Turkey to Invest $3.5 Billion in Iran Gas, Upsetting US

ANKARA (Reuters)–Turkey will invest $3.5 billion in Iran’s South Pars gas field starting from 2008, two senior Turkish energy ministry officials told Reuters on Wednesday.
The sources, who declined to be named, said that Turkey could also set up a partnership with a European Union member state that is already doing business in Iran.
Late last week Turkey announced that it had signed a deal to use Iran as a transit route for Turkmen gas and that it would also develop Iran’s South Pars gas field to transport gas on to Europe.
Both Ankara and Tehran have made it clear that they see Iran as a potential partner for the EU and U.S.-backed Nabucco gas pipeline project, which was conceived as a way to diversify gas supplies to European markets.
Washington has voiced its opposition to the memorandum of understanding between Turkey and Iran, while the EU has not yet officially commented.
The United States, a NATO ally of Turkey, has no diplomatic ties with Iran. The U.S. Congress is considering legislation that would force President George W. Bush to impose sanctions on European and other companies that invest more than $20 million in Iran’s oil and gas industry.
Iranian Oil Minister Kazem Vaziri-Hamaneh had said on Saturday details on developing the phases 22, 23 and 24 of South Pars gas field by Turkey would be finalised in four to six months.
The South Pars field is divided into phases with different sections going to different companies.
"Details … will be studied next month when Turkey’s energy minister visits and in four to six months the necessary agreemen’s will be signed," Vaziri-Hamaneh said.
The minister added that the phases would be developed under so-called "buy back" terms.
Under Iran’s buy-back terms, firms hand over operations of fields to the National Iranian Oil Company (NIOC) after development and then receive payment from oil or gas production for a few years to cover their investment.
The United States on Monday spoke out against the preliminary agreement between Turkey and Iran to carry natural gas from Iran and Turkmen’stan to Europe, the Anatolia news agency reported.
"It does not seem wise to put increasing trust in Iran as a source and transit country of natural gas" when it is under sanctions over its controversial nuclear program, the agency quoted Kathryn Schalow, the spokeswoman for the US embassy here as saying.
The memorandum of understanding was signed away from public eye last week in Ankara after talks between Turkey’s Energy Minister Hilmi Guler and Iranian Oil Minister Kazem Vaziri Hamaneh.
Officials from the two countries need to complete technical work for the agreement to be finalized.
The deal is seen as boosting the prospects of a planned 2,000-mile pipeline project, known as Nabucco, to carry gas from the Middle East and Central Asia to the European Union via Turkey and the Balkans, bypassing Russia.
Turkey already buys gas via a conduit from the northwestern Iranian city of Tabriz to Ankara, which was inaugurated in December 2001 even though the deal was frowned upon in the United States, Turkey’s long-standing NATO ally and Iran’s arch-foe.


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