TURKEY: Iran gas pipeline bids invited

03 January 1997

Bids have been invited by 28 February for construction of the first stage of a pipeline to import natural gas from Iran. The agreement, worth a total of $18,000 million, will run for 23 years. The first stage involves construction of the Turkish section of the pipeline. The agreement is part of a warming of relations between Tehran and Ankara, and has led to concern in the US.

Signed in August to import a total of 190,000 million cubic metres (mcm), the agreement was brought forward by a year in November to start in 1998 (MEED 15:11:96). The tender invitation by state pipeline agency Botas seeks bids from individual companies or consortia, and specifies a bid guarantee of $3 million (see Tenders).

Turkey's 300-kilometre first stage of the pipeline, running from Dogubeyazit on the southeastern border with Iran to the eastern city of Erzurum, is expected to cost about $200 million. Iran will finance and build its 270- kilometre section from Tabriz to the Turkish border. The Turkish first stage will eventually be extended to Ankara once another pipeline is built to Erzurum from the Georgian border. The second pipeline will import a projected expansion in gas supplies from Russia (Oil & Gas, MEED Special Report, 1:11:96, page 32.)

A protocol for the pipeline's construction was signed on 5 November during a visit by Iranian Oil Minister Gholamreza Aqazadeh to Ankara. The first 3,000 mcm will be supplied in 1988, the supplies thereafter rising to 10,000 mcm a year by 2005, Aqazadeh said.

Prim Minister Necmettin Erbakan apparently flouted the US by signing the mid-August agreement in Tehran on his first official visit abroad. The government has argued that the agreement does not contravene US sanctions against Iran introduced shortly before its signature, because Turkey will finance its own section of the pipeline. However, the US is reportedly still studying whether the agreement should incur secondary sanctions against foreign firms investing more than $40 million in Iranian or Libyan energy projects.

Since taking power in early July, Erbakan has pursued a controversial policy of forging links with other Islamic states while maintaining Turkey's traditional Western links. Iranian President Rafsanjani himself was expected to arrive in Ankara on 19 December at the start of a three-day visit, ostensibly with increased bilateral trade at the head of his agenda.

Governments in recent years have urgently sought to expand and diversify imported gas supplies, at present dominated by Russia and Algeria. The country's annual demand for natural gas will increase to about 27,000 mcm by 2000 from about 10,000 mcm at present.

In the latest development, Energy & Natural Resources Minister Recai Kutan signed a 25-year agreement in Yemen on 13 December for the import of 2.6 million tonnes a year of liquefied natural gas (LNG) starting from 2001 (see Yemen). The agreement followed one reached with Egypt a month previously.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications