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. Last Updated: 07/27/2016

Iran Reveals Kazakh Oil Aspirations

ALMATY, Kazakhstan -- Iran said Friday it was in talks on building a 1,500 kilometer pipeline to ship Kazakh oil to the Gulf, becoming the newest entrant in the race to export Caspian hydrocarbons.

The announcement coincides with indications that a mammoth oil drilling effort in Kazakhstan's sector of the Caspian may have hit pay dirt.

If the Kashagan field, being explored by the international OKIOC consortium, contains even part of the 4 billion metric tons suggested by initial estimates, competition between various proposed pipeline routes is likely to heat up.

Iranian Deputy Foreign Minister Mohammed Hossein Adeli told delegates at a World Economic Forum summit that the main advantage of an Iranian pipeline was that it would take advantage of already existing infrastructure.

"This is the cheapest, shortest most economically viable way to take 1.8 million barrels per day of oil over 1,500 kilometers," he said. "Once it gets to the Gulf it may be transported east or west ... environmentally too it is the safest option."

Adeli estimated the total cost of the project at $1.2 billion, or about half the cost of a competing U.S.-backed link from the Azeri capital Baku to Ceyhan in Turkey.

Kazakh President Nursultan Nazarbayev said Thursday the Kashagan project was likely to yield a positive result and could boost the country's crude output many times, even forecasting production at 8 million barrels per day by 2015.

An official for the National Iranian Oil Corporation said rumors of a big find at Kashagan had quickened the pace of work on the Iranian pipeline project, designed mainly to transport crude from OKIOC's field.

Adeli said work on the Iranian section of the two-phase project had already started in the form of a 390-kilometer, 800,000-bpd link from the Caspian port of Neka to Tehran.

The second phase involves a 1,500-kilometer, 1 million-bpd capacity line from Kazakhstan to Iran via Turkmenistan.

"There are 6,000 kilometers of oil pipelines in Iran ... and the plan is to connect the new pipeline to existing lines which currently feed refineries in the north of the country," Adeli said, adding that discussions were continuing with Kazakhstan and Turkmenistan.

He said both phases could be built within three years if talks with Kazakhstan and Turkmenistan progressed well.

Iran has so far lurked on the fringes of a race between the United States and Russia to dominate the energy-rich Caspian, because of U.S. sanctions forbidding virtually all commerce with Iran.

But some analysts see an end in sight to Iran's "rogue state" status.

"The tide is shifting," said Julia Nanay, director of the Petroleum Finance Company.

"Things have come a long way over the past three years ... it is now feasible to see there could be an easing on how the United States approaches investments in Iran."

An Iranian pipeline would come online only after the Caspian Pipeline Consortium will have completed a 1,500-kilometer link stretching from western Kazakhstan to Novorossiisk on Russia's Black Sea coast. The CPC line is due to start pumping next year.

However, the Iranian pipeline could dim the prospects for the more expensive Baku-Ceyhan pipeline.