US hopes Azeri-Turkish gas deal to be signed soon

By Margarita Antidze

BAKU, June 6 (Reuters) – The United States hopes that Azerbaijan and Turkey will sign a transit agreement for new gas from the Shah Deniz field in coming weeks, the U.S. Special Envoy for Eurasian Energy, Richard Morningstar, said on Monday.

Azerbaijan is negotiating with Turkey to sell 6 billion cubic metres (bcm) of gas per year from the second phase of the giant Shah Deniz gas field in Azerbaijan, and to ship 10 bcm to European customers via Turkey.

Talks include issues of transit fees, volumes of gas as well as transportation options, but do not specify which pipeline would carry the gas.

The Shah Deniz field is being developed by BP and Statoil as well as state energy company SOCAR and some others. It is estimated to contain 1.2 trillion cubic metres of gas.

Production began in 2006, and the second phase is expected to start by 2017.

“My understanding from all of the parties is that an agreement is very close,” Morningstar told reporters in the capital Baku. “We see no reason why the agreement should not be signed… in the next several weeks,” he said.

Turkish state gas company Botas said in April the agreement was expectd to be signed in the second quarter of 2011, while SOCAR President Rovnag Abdullayev said earlier he hoped to sign the agreement before the end of 2011.

Azerbaijan has been in talks with more than 20 firms and consortiums looking to buy gas from Shah Deniz II and said last year it will conclude negotiations by mid 2011.

Azerbaijan is being courted by the West and Russia for its energy reserves in the Caspian Sea, and is a key potential gas supplier for the EU-backed Nabucco pipeline project, aimed at reducing the continent’s energy dependence on Russia.



The 7.9 billion euro Nabucco pipeline aims to bring up to 31 bcm of gas annually from the Caspian and Middle East to an Austrian hub via Turkey and the Balkans, cutting out Russia.

But it faces competition for Azeri gas from Russia’s South Stream project to take the fuel under the Black Sea to Europe. Russian state energy giant Gazprom signed a deal with SOCAR in September 2010 to buy 2 bcm of gas in 2011 and even more from 2012.

Morningstar said the United States considered Nabucco as “the most preferable” option from a political and strategic snadpoint. “The question is whether the Nabucco pipeline is commercially viable,” he said.

“The basic issue is that if that pipeline is completed in 2017 will there be enough gas available that makes it viable at that point.”

He said members of the Nabucco consortium as well as gas producing countries needed to make a decision on a pipeline “in the coming months.”

Azerbaijan’s gas output rose by 11.2 percent in 2010 year-on-year to 26.2 bcm from 23.6 bcm in 2009. The oil-rich country plans to produce 28.0-29.0 bcm of gas this year. Gas output at Shah Deniz I rose to 6.9 bcm last year from 6.2 bcm in 2009.

Azerbaijan’s total gas reserves are estimated at 3-5 trillion cubic metres.

It sells gas to the domestic market, neighbouring Georgia and Turkey via the Baku-Tbilisi-Erzurum pipeline, as well as to Russia. (Editing by James Jukwey)