By Azernews

By Ayya Lmahamad

Azerbaijan, Iran and Turkmenistan signed a trilateral agreement on the swap of gas supplies on November 28.

The agreement envisages deliveries of 1.5 to 2 billion cubic meters of gas each year, with Turkmenistan supplying gas to Iran and Iran delivering an equal quantity of gas to Azerbaijan. Thus, under the trilateral deal, Turkmenistan will sell 5-6 million cubic meters of gas per day to Azerbaijan. These volumes are expected to increase in the future.

The implementation of the agreement is planned to begin on December 22, 2021.

After a meeting with the Turkmen delegation led by Foreign Minister Rashid Meredov in October 2021, Iranian Oil Minister Javad Ovji announced Tehran's intention to pay the gas debt to Turkmenistan. It should be noted here that due to Iran's debt Turkmengaz has stopped gas deliveries to Iran since January 2017.

After the talks, during Azerbaijani Deputy Prime Minister Shahin Mustafayev's visit to Iran, an agreement was reached on the swap of gas supplies to Azerbaijan via Iran from Turkmenistan.

Growing gas demand

In an interview with Azernews, Azerbaijan’s State Economic University Prof Elshad Mammadov has said that the Turkmenistan-Azerbaijan-Iran gas swap agreement should be placed in the chain of an agreement with Russia, which provides the possibility of gas supplies from Russia to Azerbaijan.

He noted that Azerbaijan has foreign liabilities in terms of gas supplies to Europe and other trade partners.

“In other aspects, in Azerbaijan, there is an increase in domestic demand for natural gas, and besides, a significant portion of the gas is not marketable, that is, it is directed to the appropriate technological processes related to the filling of oil wells. So the demand for gas is growing, and it is not an accident that following the agreement with Russia, we have witnessed an agreement with Iran and Turkmenistan,” the expert said.

He noted that a sharp increase in the Azerbaijani gas supplies to Turkey plays a significant role and raises the issue of the necessity of adequate insurance to cover gas demand in Azerbaijan as imported supplies.

Iran and Turkmenistan

Speaking about Iran and Turkmenistan, Mammadov stated that despite the fact that these countries have significant natural gas reserves, the energy sector has its own specifics, its own logic.

The expert noted that the uneven distribution of gas fields in Iran and the energy shortage in the country's northern regions are traditional.

“In this aspect, the implementation of swap supplies will be relevant for a long time and it fits into the energy policy. Because the uneven distribution of gas fields leads to the fact that sometimes the implementation of imported supplies is more profitable from the economic and technological point of view,” he said.

Speaking about Turkmenistan, the expert stated that despite the fact that the country has impressive potential in terms of gas production, it is experiencing serious difficulties in exporting its energy resources. He noted that Ashgabat will only benefit from the gas volumes it will be able to export.

Bilateral cooperation

Azerbaijan and Iran have a swap agreement on gas supplies, which was signed during former Iranian President Mohammad Khatami’s visit to Baku in August 2004. In December 2005, a gas pipeline was commissioned to bring natural gas to the amount of 1 million cubic meters per day to Nakhchivan. Under the swap agreement, Azerbaijan supplies gas to Iran’s isolated northwestern border city of Astara, and in return, Iran supplies 85 percent of that volume to Nakhchivan, with the 15 percent differential acting as a transit fee. With the liberation of the Azerbaijani territories in last year's war with Armenia, the implementation of the plans of direct gas supply from Azerbaijan to Nakhchivan became possible.

On January 21, 2021, Azerbaijan and Turkmenistan signed a memorandum of understanding over the joint exploration of the Dostlug gas field. According to experts' estimates, the Dostlug gas field contains natural gas and 60-70 million tons of oil. Discovered in 1986 by Azerbaijani specialists, the Dostlug field locates on the maritime border between Azerbaijan and Turkmenistan. The deal will enable future transport of Turkmen hydrocarbons to Europe via Azerbaijan, thereby bolstering Azerbaijan’s position as a regional energy hub and Europe’s energy provider.

Turkmenistan is the world's fifth-largest gas reserves according to OPEC and fourth-largest according to BP. Iran is firmly in second place in both rankings. Azerbaijan ranks 21st and 13th on these lists, respectively.