Iran angered by Turkmen gas cut, still wants imports

By Edmund Blair - Analysis

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.

GOOD CUSTOMER

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.