Iran angered by Turkmen gas cut, still wants imports

TEHRAN (Reuters) - Turkmenistan's move to cut gas exports to Iran in December may have sparked Iranian threats to find other suppliers but logistical needs and commercial logic mean Tehran will not want to abandon the trade.

Industry experts say it makes sense for Iran to continue Turkmen gas imports to feed a northern Iranian region that is difficult to supply from its big southern fields.

But the row may spur Iran, which sits on the world's second biggest gas reserves, to develop its resources faster, they add.

On Tuesday, Russia's Gazprom, the world's top gas producer, agreed to take on big new energy projects in Iran including developing more phases of the South Pars gas field.

Turkmenistan halted daily gas deliveries at the end of December of up to 23 million cubic meters, citing technical issues. Iran, suffering a bitterly cold winter, accused Ashgabat of an "immoral" tactic to get a higher gas price.

The row with Turkmenistan was felt further afield, as Iran cut exports to Turkey, which in turn cut supplies to Greece.

Oil Minister Gholamhossein Nozari said in January Iran could find other gas suppliers if Turkmenistan did not resume pumping.

But, since then, Tehran has continued to speak about resolving the row with Ashgabat including requesting to be paid in euros rather than U.S. dollars, a currency Iran wants to avoid using in business because of U.S. sanctions.

"Because we are in the market to trade gas, we will do what is expedient for Iran. So far we have not replaced (Turkmenistan with other partners) and we have no plan to fully abandon Turkmenistan," Ebadollah Ghanbari, a spokesman for the National Iranian Gas Company, told Reuters.

Turkmen supplies make up a small portion of Iran's domestic gas needs but the cut came in the depths of the coldest winter in decades and left many Iranians in the north without heating or cooking fuel.

"It is not even 10 percent of Iranian gas consumption but in terms of logistics it is important because it is connected to one section of the country which is very far from the southern gas fields of Iran," said Iranian energy expert Narsi Ghorban.

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The cuts prompted some public protests and a hasty visit to the region by President Mahmoud Ahmadinejad, seeking to address an unwelcome problem before the March parliamentary election.

Iran is working to expand the national gas network to hook up northern regions, the head of the national gas company, Reza Kasaizadeh, said in a report on Iran's Oil Ministry Web site.

But Ghorban said it made commercial sense for Iran, which will have to spend hefty sums to expand its network, to continue and even expand the trade with Turkmenistan. Iran has long sought to make itself a transit route for gas from Central Asia.

"My assessment is that as much as Iran needs Turkmenistan in its north, Turkmenistan needs a good customer as well," he said.

But the supply disruption and concern about reliability of suppliers may prompt Iran to push harder to develop its own reserves, including phases of the huge South Pars gas field in the Gulf.

"The development of South Pars has been delayed, otherwise we would not have this problem," said Hamid Zaheri, general manager of Crescent Petroleum in Iran, a company seeking to import Iranian gas to nearby United Arab Emirates.

"Now that this has happened with Turkmenistan, I am sure the government will be very keen to expedite (the work)."

Iran's oil minister has said gas output was pushed higher during the row. It has reached 470 million cu meters a day.

But Ghorban said the supply disruption could cast a shadow on Iranian export plans, which analysts say have made slow progress in part because U.S. sanctions hinder access to technology and have made foreign firms wary.

"The main significance is people are thinking again and thinking twice about the issue of export. You cannot have a lot of exports if you cannot cater for the domestic sector," he said.

As part of measures to cope with the winter shortages, Iran re-routed gas from oilfields, where it is used to inject into wells to increase crude output, industry experts said. But they said this comes at a price by reducing crude recovered.

One expert said, on average, about 250-350 cu meters of injected gas, which may be worth just $25 or so depending on the gas contract price, recovers an extra barrel of crude, worth more than $95 a barrel for benchmark oil on world markets.

Iranian media have said Turkmenistan wants to double the price of gas it supplies to Iran to $140 per 1,000 cubic meters. A Russian firm has already agreed to pay $130 to $150 per 1,000 cu meters in 2008 for Turkmen gas.

(Additional reporting by Hossein Jaseb; Editing by James Jukwey)