IRAN-ARMENIA GAS PIPELINE SET TO BEGIN SHIPMENTS

C O N F I D E N T I A L YEREVAN 000326 SIPDIS E.O. 12958: DECL: 05/14/2019 TAGS: ECON ENRG AM IR SUBJECT: IRAN-ARMENIA GAS PIPELINE SET TO BEGIN SHIPMENTS Classified By: Ambassador Marie L. Yovanovitch. Reasons 1.4 (b/d) SUMMARY -------------- ¶1. (C) A GOAM official has confirmed press reports that the Iran-Armenia gas pipeline will begin shipments of gas to Armenia this week. Although it is now the low season with respect to Armenia's domestic gas demand, and the thermal power plant that will ultimately be the primary user of the Iranian gas is still under construction, the plant will use another generator to produce electricity that it will start sending to Iran. End Summary. GAS TO START FLOWING THIS WEEK -------------- ¶2. (C) Several newspapers in the past few days have reported that the Iran-Armenia gas pipeline, which was completed in late 2008, would begin to transport gas to Armenia as early as this week. The reports were based on statements from an Iranian official responsible for energy exports. Such an announcement appeared to be premature for, while the pipeline is finished and has undergone successful testing, spring is a period of low demand for gas, all of which is met easily by the existing northern pipeline. In addition, the new pipeline is planned primarily to supply gas to a modern combined-cycle thermal plant that is not expected to be completed before mid-2010. ¶3. (C) Deputy Energy Minister Areg Galstyan told EmbOffs on May 13 that he was expecting shipments of gas through the pipeline to begin at any time. He said the GOAM is gradually pressurizing the line, in what amounts to an extended operational test of the pipeline's readiness to carry commercial quantities. They will begin by sending small amounts and will then gradually build up the volume (pressure) until reaching normal operating capacity by September. ¶4. (C) Galstyan explained that while the modern thermal generator at the Yerevan Thermal Power Plant would not--even in the best case scenario--be in operation until next year, for now the gas would power an older, less efficient thermal plant that will begin electricity shipments to Iran. This model is capable of producing approximately 3 kWh of electricity per cubic meter of gas, the same amount Armenia is contracted to provide to Iran in exchange for the gas. The more efficient new unit at the thermal plant will, once operational, allow Armenia to meet its obligations for sending electricity to Iran while providing additional electricity for the Armenian power grid. Galstyan acknowledges that the temporary arrangement provides no financial benefit to Armenia, since it produces no surplus power. YOVANOVITCH