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Pipeline construction on track

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  • Pipeline construction on track

    Africa Analysis, Ltd.
    March 19, 2004


    Iranian ambassador to Armenia Mohammad Farhad Koleini has disclosed
    that the Iranian oil and gas minister is expected to visit Armenia
    soon to conclude a final agreement on the construction of the
    Iran-Armenia gas pipeline. Construction of the pipeline is scheduled
    to start soon, to be completed within a year or two. The Armenians
    are very keen on the pipeline, which will become one of the main
    alternative sources of fuel for Armenia after the closure of its
    nuclear power plant. The Russians also consider the construction of a
    gas pipeline from Iran to Armenia to be in their interest. At
    present, Russia is consulting with Armenia on a feasibility study
    since there is a possibility that the Russian company Gazprom may
    operate part of the pipeline through Armenia in the future.

    The Iran-Armenia gas pipeline has been on the drawing board since
    1992. In addition to the two main participants in the project, other
    interested parties include Russia, Turkmenistan, Ukraine, countries
    in the European Union, and China. The European Bank for
    Reconstruction and Development has said that it is ready to finance
    the project.

    About $ 1bn is needed to replace the capacity of the nuclear plant.
    At the moment only the European Union has said that it is ready to
    put 100m into a special fund for the project. But the EU will only
    pay the money to create alternative energy supply sources once the
    Armenian government closes its nuclear plant, which the EU has been
    insisting on.

    It is hoped that the EU's decision will prompt other foreign
    investors to consider injecting funds into the project.

    Armenia and Iran signed an agreement in 1995 to establish the route
    of the pipeline, which stretches along 141km, with 41km in Armenia
    and 100km in Iran. The agreement also sets the price for gas to be
    transported through the pipeline at $ 84 per 1,000 cubic metres. The
    cost of the project is estimated at $ 120m.

    The pipeline may be extended to the Armenian-Georgian border. In this
    case, the cost of the project will increase to $ 306m and the
    pipeline will be 550km long and have a capacity of 4.5 billion cubic
    meters a year.