Category: Iran

TEHRAN, Aug 25 (Reuters) – Iran’s revised oil and gas development contracts offer more incentives to foreign firms and Turkey’s reservations about the deals reflect an initial lack of knowledge, the Iranian oil minister said on Monday.

A Turkish Energy Ministry source said last week Turkey would not sign a natural gas accord with Iran until changes acceptable to global investors were made to so-called “buy-back” deals, which are often criticised by foreign firms.

The gas deal was expected to have been signed when President Mahmoud Ahmadinejad visited Turkey earlier in August.

“The Oil Ministry’s international agreements have made good progress. The modification of the buy-back contracts provides more incentives for foreign companies to participate in Iranian projects,” Oil Minister Gholamhossein Nozari said.

He did not give details.

“The Turks were not informed about the culture of the buy-back contracts. But with the negotiations that took place there (in Turkey), they were told the price ceiling of the contract is determined after carrying out tenders,” he said.

His comments were made to journalists, according to the Oil Ministry’s news website SHANA.

Turkey and Iran last year signed a preliminary accord on joint gas production and export under which Iranian gas would be exported to Europe through Turkey and Turkey would produce 20.4 billion cubic metres of natural gas in the South Pars gas field.

The United States, which is seeking to isolate Iran in a row over Tehran’s nuclear ambitions, has opposed the deal.

The Turkish ministry source said the proposed buy-back system created “serious risks” for Turkey in terms of pricing. Turkey wants to buy gas directly from the fields and wants Iran to give a guarantee on contributing towards investments.

Under such buy-backs, firms generally hand over operations of fields to Iran after development and receive payment from oil or gas production for a few years to cover their investment.

Iran says it is revising terms but has not given details.

The Turkish source said the risks linked to the buy-back system included issues such as commodity price rises, financing costs, the lack of a production guarantee and insurance costs.

Nozari dismissed the idea of production sharing deals, a form of oil contract found elsewhere. “Such contracts have been abolished in the world and less than 10 percent of oil production is done using this mode of contract,” he said.

An Iranian oil official told Reuters this month Iran was negotiating a deal with Asian oil firms for two oil and gas blocks in the Caspian Sea and this could involve a production sharing contract, if parliament and the authorities agreed that the model was best for the high-cost Caspian area.

Iran says a study has shown Iran’s Caspian region contains an estimated 21 billion barrels of oil and gas equivalent.

“A number of wells have been drilled in the shallow parts of the Caspian Sea in order to determine commerciality but we have not received a definitive answer on that,” Nozari said, adding that seismological tests were also going ahead. (Reporting by Hashem Kalantari, writing by Edmund Blair)

By JOHN C.K. DALY, UPI International Correspondent 

Published: Aug. 21, 2008 at 5:52 PM

WASHINGTON, Aug. 21 (UPI) — The repercussions of Russia’s reassertion of power within what it deems its “sphere of influence” in “the near abroad” continue to ripple throughout Eastern Europe, the Balkans and the Caucasus. Washington’s increasingly strident rhetoric over the Russian-Georgian conflict over South Ossetia is having repercussions from Prague through Warsaw to Kiev, as governments scramble to assess the fallout from the dispute.

Edging closer into Washington’s orbit, Poland has agreed to base 10 U.S. anti-ballistic interceptor missiles and the Czech Republic its complementary radar facility by 2011-2013 to complete a system with components already situated in the United States, Greenland and Britain. While the Bush administration avers that the system is designed to intercept rogue missile launches from renegade states such as Iran, the Kremlin fiercely maintains that geography alone plainly shows the system’s anti-Russian intent and that, along with incorporating former Eastern European and former Soviet republics within NATO, it is an American-led attempt to encircle Russia.

Even more infuriating to Moscow, earlier this week Ukrainian President Viktor Yushchenko, following Russia’s unilateral abrogation earlier this year of a 1992 agreement with Ukraine on the use of Ukraine’s two Soviet-era missile early warning system tracking stations, issued a decree ending Ukrainian participation in the accord and made an offer of the two stations for “active cooperation with European nations.”

