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Turkey, Iran set to clear hitches in gas deal

By Ercan Ersoy

ANKARA, Feb 11 (Reuters) - Turkish and Iranian officials will meet twice this month to overcome last hurdles in a 23-year, $23 billion gas delivery and pipeline deal, Turkish officials said on Friday.

"Our team will go to Tehran on Monday and later in the month a delegation from the National Iranian Gas Company (NIGC) will come to Ankara for talks," said Gokhan Yardim, general manager of Turkey's state pipeline concern Botas.

"Work to sign the operational agreement, which defines issues related to gas measurement and its border crossing, will begin this month and will soon be finalised," he told Reuters.

Turkey and Iran agreed for the project in 1996 during an Islamist-led government in Ankara. According to the project, a 1,300-km pipeline will be built from Iran 's Tabriz to Turkey's capital Ankara.

The two sides have began building the pipeline on their soils, but global financial crisis triggered in Russia in 1998 have delayed the financing of the Turkish section.

"We found $450 million through international creditors in 1999, which cleared the finance issue in the Turkish section," Yardim said.

Yardim said talks between Botas and NIGC in January resolved a dispute in the 1996 agreement, which stipulates Turkey pay indemnity if it fails to complete the gas pipeline by early 1999, according to a "take or pay" clause in the agreement.

"We have not fulfilled our obligations because of matters that were not in our hands," Yardim admitted.

"But we have shown the Iranians that they have not fulfilled their pledge either to build the measurement station on their soil near the Turkish border," Yardim said.

The two sides agreed in January that the take-or-pay condition should take effect from July 30, 2001, when gas sales are scheduled to begin. Supplies will rise to 10 billion cubic metres (bcm) a year in 2005 from the initial three bcm.

Yardim said the operational agreement would soon be signed with Iran .

"Without that document, we cannot proceed further."

The document will point out that Iran bears responsibility to build the gas measurement station near the Turkish border where supplied gas will be measured against quantity, pressure, quality and other parametres before it is billed to Botas.


Turkey will have to build a compressor station on its soil near the border, according to the gas agreement.

Botas has received bids from two companies, U.S. Solar and German MAN AG, to build the compressor station.

But a Washington reservation, based on its 1996 Iran Libya Sanctions Act (ILSA) that threatens to punish foreign firms investing more than $20 million a year in Iranian energy, delayed the Solar order, Turkish officials earlier said.

Washington has repeatedly urged Turkey, which needs diverse energy sources to help close its power deficits, to consider gas suppliers other than Iran .

Yardim played down the U.S. restriction and said Botas would soon select the compressor supplier. Turkey says it needs Iranian gas to meet surging demand from industrial, home and power plant consumers.

Its consumption is projected to hit 15.6 bcm this year - 10.5 bcm of that from Russia, Turkey's chief supplier, 3.9 bcm from Algeria and 1.2 bcm from Nigeria in LNG form.

Turkey consumed 12.3 bcm in 1999, of which Russia sold 9.5 bcm and Algeria the rest as LNG.


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