Turkey will not sign a planned natural gas accord with Iran unless changes acceptable to global investors are made to its proposed buyback system, a senior Turkish energy ministry source told Reuters on Friday. Turkey and Iran failed to conclude expected energy accords during Iranian President Mahmoud Ahmadinejad's visit to Turkey last week.
Washington, which is trying to pressure Tehran to give up its nuclear programme, opposes the deal. Turkey and Iran last year signed a preliminary accord on joint gas production and export under which Iranian gas would be exported to Europe through Turkey and Turkey would produce 20.4 billion cubic metres of natural gas in the South Pars gas field.
The investment would amount to $3.5 billion. The source said the proposed buy-back system created "serious risks" for Turkey in terms of pricing. Turkey wants to buy gas directly from the fields and wants Iran to give a guarantee on contributing towards investments.
"The investment model applied to the oil and gas system in Iran is not in a language that investors can understand. Iran must develop new investment models and open the way for investments from countries like Turkey," the source said.
"Iran must soften its buy-back model," he said. Foreign companies often complain about the terms of Iran's buyback deals, which they say are not particularly generous. Under such agreements, companies generally hand over operations of fields to Iran after development and then receive payment from oil or gas production for a few years to cover their investment. Turkish Energy Minister Hilmi Guler said on Monday he hoped negotiations with Iran on energy sector investments would yield fruit within one month.
Ahmadinejad's visit to Turkey was seen as part of a diplomatic initiative to seek support in the face of international calls for a suspension of his country's nuclear enrichment programme, the subject of ongoing talks between Iran and Western powers. "In the memorandum of understanding Turkey took serious risks. But based on an assessment, this agreement will not be signed under present conditions and the process will continue," he said.