If Eastern Europe has been traumatized by the recent display of Russia’s military might, with Ukraine and Georgia seeing possible NATO membership as the surest guarantor of their security further east, another stalwart NATO member is carefully evaluating Russia’s other rising influence — energy. As Turkey re-evaluates Eurasia’s changing political and economic landscape, Washington in its eagerness to confront Russia may see another of its cherished foreign policy tenets, that of blockading Iran with sanctions, weakened, perhaps fatally.

Since the 1979 Iranian Revolution overthrew the Shah, it has been a core tenet of U.S. foreign policy to contain the Islamic Republic of Iran, currently enshrined in the 1996 Iran-Libya Sanctions Act. Expanding Washington’s reach, ILSA threatened even non-U.S. countries and companies with possible sanctions if they invested more than $20 million in developing Iran’s energy resources.

For Turkey, which imports 90 percent of its energy supply, the Washington dictum of “happiness is multiple pipelines” is a stark reality, however much Washington loathes the mullahcracy in Tehran. Turkey does not have the luxury of allowing “pipeline politics” to trump its national energy security policies, as its current choice of major natural gas suppliers is stark — Russia or Iran, while waiting for Azerbaijan to ramp up production. Highlighting the vulnerability of regional pipelines to conflict, the fighting in South Ossetia halted Azeri oil shipments through Georgia.

Iran, which contains the world’s second-largest gas reserves, currently provides nearly one-third of Turkey ‘s domestic demand, while Russian energy giant Gazprom provides 63.7 percent of Turkey’s imports, primarily via the Black Sea undersea Blue Stream pipeline, with smaller volumes coming from Azerbaijan. Much to Washington’s annoyance, in 1996 Turkey signed a contract with Iran for natural gas deliveries, which began in December 2001 via a pipeline from Tabriz to Ankara. Five years later the South Caucasus pipeline, also known as the Baku-Tbilisi-Erzurum natural gas pipeline, opened; with an annual capacity of 8.8 billion cubic meters, BTE carries Azeri Caspian natural gas to Turkey via Georgia.

In June Turkey’s Devlet Planlama Teskilati (State Planning Organization) prepared a comprehensive projection for Turkey’s economy covering 2009-2011, which included measures to ensure Turkey’s long-term energy supply security and accorded top priority to decreasing Turkey’s dependency on imported natural gas. In the interim, however, given the vulnerability of Azeri imports because of the unsettled nature of current Georgian-Russian relations and the apparent unpredictability of the Kremlin, Ankara is deepening its ties with Tehran, however much Washington disapproves. On July 29 Iranian Petroleum Minister Gholamhossein Nozari said in Tehran that Turkey and Iran are negotiating over Turkey being a transit corridor for Iranian natural gas exports to Europe and that Iran will provide increased amounts of natural gas to Turkey during the winter.

Nor is Turkey limiting its interest in Iranian energy purely to transit policies: In July 2007 Ankara signed a deal with Iran to develop three gas projects in its giant South Pars offshore gas field in the Persian Gulf as well as to build two pipelines to transport an estimated 30 billion cubic meters of Iranian and Turkmen gas annually through Turkey for resale to Europe. The 3,745-square-mile Persian Gulf South Pars-North Dome gas condensate field, straddling Iranian and Qatari territorial waters, is the world’s largest gas field, containing an estimated 51 trillion cubic meters of natural gas, 50 billion barrels of condensate and reserves equivalent to 360 billion barrels of oil.

The next result of such activity has been a rapid increase in bilateral trade; in 2007 bilateral Turkish-Iranian trade exceeded $8 billion, a 19.5-percent increase over 2006.

In case Washington was inclined to shake its sanctions stick at Ankara in the wake of Iranian President Mahmoud Ahmadinejad’s two-day visit to Turkey last week, Turkish President Abdullah Gul hailed the visit as “fruitful and helpful” and added, “Expansion of relations on a regional level seems quite natural for Turkey, and it is not important what other states think of it; Turkey cares for its own interests. Turkey will establish good ties with its neighbors with an aim of stability and security in the region.” Underlining Turkey’s commitment to improving its energy ties with Iran, Turkish Energy Minister Hilmi Guler will pay a return visit to Iran within the next two weeks.

Gul tersely summed up Ankara’s concerns in his closing remarks: “We are an independent country. Here we eye our country’s interests. … We have to make investments for the (energy) supply security of Turkey.” In the 21st century, keeping your electorate warm trumps alliance politics every time.