Turkmenistan and Iran inked an agreement to deliver 10bn cubic meters of Turkmen natural gas annually on July 3, which Iran will subsequently transport to Iraq, RFE/RL reported. The contract was announced by Turkmenistan's Foreign Ministry, although the exact price Iran will pay for the gas was not disclosed.
The deal includes plans for Iranian companies to construct a new 125-kilometer pipeline between Iran and Turkmenistan to increase the Central Asian country's gas delivery capacity. Turkmenistan also aims to boost its gas supplies to Iran to 40bn cubic meters per year, without specifying a timeline for this increase.
Turkmenistan has conducted gas swaps with Iran for years, though in relatively small volumes, typically a few billion cubic meters annually. Income from natural gas exports is crucial for Turkmenistan's budget, as the country possesses the world's fourth-largest proven natural gas reserves, estimated at nearly 14 trillion cubic meters according to British Petroleum data.
Currently, Turkmenistan produces about 80bn cubic meters of natural gas annually, implying a production-to-proven-reserve life of 166 years, an extraordinarily high figure by global standards, suggesting the potential for increased production.
However, Turkmenistan has encountered difficulties in accessing markets for its extensive natural gas resources. Surrounded by Russia, Uzbekistan, Iran, and the landlocked Caspian Sea, the country lacks infrastructure for direct liquefied natural gas (LNG) exports to global markets.
China is Turkmenistan's primary customer, purchasing about half of the country's annual production. Turkmenistan is also developing a pipeline project aimed at supplying gas to Afghanistan, Pakistan, and India, regions where the demand for natural gas is projected to increase significantly in the coming decades.
For decades, Turkmenistan has considered constructing a pipeline across the Caspian Sea to Azerbaijan, extending to Europe. However, opposition from littoral states Iran and Russia, the latter previously being Europe’s largest natural gas supplier, has stalled this project. Europe's recent efforts to reduce natural gas demand have further questioned the viability of the Caspian pipeline.
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