Hurriyet Daily News

June, 2010

The natural gas trade agreement signed between Turkey and Azerbaijan is expected to open the path for new investments in Caspian Sea fields. Azerbaijan will seek to ship 10 billion cubic meters of gas a year from the second phase of Shah Deniz across Turkey to Greece, Bulgaria, Serbia and Syria, among other gas consumers.

Turkey and Azerbaijan’s natural-gas trade agreement may trigger investments in Caspian Sea fields and boost exports of the fuel to Europe, energy ministers from the two countries said on Monday. Azarbijan aims to sell gas from the BP and Statoil-led Shah Deniz project to Europe after agreeing on transit through Turkey as well as supplies to the country, its largest customer, Azeri Energy Minister Natig Aliyev said in Istanbul after meeting with his Turkish counterpart.

European consumers have sought to cut dependence on Russian gas supplies after disputes between Gazprom and Ukraine, the Moscow-based gas exporter’s main transportation route, halted supplies in 2006 and 2009. European energy companies are vying for supplies from the $20 billion second phase of Shah Deniz as they plan pipelines from the region. “This opens the door for the Shah Deniz consortium to start negotiations with customers and look at the different transportation solutions for gas to Europe,” Kjersti Morstoel, a Statoil spokeswoman, said on Monday by telephone.

Azerbaijan will seek to ship 10 billion cubic meters of gas a year from the second phase of Shah Deniz across Turkey to Greece, Bulgaria, Serbia and Syria, among other gas consumers, Aliyev said. Shah Deniz-2 may provide 16 billion cubic meters of gas a year after starting in about 2016, according to the State Oil Co. of Azerbaijan, or Socar, a partner in the project.

Triggering new projects:

Turkey plans to buy 2 billion cubic meters of gas in 2017 from the second phase of Shah Deniz, which may rise to 6 billion cubic meters in 2019, Turkish Energy Minister Taner Yildiz said after the meeting. “This agreement will trigger other major energy projects in the region,” Yildiz said.

Turkey will get the right to re-export gas from Shah Deniz-2, Yildiz also said. Turkey’s ability to profit from differences between domestic and European prices has damped interest in pipelines across its territory, Statoil said last year. Re-exporting gas from Shah Deniz-2 wasn’t discussed, Socar vice president Elshad Nassirov said.

The OMV -led Nabucco pipeline is vying with smaller volume projects such as the Interconnector Turkey-Greece-Italy, or ITGI, led by Edison and Depa and Statoil and Elektrizitaets-Gesellschaft Laufenburg-led Trans Adriatic Pipeline, or TAP, to ship Caspian gas to Europe. “This is a step in the right direction,” Reinhard Mitschek, managing director of the Nabucco project, said in an e-mailed statement.

Settling the commercial aspects of the agreement may take an additional six months to eight months, Murat Heydarov, adviser to the head of Socar, said in Baku last week. Yildiz said the price for Azeri gas supplies is “in line” with market levels such as those from Russia. The deal lessens Turkey’s liability to take-or-pay contracts, and the country will now revise “all” such accords, he said. Turkey is Russia’s second largest gas consumer under such contracts outside the former Soviet Union, following Germany, according to Gazprom.

Petkim Petrokimya Holding, a Turkish chemicals maker owned by Turcas and Socar, will get 1.2 billion cubic meters a year of Azeri gas at a “favorable” price, Yildiz said. The Azeri deal won’t raise consumer prices, he added.