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    Iran's Transit Fees Could Be the Highest--Not Just in Azerbaijan But in the Whole Region

Summary

State Oil Company of Azerbaijan Republic has released a report that says Iran reduces 19.5% of the volume of gas swapped with Azerbaijan as a transit fee

by: Ilham Shaban

Posted in:

Pipelines, Security of Supply, Baku–Tbilisi–Ceyhan (BTC) , News By Country, Azerbaijan, Russia, , Georgia, Iran, Gas for Transport, Caspian Focus

Iran's Transit Fees Could Be the Highest--Not Just in Azerbaijan But in the Whole Region

State Oil Company of Azerbaijan Republic (SOCAR) has released a report that says Iran reduces 19.5% of the volume of gas which is swapped with Azerbaijan as a transit fee. 

Iran receives gas from Azerbaijan at the Astara border and delivers it to Nakhchivan Autonomous Republic at the Jolfa border of Azerbaijan.

The transfer fee is high when prepared to other gas swap agreements Azerbaijan has. Georgia, for example, transits Azerbaijan’s gas to Turkey. Although the route through Georgia is nearly equal to the distance between Astara and Nakhchivan, Georgia reduces just 5% of the volume of gas sent as a transit fee.

In the first 10 months of 2015, Azerbaijan exported 4.8 billion cubic metres (bcm) of gas to Turkey; Georgia reduced only 240 mcm/d of this volume as a transit fee.

SOCAR and Iran have been conducting the gas exchange (swap) operations since 2005. So far, neither the Iranian nor the Azerbaijani side have disclosed how much of a transit fee Iran is getting for swap transactions. 

However, a look at some statistics SOCAR has released in its recently audited report for 2014 can shed some light on the matter. 

According to the report, in 2014, 398.5 million cubic metres (mcm) of gas were transited from Azerbaijan to Iran; in the "consumption" section of the same report, it says that 319 mcm of gas was sold to Nakhchivan's gas production unit(delivered from Iran to Nakhchivan) in 2014. It would appear to indicate that the Iranian side has taken 79.5 mcm of gas as its "earnings" from swap transactions.
 

Or, to give it a percentage, that would indicate that in exchange for delivering 319 mcm of gas, Iran reduced 19.9% of the transited gas as a transit fee. 

In 2013, Iran's gas swap volume was 424 mcm, of which 350 mcm was sold to the Nakhchivan gas production unit. That indicates that 74 mcm was the share taken as a transit fee in 2013, equaling 17.45%. 

A source in SOCAR told Natural Gas Europe that Iran explains such high transit fees as being necessary because of the capital costs of the Khoy-Nakhchivan gas pipeline.

The current highest recorded transit fee for gas is in the territory of Georgia: Russia pays a transit fee of 300 million mcm to transit 2 billion cubic metres of gas to Armenia, which is 15% of the total volume. But these figures appear to indicate that transit fees between Azerbaijan and Iran are even higher. 

Turkey has previously filed a formal complaint against Iran over its gas prices with the International Court of Arbitration.

Iran reportedly charges Turkey $490 for every 1,000 cubic metres of natural gas exported to its western neighbor.

Meanwhile, Iran would earn $3.7 billion a year from exporting 25 million cubic metres of natural gas (9.125 billion cubic metres annually) to Iraq. In other words, each 1000 cubic meters of Iranian gas would cost Iraq more than $400.

From January to September 2015, the average export price of Russian gas totaled $238.2 per 1000 cubic metres, according to the Russian Federal Customs Service.

Turkey was paying $418 per 1,000 cubic metres of natural gas from Russia, its largest supplier, and $487 per 1,000 cubic metres for gas from Iran, the country's second-largest supplier. However, Azerbaijan, the third-largest supplier of natural gas to Turkey, sold gas to Turkey for just $340 per 1,000 cubic metres.