turkey with richer fields.
Yildiz said Turkey's step towards Iran is in accordance with its policy of establishing "zero-problem" relations with its neighbours and advancing to a maximum level of energy cooperation with surrounding countries.

"As you would know, the transfer of property rights of oil and natural gas deposits is not a matter of discussion, as set out in their Constitution. All you can get is the land tenures of these fields, for temporary periods of time. We will have the right to sell, for instance, half of the gas extracted from the field. Of course additional conditions and the prices will be discussed later. After a series of studies on the fields, a ballpark quantity of the deposits beneath the earth will be determined," the minister said about the process.
TPAO will later start exploring and extracting the gas reserves and will also be able to establish platforms to drill into the earth up to 150 meters in search of gas. Following that, the company will start production and sales.

In addition to increased energy cooperation, the two countries further agreed to strengthen their banking and transport ties in a drive to almost treble trade between the two neighbours to $ 20 bn in the next few years. As of the end of 2008, total trade volume was roughly $ 7 bn.
"The two countries are determined to expand their bilateral relations in all fields," Rahimi told attendees of a joint news conference with Erdogan.

Erdogan, on the other hand, said he welcomed an Iranian call for trade volume to eventually reach $ 30 bn.
Rahimi said the two sides reached a series of agreements, including building two power plants, setting up a free industrial zone on both sides of the border and on Iranian and Turkish banks opening branches in the other country.

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