The agreement on swap supplies of Turkmen gas through Iran to Iraq presents significant benefits for Turkmenistan, a country rich in natural gas but lacking in market access due to its isolated geography, Alexandre Araman, Director for Middle East Upstream at Wood Mackenzie, told Trend.
Araman explained that despite Iraq being the world's fourth-largest oil producer, it has consistently struggled to meet its domestic gas demand. "Baghdad imports around 1 billion cubic feet per day of expensive Iranian gas for its power sector, while flaring large quantities of associated gas," he noted. However, the analyst pointed out that Iraq has faced difficulties in paying for these imports due to international sanctions against Iran. The new deal to purchase Turkmen gas instead of Iranian gas is expected to alleviate these issues, with Iran likely to receive gas as a tariff for pipeline usage. "This three-way swap agreement involving Tehran provides an effective way for Baghdad to diversify its gas supply," he added.
The expert highlighted that Turkmenistan’s 500 million cubic feet per day export contract with Gazprom, set to expire this year, is unlikely to be renewed. The deal's timing works in Turkmenistan’s favor, as both the country and its primary export market, China, experience peak demand in winter, while Iraq needs the most gas during the summer.
For Iran, the swap agreement is crucial as gas exports to Iraq have been a vital source of U.S. dollars amid heavy sanctions. Araman explained that if the deal materializes, Tehran would be able to allocate more gas to its domestic market, especially during peak summer demand, while securing access to U.S. dollars through pipeline tariffs.
Araman also drew parallels with a similar gas swap arrangement between 2021-2023 involving Azerbaijan and Iran, noting that Iran is likely to continue serving Iraq from its own reserves while receiving equivalent volumes from Turkmenistan for its northern provinces. However, he mentioned that to boost Turkmenistan’s export infrastructure capacity, 125 kilometers of pipeline and three compressor stations would be required.