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Iran expects gas flows to Turkey to resume in July, rejects force majeure claim


Pipeline still not repaired after March 31 explosion

Iran threatens international arbitration

Contract renewal talks 'under way': Jamshidi-Dana

  • Author
  • Aresu Eqbali    David O'Byrne
  • Editor
  • Jonathan Loades-Carter
  • Commodity
  • LNG Natural Gas

Tehran — Iran expects gas exports to Turkey to resume by mid-July at the latest, a senior Iranian gas official said June 7, following an explosion on a pipeline in Turkey that forced supplies to be suspended at the end of March.

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Mehdi Jamshidi-Dana, former director for dispatching at state-owned National Iranian Gas Company and now interim caretaker of its Gas Transfer Company, also said NIGC rejected a claim from Turkey that the suspension of supplies represented a force majeure event.

"We predict that the repair of the Iran-Turkey gas pipeline will end in the month of Tir (June 21-July 21) and gas flow will resume," he told the oil ministry news agency Shana.

Turkey's energy ministry and gas importer Botas have not made an announcement on progress in repairing the pipeline, but Jamshidi-Dana said Turkey had claimed the pipeline explosion was a force majeure event, meaning Ankara could avoid paying for gas not taken under the two sides' 25-year take-or-pay contract that came into effect in 2001.

Neither the Turkish energy ministry nor Botas responded to requests for comment June 8.

The explosion on the line took place on March 31, but repairs had still not been completed despite work following such attacks usually taking around three to seven days, Jamshidi-Dana said previously.

"Iran has announced in writing that it does not accept this is a force majeure event. In several correspondences, we said Iran is ready to repair this pipeline within eight days but the Turkish side didn't welcome that," Jamshidi-Dana said.

Turkey imported 7.7 Bcm of gas from Iran in 2019, or some 17% of its total gas imports, under the long-term contract that allows Ankara to buy 9.6 Bcm/year.

International arbitration

Jamshidi-Dana warned that Iran could take the issue to international arbitration if it was not resolved, but stressed that "friendly relationship and professional acting by Turkey" would mean Tehran would not take the matter that far.

Talks for an extension of the contract meanwhile are underway, he said, though progress was being impacted by the global pandemic situation.

"Negotiations to sign new contract are being carried out slowly because of the coronavirus outbreak. But our examinations show that imports of Iran's gas have advantages for them. It's still not clear what a new contract would be. But Turkey undoubtedly needs to import gas from Iran," Jamshidi-Dana said.

Sources have suggested that Ankara would be using the delay to pressure Tehran to reduce the price of the gas it sells to Turkey.

Turkey has also been importing much higher volumes of LNG in recent months at prices reported to be significantly below its contract price with Iran.

The US has become an increasingly important supplier to the Turkish market. According to data from S&P Global Platts Analytics, Turkey has taken 24 cargoes of US LNG already in 2020, compared with 13 for the whole of 2019 and just four in 2018.