Iraq’s Oil Ministry has rejected plans to import natural gas from Iran despite reports that it has signed a Memorandum of Understanding (MOU), a source close to the ministry tells MEED.

Iranian state-run Shana news quoted an announcement by Javad Oji, managing director of the National Iranian Gas Company (NIGC) on 1 August. The report followed a visit of an Iranian oil delegation to Iraq. Negotiations focused on meeting Iraq’s power generation needs (MEED 3:8:10).

The MOU lays the ground for a contract to export 5 to 10 million cubic meters a day ( cm/d) of gas over a five to seven year period.

“Clearly someone is lying”, says an industry source based in London. “Both reports can’t be true”.

The announcement comes only a few days after Baghdad delayed the auction of three gas fields by a month to 1 October. The Oil Ministry said it would allow international oil companies to export as much as 50 per cent of the production from the fields after meeting domestic power demands (MEED 3:8:10).

“Talks with Iran over gas have been going on for some time. They [the Oil Ministry] have acknowledged previously the need to sign a deal to get gas for their planned power stations. If it has been signed, then this would support the argument against any deals with foreign oil companies that would see Iraq exporting gas”, says the London source.

Iran’s ability to take on extra gas exports is also tenuous. Despite holding the second largest natural gas reserves, in the world at an estimated 29.6 trillion cubic metres, the Islamic Republic plays a somewhat small role in the global gas market.

In 2008, the country produced 116 billion cubic metres of natural gas, 96 per cent of which was consumed domestically.

National Iranian Gas Export Company (NIGEC) says it exports 30 million cm/d to Turkey, but imports an average of 15 million cm/d from neighbouring Turkmenistan to its northeast.