Iran and Turkey ready to sign new contract

Iran and Turkey ready to sign new contract

At a press conference in Ankara August 12 with his Iranian counterpart, Mohammad Javad Zarif, Turkey's foreign minister Mevlüt Çavuoglu said that Turkey wanted to buy more gas from Iran. 

Turkey is keen to buy more gas from Iran, now that the dispute over price has been resolved in Turkey's favour. Iran had agreed last year to export more, as long as Turkey – its only export market – agreed to pay a high price. But now that condition has lost validity.

Iran is now exporting 30mn m³/d on average but it could raise this by a fifth to 36mn m³/d, the managing director of the National Iranian Gas Company, Hamidreza Araqi said August 19, using existing pipelines and production capacity.

In 2012, Turkey sued Iran in the International Court of Arbitration for overpricing gas purchases between 2011 and 2015. The court decided in favour of Turkey in February 2016, and ordered that both parties agree to a reduction in prices of between 10% and 15%.

In February, Araqi reportedly said: "Although the court's ruling is final, the money that Iran should pay out to Turkey has not yet been determined," estimating the compensation to be around $1bn. The exact discount is expected to be announced in September 2016.

Hamidreza Araqi

Turkey imports about 10bn m³/yr from Iran – the country's second largest supplier after Russia – under a 25-year deal signed in 1996. Some 2.051bn m³ of gas were exported in the first 5 months of Iran’s last fiscal year to March 20, the NIGC managing director also said, while the comparable figure for this year was 2.093bn m³.

Iran sends more gas to Turkey in winter than in summer. According to Turkey’s official statistics, Iran exported 3.346bn m³ from Iran in January-May 2016, which indicate 9% growth year-to-year.

Elsewhere in his remarks, Araqi said the volume of gas which has been stored in two storage facilities of the country, namely Sarajeh and Shourijeh, has increased slightly to 1.052bn m³ this fiscal year.

Meanwhile, gas deliveries to power plants during the first four months of this fiscal year rose by 1.6bn m³ to 27.067bn m³, while the demand for major industrial users rose 944mn m³ to 13.043bn m³. 

Since the start of the fiscal year Iran has increased its output capacity by 15mn m³/d to about 750mn m³/d, while the figure is expected to reach 835mn m³/d by the end of the fiscal year.