Azeri-Iranian summit brings no joy for BP

By Rufat Abbasov

BAKU, Aug 5 (Reuters) – Iran and Azerbaijan signed gas and electricity
swap deals on Thursday, but the leaders of the two Caspian Sea states
did not give details how they planned to solve problems of disputed
oilfields once tapped by BP.

Iranian President Mohammad Khatami, whose long-awaited visit to
Azerbaijan had been repeatedly postponed over the past few years, and
his Azeri counterpart Ilham Aliyev signed a total of 10 social,
cultural and economic agreements in Baku.

“The implementation of these agreements will create thousands of new
jobs in Azerbaijan,” Aliyev said after the signing ceremony.

One of the key deals signed between the two states involves gas swaps,
which will start with small volumes in 2005 and rise to 350 million
cubic metres (mcm) of gas a year by 2009.

The swaps will allow Azerbaijan to supply its remote Nakhichevan
province via the Iranian territory.

Baku cannot supply the region directly as it is separated from the
rest of the country by the territory of Armenia, still formally at war
with Azerbaijan.

Azeri state oil and gas company SOCAR will sell 80 mcm of gas in the
last quarter of 2005, awaiting the launch in 2006 of the large
Shakh-Deniz offshore gas field, led by BP and Norway’s Statoil.

SOCAR is involved in the giant project, which will be exporting the
bulk of gas to Turkey, but the state firm wants to use its share of
output for domestic needs.

It will be sending 200 mcm to Iran from 2006, 250 mcm in 2007, 300 mcm
in 2008 and 350 mcm in 2009. Iran will in exchange supply its own
volumes to Nakhichevan, keeping 15 percent of volumes as a service
commission.

Tehran also agreed to lend Baku $75 million to build new equipment and
facilitate trade in electricity.

BP FIELDS NOT DISCUSSED

Khatami, who will stay in Azerbaijan until Saturday, said the two
states were keen to resolve all disagreements.

“There is no problem which cannot be solved by talks,” Interfax news
agency quoted him as saying.

But the two leaders failed to mention the issue of disputed Caspian
oilfields, while the head of SOCAR Natik Aliyev told Reuters the issue
was not discussed during the summit.

In July 2001, Iranian gunships and a military aircraft chased off two
of BP’s oil exploration ships from a disputed Caspian Sea sector.

BP suspended exploration work around its Araz-Alov-Sharg oil
concession, which experts say may contain significant reserves. Iran
calls the block Alborz.

The division of the Caspian between the five littoral states — Iran,
Russia, Kazakhstan, Azerbaijan and Turkmenistan — remains unresolved
despite protracted talks.

Russia, Kazakhstan and Azerbaijan have agreed on how to divide the sea
in their sectors, but Iran and Turkmenistan are still reluctant to
agree with the proposed division principles.

08/05/04 14:21 ET