National Iranian Gas Company (NIGC) on 3 August announced the commissioning of a new Iranian pipeline linking the giant South Pars gas field in the Persian Gulf with six northern provinces (Semnan, Golestan, Mazandaran, North Khorasan, Khorasan Razavi and South Khorasan). Last winter, residents in some areas suffered when Turkmenistan unilaterally discontinued gas supplies to its southern neighbour over a price dispute. Supplies have not yet resumed and the two sides are reportedly preparing for arbitration to determine the amount of historical debt to be paid by Iran. These are put at US$2 billion by the Turkmen side; the Iranian authorities claim they owe nothing, having settled the debts long ago.

For Ashgabat, the inauguration of a new Iranian pipeline is an obvious blow to its export diversification strategy, which has left it without two former customers: Russia and Iran.

The 170km new Iranian pipeline runs from Damghan, through Kiasar and Sari, to Neka on the Caspian Sea and has total throughput capacity of 40 million cubic metres a day (mcm/day). Iranian petroleum minister Bijan Namdar Zangeneh and other officials attended the commissioning. The construction of the pipeline reportedly cost approximately US$250 million and was entirely financed and carried out by Iranian semi state-owned companies.

Turkmen officials admit that the main consequence of the new Iranian pipeline entering into service will be a “substantial” reduction in Iran’s dependence on gas imports from Turkmenistan. Because of its geographic proximity, Turkmengas had been the key supplier of gas to northern Iran since the commissioning of the first cross-border pipeline in 1997. Last year it supplied 5.86 billion cubic meters (bcm), 53% less than in 2015. Annual supplies had averaged 9.5–10 bcm over the past decade.

This is an excerpt from an article in our monthly Caspian Focus publication.