In a move that might seem calculated to damage already delicate
relations with Washington, Turkey has issued a license to a Turkish company
planning to construct a pipeline to export Iranian natural gas across Turkey and
Europe to Germany.
Turkey's state
Petroleum Administration (PIGM) has issued the license to Turang Transit
Tasimacilik, giving it the right to operate a 35bn cubic metre per year (cm/y),
1,720-kilometre-long pipeline from the Iranian border town of Bazargan across
Turkey to Ipsala on the Turkey-Greece border and from there across Europe to
Germany.
Valid for 30 years,
the license carries the condition that Turang must demonstrate within two years
that it has finalized agreements with gas producers and concluded financing for
the line, or face the license being cancelled. However, here's where the facts
end and the speculation begins.
Where's the
gas?
Turang is a
subsidiary of Turkey's Som Petrol, a small petroleum products trading company
owned by Turkish businessman Sitki Ayan, which was said by Tehran to have signed
a deal to transport Iranian and Turkmen gas from Iran to Europe via Turkey.
Subsequently, Ayan was reported in the Turkish media as claiming to have
arranged financing for the construction of an export pipeline, which is expected
to cost up to $11.5bn to build.
However, it's unclear
what sort of financial institutions would be prepared to take on what amounts to
quite a substantial risk, with an unknown company on a project over which there
are several significant question marks.
To begin with, while
Som Petrol does appear to have some sort of agreement with Tehran allowing it to
export gas from Iran to Europe via Turkey, it is unclear exactly where the gas
will come from.
Iran has for some
years been facing problems developing production from its own gasfields due to
US pressure on oil and gas companies not to work there. Turkmenistan too doesn't
currently have sufficient gas to fill a 35bn cm/y pipe; currently, it sells most
of its gas to Russia and China, with only a small portion being exported to Iran
for domestic use there.
At the other end of
the equation, Som Petrol also has yet to negotiate transit agreements with
Greece and whichever other countries it chooses to run its pipeline through to
reach Germany, not to say conduct environmental impact studies, receive
construction permits and, most importantly of all, identify potential buyers of
the gas and sign sales agreements.
In fact other than
the agreement with Iran - the details of which have not been made public - all
the project currently has is a license from Turkey, valid for two years during
which the sponsoring company, must complete all of the above. In other words,
Turang, a small company with no previous experience of developing multi-national
pipeline projects, must in two years conclude a lengthy series of agreements and
studies that the six large state energy groups that make up the consortium
sponsoring the Nabucco gas pipeline, which also plans to carry gas across Turkey
to Europe, have been unable to complete in eight years, even with the full
backing the EU. And that's the same EU which has backed the US sanctions against
Iran and repeatedly indicated an unwillingness to take gas from an Iranian
regime conducting a nuclear programme, allegedly aimed at developing weapons
capability.
Given the tiny odds
of Som Petrol managing to arrange all this within the given two-year time span,
it begs the question why anyone is bothering to try to publicize a project that
surely cannot be realized. The answer to that almost certainly lies in the
decision earlier this year by the US to impose a second sanctions package on
Iran - over and above that approved by the UN.
Keeping the door
ajar
This second package
seeks to penalize international companies from working in certain sectors of the
Iranian petroleum sector. Among those companies subsequently listed as being in
breach of sanctions was Turkey's state-owned upstream operator TPAO, which in
2007 was the subject of a preliminary agreement between Ankara and Tehran under
which TPAO would develop three blocks of Iran's giant South pars gasfield and
export the gas back to Turkey for transit to Europe.
Although no final
agreement was ever reached, it remained under discussion until the announcement
of Som Petrol's agreement with Tehran, at which point Turkish officials
confirmed that TPAO's deal had been shelved. This move served to bring Ankara in
line with Washington's wishes, while at the same time keeping a door open to
Tehran.
It may not be that Som Petrol or its subsidiary Turang ends up
constructing and operating a pipeline carrying Iranian gas to Europe, but their
role may yet serve to allow that happen at some point in the future - assuming
that Tehran can succeed in convincing Washington and Europe that it has no
aspiration to attain nuclear weapons.