[NGW Magazine] Iran has no alternative to Turkmenistan
This article is featured in NGW Magazine Volume 2, Issue 16
By Dalga Khatinoglu
Iran wants to free itself from importing gas but that means much larger costs: building a pipeline to take the fuel to the far northeast of the country, and ideally also extra locational storage for system security.
Iran officially inaugurated the 170-km Damghan-Sari pipeline with its 14.5bn m³/yr of nominal gas transit capacity August 1, saying that it has thereby cut the dependence of its northeast regions on Turkmen gas imports.
However, the details of ongoing projects show that Iran still depends on gas imports from its northern neighbour and that it will need to buy even more gas in the future as the local fields in that region have entered their declining years.
The Damghan-Sari pipeline is an extension of the Tehran-Damghan pipeline connected to Iran Gas Trunkline 2 (Igat-2), whose capacity is 30bn m³/yr. It stretches from South Pars to Parchin – east of the capital Tehran – and delivers gas to various regions as well as the Tehran-Damghan route. Igat-2 also takes gas from fields in central regions.
Iran Gas Engineering and Development Company's head Hassan Montazer Torbati told NGW that no new compressor station has been installed along the Tehran-Damghan-Sari route. Regarding the gas shortage in these regions in winter, it is not clear how Iran can deliver more gas to Sari in a cold spell. However, a source at Iran’s oil ministry told NGW that a gas pressure regulator has been installed on the Tehran-Damghan route in order to limit gas deliveries to this region, and so maintain pressure in the Damghan-Sari pipeline.
An earlier aim of Iran – a decade ago – was to build the 1,100-km so-called Igat-11 line, which would have cost some $6bn, to deliver 40bn m³/yr from South Pars to northeast regions, but the project has not started yet. Without this pipeline, cutting dependence on Turkmen gas import seems impossible.
Iran was importing 9bn m³/yr gas from Turkmenistan, but the deliveries stopped last January as Iran failed to repay its long-standing debt of $1.8bn. Turkmenistan has a swap operation with Iran, delivering it 1.5-2bn m³/yr in exchange for Iran supplying the same amount to Azerbaijan in the northwest using its own gas. This swap operation, as well as the regional fields’ 14bn m³/yr production capacity – almost all of which comes from Khangiran – is not enough to meet the northeast region’s demand of 26bn m³/yr.
Further, Khangiran only had 680bn m³ of gas reserves in the first place, and of that, 350bn m³ have been extracted; so the field has already gone into decline. The other two small fields in this region, including Gonbadli, are very old and close to their end of life.
Iran is planning to carry out exploration in the northeast region to replace old reserves with new finds, but if this is unsuccessful then it must either import more from Turkmenistan or finally build Igat-11 to ensure the constant gas supply to northeast regions.
Iran also has two underground gas storage facilities with current 2bn m³ capacity in the north of the country. Plans announced two years ago to spend $3bn on bringing capacity in the north of the country to 11-12bn m³ never materialised. The country’s gas demand in winter is very high, because the housing sector consumes about half the processed gas production and its demand triples in winter.
According to an official document, seen by NGW, Iran produced 204.5bn m³ of refined gas in the last year, ended March 20, of which 8.5bn m³ went to Turkey as well as Armenia under a gas-to-power barter. In July, Iran started exporting 6mn m³/d to Baghdad as well; this amount will more than quadruple next year, when it reaches 25mn m³/d. Iran has another agreement with Iraq also to supply 25mn m³/d to Basra in the next two years.
Iran increased gross gas production by 25bn m³ to 285bn m³/yr during last fiscal year and the same growth is expected for the current year. However, the country faces gas shortage in winters owing to a lack of gas storage facilities, delays building major pipelines, high demand growth as well as leaky old pipes.
Energy ministry statistics indicate that Iran had to use more than 6bn litres of diesel and fuel oil in its power plants during the three months of last winter owing to a shortage of gas in the north. This volume equals a half of total liquid fuel used in the power sector in the whole of the last fiscal year. Gas flows to some regions and to petrochemical, compressed natural gas stations and cement plants was also disrupted in some winter weeks.
The statistics of ministry also show that Iran used 1.15bn litres of fuel oil and gas oil in the first 160 days of current fiscal year (March 21-July 28) in warm months, a little less than the same period in last year, while gas use in this sector increased by 9.4% to about 27bn m³.