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Iran says it will supply half Nabucco pipeline's capacity

By Derek Brower

Iran will fill half the capacity of the planned Nabucco pipeline to Europe, the country's deputy oil minister said yesterday.

In an exclusive interview with WGC News in Buenos Aires, Azizollah Ramezani also said Iran must invest $200bn in its energy sector in the next five years – and foreign firms will supply half the financing.

Iran is facing a renewed onslaught of economic sanctions by Western countries worried that the country is seeking to develop a nuclear weapon. But Ramezani said the country's energy potential holds the key to improving relations between Iran and the West.

Iranian gas reserves are the second-biggest in the world after Russia's, although existing sanctions and underinvestment upstream have severely limited its export capacity. However, Ramezani said Iran would be ready to support both a planned export pipeline to India and Pakistan as well as the Nabucco link to Europe by 2014.

And he warned the developers of Nabucco that without Iran's participation, it would be unlikely to proceed. "Nabucco needs to have enough gas [to be built], but without Iran it will not. Iran will enter the pipeline before it begins operation."

The Nabucco consortium told WGC News that it was unaware of any agreement with Iran to supply gas through its pipeline.

Nabucco aims to import up to 31bn cubic metres a year (cm/y) to central Europe. First-phase Construction should begin in 2011 with 8bn cm/y due on stream by 2014. The developers say it will cost €7.9bn.

The project, led by Austria's OMV, is designed to diversify Europe's sources of natural gas away from Russia and avoid transit through Ukraine.

However, hopes of securing gas for the line from Turkmenistan may rest on development of a new pipeline across the Caspian Sea. But the sea's littoral states have yet to agree a legal framework for such infrastructure. Gazprom's Alexander Medvedev has previously described Nabucco as a "virtual pipeline" – a sarcastic reference to its struggles to source sufficient gas volumes to make progress.

Yesterday, Johann Gallistl, a Nabucco executive, told WGC News the pipeline's first phase would be underpinned by gas from Iraq and Azerbaijan.

Iran's involvement would be a coup for the Nabucco partners, which have previously suggested the country would be an important supplier. An official from National Iranian Gas Company says supplies to Nabucco, which will travel through Turkey and the Balkans into central Europe, would come through existing pipelines in Iran and new infrastructure yet to be commissioned.

Meanwhile, the Iranian section of a pipeline to supply Pakistan with 11bn cm/y of gas will be complete by 2014, Ramezani said yesterday. India had also previously been interested in importing piped gas from Iran, but withdrew from the project last month, according to reports in India.

Meanwhile, four LNG projects based on reserves from the huge offshore South Pars field are "under construction" and will yield 36m-37m tonne a year (t/y) of capacity, Ramezani said. The first project to come on line will be Pars LNG, a two-train 8m t/y plant being developed by Iran's state-owned energy company.

Iran's LNG sector has been undermined by a series of withdrawals by Western majors, including Spain's Repsol and Total.

Yet Ramezani hopes other foreign investors will meet up to half of a $200bn spending programme in the country's energy sector in the next five years. About 70% of that investment will go towards gas projects.

Analysts say depletion of Iran's oilfields is now requiring heavy gas injection to keep production rates stable, but Ramezani said gas output in the country would be sufficient to support the export plans as well as enhanced oil recovery.

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