Hurriyet Daily News: Turkey strikes key gas deals with Azerbaijan

Hürriyet Daily News

Monday, June 7, 2010

FULYA ÖZERKAN

Turkey signed three new agreements Monday with regional ally Azerbaijan for the sale of the latter’s natural gas and its transportation to European markets via Turkish soil.

Azerbaijani President İlham Aliyev and Prime Minister Recep Tayyip Erdoğan oversaw the signing of the deals between the two countries’ energy ministers, as well as pipeline companies BOTAŞ and SOCAR. The deals were signed on the sidelines of an international security summit in Istanbul.

Turkey said the agreements strengthen the chances of realizing the European Union-supported Nabucco project, which is aimed at reducing reliance on Russian energy supplies.

“The signing today will accelerate the Nabucco project,” Energy Minister Taner Yıldız told the news conference.

It was not immediately clear, however, whether Azerbaijan would join the multi-national Nabucco project as Baku has so far declined to make a firm commitment.

One of the agreements comes following prolonged negotiations between the two countries over the price of Azerbaijani natural gas from Shah Deniz I.

Yıldız said the countries had reached an agreement over the price but refused to reveal the figure due to secrecy concerns but added that the price would be adjusted according to market conditions, rather than taken at a fixed rate.

A senior Energy Ministry official told the Hürriyet Daily News & Economic Review that the price Turkey will pay for Azerbaijani gas would be lower than that of Russian gas. Under the current circumstances, Turkey receives 6 billion cubic meters of gas from Azerbaijan, pumping a portion of the figure to Greece.

The previous natural gas contract provided Baku with the right to revise the agreement to its own advantage due to rising oil prices all over the world in 2008. With the current agreement, Turkey also agreed to pay back the difference that has accrued since April 15, 2008.

Questions on right to re-export

The other agreement with Azerbaijan covers the shipment of some 11 billion cubic meters of natural gas. Some of this will be used by Turkey while the rest will be transported to Europe.

Ankara and Baku negotiated over the terms of re-export for a long time, with Turkey insisting on having the right to re-export gas from Shah Deniz II to Europe.

The issue of re-export is thorny and neither side has made a precise statement as to whether Monday’s deal gives Turkey the right to re-export the Azeri gas, as Ankara was continuing its efforts to convince Baku to grant it the right to re-export.

Officials said the two agreed over the transit fee but refused to reveal the price.

The Shah Deniz II project is expected to go into operation in 2018.

LINK: http://www.hurriyetdailynews.com/n.php?n=turkey-strikes-key-gas-deals-with-azerbaijan-2010-06-07