TURKISH-AZERBAIJANI DEAL THROWS OPEN A "WINDOW TO EUROPE" FOR BAKU
EurAsiaNet. org
May 14 2010
NY
Azerbaijan and Turkey are close to resolving a two-year gas-pricing
dispute that has soured relations between the two strategic partners
and which has stalled development of the Nabucco pipeline.
A comprehensive package that sets the purchase price and transit fees
for shipping Azerbaijani gas to Europe via Turkey is expected to be
signed on May 16 during Turkish Prime Minister Recip Tayyip Erdogan’s
visit to Baku. Experts from Turkey’s state-run BOTAS Petroleum
Pipeline Corporation have been working with representatives of SOCAR
(the State Oil Company of the Azerbaijani Republic) on the final draft
of the agreement for the past few days. The sides signed a protocol
agreement on April 26. [For background see EurasiaNet’s archive].
A senior SOCAR executive told EurasiaNet.org that under the terms
of the pending agreement, Turkey will purchase and provide transit
for Azerbaijani gas from the sprawling Shah Deniz field, but will not
sell it to European buyers, as Ankara previously stipulated. Instead,
Azerbaijan itself will sell its gas to European buyers. The transit
tariff for gas from the large-scale phase of the Shah Deniz project,
which starts in 2016, will be about $2.00-$2.50 per 1,000 kilometers,
said the executive, who asked not to be named.
Meanwhile, Turkey has agreed to pay about $250 per 1,000 cubic meters
(tcm) of gas to Azerbaijan for the current Phase 1 of the Shah Deniz
project – more than double the current rate of $120/tcm. Baku had
earlier sought at least $300/tcm.
Turkey will pay Azerbaijan a one-time compensation payment for the
difference in the price of gas supplied to Turkey since April 2008
and the new price of $250 per 1,000 cubic meters. The compensation
will amount to roughly $1.2 billion, the source said.
Turkey’s Shah Deniz purchase volumes will continue at a maximum of 6.3
billion cubic meters (bcm) of gas per year until 2016. After 2016,
when Phase 2 of the project kicks in with production levels up to
16 bcm per year, Turkey will buy about 4-5 bcm of Shah Deniz gas
per year. The price has yet to be determined for those purchases,
the SOCAR source said.
Baku will start commercial negotiations with potential gas buyers in
Europe once the agreement with Turkey is signed, SOCAR President Rovnag
Abdullayev told a May 11 news conference. He expressed confidence
that Shah Deniz’s Phase 2 "will be implemented." Doubts had been
earlier expressed that the price squabble with Turkey could stall
development of Phase 2.
Azerbaijani President Ilham Aliyev in April expressed support for
the so-called South Corridor, which includes the Nabucco pipeline,
the Turkey-Greece-Italy and Trans-Adriatic pipelines, but noted that
action was contingent on completion of the talks with Turkey. The
corridor, he said, will ensure Azerbaijani access to "reliable and
long-term markets."
With matters now squared with Turkey, Baku has gotten a green light
to pursue those markets aggressively, energy expert Ilham Shaban noted.
The fact that Azerbaijan will do its own sales pitch for gas
transported via Turkey to Europe provides fresh incentive.
"Now Baku is keen to supply up to 5 billion cubic meters from Phase
2 to Turkey and 7-9 bcm [out of annual supplies of 16 bcm] to the
European market," said Shaban, the head of Baku’s Center for Oil
Research. Already, 98 percent of Azerbaijani oil is exported to the
West, making such mega-gas deals a neat fit for that export strategy,
he added.
The European Union is ready to welcome the gas. European Commission
Energy Commissioner Gunter Ottinger asserted that "this agreement
paves the way for strategic distribution of gas which is the basis of
‘South Corridor’ and ensures Turkey’s and EU’s energy security. This
deal will allow Azerbaijan to enforce its position as the EU’s
leading partner in the Caucasus and Caspian region," Ottinger said
in a statement posted on the European Commission’s website.
Ali Hasanov, head of the presidential administration’s political
department, went even further on May 5 and stated that Azerbaijan is
ready to supply half of its produced gas to the Nabucco pipeline.
"Azerbaijan attaches high importance to the Nabucco project," the
Turan news agency quoted Hasanov as saying.
One Baku-based political analyst, Rauf Mirgadirov, political columnist
of the Russian-language daily Zerkalo (The Mirror), believes that
Ankara insisting on the link between rapprochement with Armenia and
concessions on the Nagorno-Karabakh conflict "restored the trust
between Azerbaijan and Turkey and made agreement on the gas issues
easier." [For background see EurasiaNet’s archive].
Editor’s note: Shahin Abbasov is a freelance correspondent based
in Baku. He is also a board member of the Open Society Institute
Assistance Foundation-Azerbaijan.
From: Emil Lazarian | Ararat NewsPress