July 19, 2007	Thursday	Rajab 03, 1428

ANKARA/ISTANBUL, July 18: Turkey's latest plans to carry Turkmen and Iranian gas via Iran and on to Europe will support the Nabucco project and strengthen Ankara's hand in trying to turn Turkey into a gas trading hub for the region.

The European Union and Russia have long seen Turkey as a transit country but an agreement between Tehran and Ankara last week laid the groundwork for Turkey to develop part of Iran's South Pars gas field and sell gas from Iran and Turkmenistan.

“The agreement signed last week is still at the initial level... But Turkey will agree to trade gas either with the Turkmen or Iranians. Turkey is not getting involved in such a big project just to remain a transit country,” said a senior energy ministry official.

Turkey plans to invest $3.5 billion in the development of the South Pars gas field as early as 2008, energy ministry officials told Reuters on Wednesday.

In addition to plans to develop and sell gas from the Iranian gas field, Turkey would use Iran as a transit country for gas from Turkmenistan. Part of that gas could also be resold to European markets. But in its new role it would have to negotiate re-export deals with both suppliers and new customers.

“One issue is the diversification of European gas supplies and Turkey is clearly an alternative route for gas to go into Europe,” said Julian Lee, an analyst at Global Energy Studies in London.

“However, the other issue is whether the EU and exporting countries are happy to let Turkey take that role of international hub,” he said.

With the current agreement in place, Turkey is still waiting for a final answer from Moscow to whom it has made an offer to transport and re-export gas to Europe. Initially Gazprom has not responded warmly to the offer.

“The agreement may create discontent among some countries but Turkey is warm to the idea of transporting Russian gas through (Turkey's) territory by formulating new partnerships. Gazprom also knows this,” the energy ministry official said.

Meanwhile, trade with Turkmenistan poses potential problems as the exact size of the country's gas reserves, although huge, are still unknown.

“I think there are great uncertainties over gas reserves in Turkmenistan and this is an area of concern,” said Lee.

“(But) the western countries operating in Turkmenistan have been overall happy with the way their contracts have been handled and the way the agreements have been constructed,” he said.

NABUCCO: Both Turkey and Iran have said Iran could participate in the European Union-backed Nabucco gas pipeline project, which will attempt to diversify European gas markets away from Russian supplies.

“The Russians are trying to compete with the Nabucco...so one of the main players, who is somewhat out of the sphere of Russia is Iran, which has some of the largest reserves in the world, which have to be marketed some time,” said David Niles, a European gas analyst at London's Datamonitor.

In June Moscow announced a 20 billion cubic metre capacity pipeline project that would take Russian gas under the Black Sea to Europe, a project seen threatening the Nabucco.

European gas consumption which reached 502 bcm in 2005, is expected to rise to 700 bcm by 2015, as imports rise to 75 per cent of the market from a current 60 per cent, said Niles.

Members of the Nabucco project as well as the European Union have said they are not theoretically opposed to dealing with Iran as a Nabucco partner. “I think it's clear that Iran would participate, they've already gotten a deal with OMV,” said Niles.

Washington has voiced its opposition to the Turkish-Iranian agreement, while the EU has not yet officially commented.

The United States, a Nato ally of Turkey, has no diplomatic ties with Iran. The US Congress is considering legislation that would force President George W. Bush to impose sanctions on European and other companies that invest more than $20 million in Iran's oil and gas industry.—Reuters