Iran takes delivery of oil from Caspian neighboring states at northern Neka terminal and returns the same amount for shipment to their customers in the Persian Gulf terminals on a swap deal.

Speaking to reporters at the inaugural ceremony of Neka-Rey pipeline, Oil Minister Bijan Namdar Zanganeh said that one million barrel a day (bpd) oil from the Caspian Sea littoral states can be transferred with no need to establish long pipelines.

"Iran is the shortest, most economical and secure route for oil transfer of the Caspian Sea littoral states to the international high seas," he said.

"Feasible study on Iran's oil industry and network in 1998 has showed us there exists the possibility of transfer of parts of Caspian Sea oil with no need for establishing long pipeline," he said.

He pointed to the 170,000 bpd capacity of the first phase of Neka terminal at the Caspian Sea via 320 kilometers pipeline of Neka-Rey and said the project has the capacity to transfer up to 500,000 bpd day to Tehran, Arak and Tabriz refineries.

"In case of increase in the amount of Caspian Sea oil, Neka terminal is capable of pumping one million bpd with piping the extra to Isfahan refinery," he said.

Currently, Russia, Kazakhstan and Turkmenistan are supplying 150,000 bpd oil to Neka-Rey pipeline.

He said that studies are underway on linking Kazakhstan and Turkmenistan pipelines to Neka and construction of high-capacity ships are on the agenda of Iran's Oil Ministry in line with establishment of Neka-Rey pipeline.

"Implementation of Neka oil terminal and improvement of Tabriz and Tehran refineries to use the oil of Caspian Sea littoral states have been carried out as buy-back through an investment of 160 million dollars by a consortium comprising China's Sinopec and Asia Federal corporations as well as the British Vitol.

President Mohammad Khatami on Thursday commissioned the first stage of Neka-Rey pipeline project.