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    [NGW Magazine] Iran starts Exports to Iraq


After a one-year delay Iran finally started exporting gas to its western neighbour Iraq in limited volumes on June 22.

by: Dalga Khatinoglu

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Top Stories, Premium, NGW Magazine Articles, Volume 2, Issue 13

[NGW Magazine] Iran starts Exports to Iraq

This article is featured in NGW Magazine Volume 2, Issue 13.

After a one-year delay Iran finally started exporting gas to its western neighbour Iraq in limited volumes on June 22. The delay was caused by Iraq’s outstanding debt to Iran for building the Naftshahr-Baghdad gas pipeline as well as the dispute over the price of the gas, the payment method and other matters. 

A former Iranian oil minister Rostam Qasemi (2011-2013), who served as the director of the Iran-Iraq economic development headquarters in Hassan Rouhani’s government, said in autumn 2014 that Iraq would pay $430-440/’000 m³, while Turkey was paying Iran around $480-500/’000 m³ on the oil-based formula.

A former head of international projects and business development at Turkish Petroleum Corp (TPAO) Tayfun Yener Umucu told NGW that Iran delivers gas at Iraq’s border at $400/’000 m³, which is a relatively high price. But, when it comes to necessity, price is not important, he said. 

In January 2017, a member of the Iran-Iraq joint chamber of commerce Sanjabi Shirazi told the ISNA news agency that there were some disagreements on the price and volume. 

Iraq’s gas market

Iraq’s market is of high importance for Iran, because the country produces just 1.1bn m³/yr of sales gas and flares 16bn m³/yr. Iran built both the pipeline and the demand sector – Iraq’s new power plants in Baghdad and Basra.  

The Iraqi section of the gas pipeline (Naftshahr-Baghdad) was built by Iranian companies, including the Iranian state-run Gas Engineering and Development Company, and it was Iranian companies that built and delivered the linepipe. 

However, Iran does not own the $450mn pipeline. Hossein Zamaninia, Iranian deputy oil minister, has recently said one of the reasons behind the delay in starting gas exports was the debt owed to the Iranian companies who built it.

Iranian companies will build another pipeline to the southern city of Basra in order to supply gas to Iraq’s Rumaila power plant. The managing director of Iran’s Mapna Group Abbas Aliabadi told NGW in an interview in May that his company would carry out all the engineering, procurement and construction operations of building the power plant, at a cost of €2.5bn. 

Mapna has already built and commissioned the al-Sadr power plant in Baghdad and another power plant in the city of Najaf.

Iran signed two deals with Iraq in 2013 and 2015 to export 25mn m³/day of gas to Baghdad and the same amount to Basra in order to be used for electricity generation in power plants. Iraq has the capacity to generate 13 GW of power now, but its plants run on liquid hydrocarbons.

So as well as exporting gas to Iraq, Iran is also building the means of transporting it there; and of consuming it when it arrives.

Gas and power exports

In the last Iranian fiscal year, which ended on March 20, the country exported 5.75 TWh of electricity to Iraq, accounting for more than three quarters of Iran’s total electricity exports.

For the time being, Iran’s gas supply to Iraq’s power plants does not threaten its electricity exports to the western neighbour, because Iraq’s need for electricity is 7 GW more than its generation capacity. So, it will take years for Iraq to build enough power plants to become self-sufficient. 

At present, Iran exports 7mn m³/d (or 2.55bn m³/yr) of gas from the Ilam fields and refinery, but the Iran Gas Trunkline-6 (Igat-6) is planned to be completed in by March 2018. 

A branch of the pipeline will be connected to the Naftshahr-Baghdad pipeline so that the gas export capacity to Baghdad will reach 14mn m³/d and then 25mn m³/d by March 2019. 

Igat-6 is projected to transfer gas from the South Pars gas field to Iran’s western areas, and part of the gas will be exported to Iraq.

Another branch, linked to Igat-6, will be also extended to Basra next year, allowing exports to start in the middle of the next fiscal year at a low level but rise to 25mn m³/d. 

Although Iran’s gas export price is around 20% lower than Turkey’s gas price, but Iran’s marginal profit will be higher. 

According to a report, released by Parliament’s Research Center this month, Iran’s cost of gas production, processing and transporting it 1,000 km would be around $190/’000 m³ while the net profit also would be at least $100/’000 m³. 

Baghdad and Basra are 450 km and 220km respectively distant from South Pars.

Dalga Khatinoglu