ICA Rules Iran Pay $2b to Turkmengaz

EghtesadOnline: The International Court of Arbitration (ICA) announced its verdict over the Iran-Turkmenistan gas row.

News ID: ۷۵۰۳۵۲

30 June 2020

IRNA said based on information from the Oil Ministry and the National Iranian Gas Company, Iran has been convicted for not paying for gas it bought from Turkmenistan from 2007 to 2013.

As per the verdict, the details of which have not been disclosed yet, Iran should pay almost $2 billion to Ashgabat to settle its debt.

The Oil Ministry and the NIGC say under (the ICA) arbitration rules, the details of the verdict will not be issued unless the two sides agree on that.

The dispute dates back to 2007 when Turkmengaz, the country’s national gas company, stopped gas supplies to Iran because the Central Asian state was gripped by unseasonably cold temperatures that year.

Taking advantage of the situation, Turkmengaz increased its gas prices at least three times and Iran had no option but to agree to continue imports because the giant South Pars Gas Field in the Persian Gulf was not ready and could not supply northern provinces namely Golestan, Gilan and Mazandaran, especially during the winter.

Natural gas extraction from SP was around 280 million cubic meters in 2007. Now it is over 900 mcm.

Rising gas prices caused NIGC’s debt to pile up in the following years. International sanctions at the time (2007-2014) imposed due to the nuclear energy program isolated Iran from the international banking system and made it difficult to pay the debt.

In 2016 Turkmengaz halted gas supplies to Iran on claims that NIGC’s past gas dues should be paid immediately.

The two sides were locked in the dispute for years, with the  Turkmens claiming that Iran owed about $2 billion in unpaid gas import bills.

In December 2016, Iran said it had paid the debt, a claim that was rejected by Ashgabat. Turkmenistan went to ICA in 2017 and Tehran welcomed the move.

NIGC imported about 23 mcm of gas per day from Turkmenistan before the dispute.

Although the gas imports ended in late 2016, Iran had no problem supplying its northern regions as it had expanded its gas network, and several gas fields in the Persian Gulf had come online, making Iran self-sufficient in gas.

Extraction Volume

In related news, IRNA quoted Hassan Montazer Torbati, the head of NIGC, as saying that the company extracted close to 270 billion cubic meters of gas (740 mcm/d) from hydrocarbon resources across the nation in 2019.

Over the past four months, gas production capacity has increased 21% or 900 mcm/d, of which 650 mcm/d comes from South Pars and the rest (250 mcm/d) from the Iranian Central Oil Fields Company that has three subsidiaries, namely West Oil and Gas Production Company, East Oil and Gas Production Company and South Zagros Oil and Gas Production Company.

“The gas network has the capacity to supply one billion cubic meters of gas (daily) to households, industries and power plants. This is up 18% compared to January when it was 800,000 mcm/d.”

Referring to the amount of gas used between November 2019 and February 2020, he noted that consumption in the period rose by 55 mcm/d (compared to 2018) and reached 600 mcm/d.

According to the official, gas exports to neighbors namely Iraq and Turkey increased 3.6 bcm in 2019, up 26% compared to 2018 when it was around 18 bcm.

Located in the Persian Gulf straddling the maritime borders between Iran and Qatar, South Pars covers 9,700 square kilometers, of which 3,700 square kilometers belongs to Iran.

The Iranian side of the field contains an estimated 14 trillion cubic meters of gas and 18 billion barrels of condensates.

Iran is developing the mega gas project in 24 phases, 23 of which are either complete or in the final stages. Development of phase 11 started recently.