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Prospects of Tehran-Baku energy relations

Prospects of Tehran-Baku energy relations

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Date: 24 December 2015 11:07

Baku, Azerbaijan, Dec. 22

By Dalga Khatinoglu – Trend:

Iran and Azerbaijan signed the final document of the 10th joint economic cooperation commission meeting in Tehran, Dec. 22, which covers cooperation in 12 various sectors including oil, gas, industry, trade, healthcare, culture, transportation and renewable energy.

The deal paves the way to cooperate more in gas swap, storing Iranian gas in Azerbaijan's underground storage facilities, oil products swap, developing energy reserves in Caspian Sea, etc.

Iran and Azerbaijan have the potential to cooperate in the oil and gas sector, since the two countries boast huge deposits of oil and gas, and are capable to explore, produce, and export oil and gas. In the energy sector, developing the projects in Caspian Sea, gas export and gas storage issues have special importance.

Caspian Energy

Iran is keen to participate in the development of the Caspian Sea fields. Iran is cooperating with Azerbaijan for a decade to develop the Shah Deniz gas field in Azerbaijan, with over one trillion cubic meters of recoverable gas reserves. Iran has a 10-percent share in the project.

The second phase of the gas field is projected to come on stream by 2018-2019, increasing the gas output by 16 billion cubic meters annually. So, the first and the second phases of the field will produce 25 billion cubic meters of gas. Plans are to export the second phase’s gas output to Turkey and Europe.

Iran can joint to the Southern Gas Corridor to deliver its gas to Europe, while the country is preparing to boost it's gas output from current 700 mcm/d to above 1,000 mcm/d in the coming years.

The most important issue for Iran currently is development of about 50 oil and gas fields, offered to foreigners last month in the framework of new designed oil and gas contracts, called Iran Petroleum Contract (IPC).

Iran has offered 4 projects in Caspian Sea, blocks 24, 26 and 29 as well as Sardar-e Jangal oil fields are proposed to foreigners for exploration and development.

Coming to Caspian Sea, the Iranian part of sea have been studied by Azerbaijani side two times - once before the fall of the Soviet Union, and the second time in 1994 and 1995 - to discover possible hydrocarbon reserves, but to no avail.

Azerbaijan also has all the technical equipment from rig building yards, barges for transferring the rigs and platforms as well as laying pipelines under sea, huge cranes, seismic vessels, several rigs to be rent to Iran as well as supportive ships for various operational activities.

Gas storage

Iran faces gas shortage in winter due to huge jump in housing gas consumption, but in summer Iran's gas demand is low. The country stores some of the surplus gas in Shoorijeh and Sarajeh gas storage facilities to pump to the national gas network in winter. The facilities’ stored gas stood at 2 billion cubic meters in autumn.

Azerbaijan has two natural gas storage facilities, Kalmaz and Garadag, with the total capacity of 5 billion cubic meters. The two facilities currently store only 3 billion cubic meters of gas, so Iran can store around 2 billion cubic meters of its surplus gas in the facilities, and receive them back during the winter seasons.

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