Completion of the $4-billion Baku-Tbilisi-Ceyhan (BTC) pipeline does not rule out a southern export route via Iran for Caspian crude, an Iranian official said on Wednesday. The BTC pipeline which was inaugurated last month, 10 years after it was first touted, has been seen as a victory of sorts for the United States, which was keen to develop a new export route for Caspian crude, independent of Iran and Russia.
The victory was sweetened by Kazakhstan, which said it was ready to commit up to 30 million tones a year of oil from its giant Kashagan field when production starts. But Iran says its own role is by no means over.
"BTC and the Iranian route are not competing with each other. Caspian producers must think carefully which export option will be best commercially," said Mahmood Khaghani, a Caspian energy affairs expert at Iran's oil ministry.
"Iran still remains the most attractive route from an economically viable as well as environmentally safe point of view. Caspian crude cannot only go via Iran to the Persian Gulf and to Asian buyers but it will also find an excellent market within Iran," Khaghani told Reuters on the sidelines of an energy conference.
He said Iran had invested over $150 million to build infrastructure at Neka port on its Caspian shores to receive oil from other littoral states. It uses this oil in its northern refineries, swapping it in the Persian Gulf with crude from its southern fields.
The swap option was initially seen as a godsend to landlocked Caspian producers but swap volumes have gradually drifted down in the past year as the price differentials between Iran's sour crude and sweet Caspian crudes widened.
Khaghani said he was confident this was a temporary issue. Ongoing refinery investments in Asia would again soon make sour crude attractive, he said, adding that Iran had already started to upgrade Neka's receiving capacity to 375,000 barrels per day (bpd) compared to about 200,000 bpd now.
Swap volumes are believed to stand now at about 80,000 bpd, down from a peak of about 110,000 bpd last year.
IRAN CONFIDENT: The second stage of the Iranian route envisaged a pipeline called KTI, between Kazakhstan and Iran via a third Caspian state, Turkmenistan.
Khaghani said Iran was also considering building a new refinery in northern Iran in Khorasan or Mazandaran province. While no details on size are yet available, Khaghani said the fourth five-year ecoonomic development programme would allow foreign as well as Iranian private companies to invest in it.
Some analysts say BTC will be sufficient to carry Kazakh as well as Azeri crude because Azeri production will start peaking just as output from Kashagan starts to ramp up. But Khaghani said new Caspian discoveries would come and output from Azerbaijan's Azeri-Chirag-Gunashli fields would not suddenly dwindle to zero.
"The BTC took 10 years to complete, so did the CPC (Caspian Pipeline Consortium link from Kazakhstan to Russia,)" he said. So I am confident the Kazakhstan-Turkmenistan-Iran pipeline which was first talked about five years ago will also ultimately be built."
"Investors must set aside political objections to this route," he said adding that US oil companies were losing out on commercial opportunities because of Washington's opposition to Iran.
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