Baku Closes in on Nabucco Gas Deal

BAKU (Upstream Online)–Azeri state energy company Socar said today long-running negotiations with Turkey on gas supplies, key for Europe’s planned Nabucco pipeline, were near completion.

“Negotiations with Turkey on gas are continuing. There are some issues, but we are approaching the end,” Reuters quoted Socar president Rovnag Abdullayev as telling reporters.

A senior Socar official, speaking on condition of anonymity, told Reuters: “I think we’ll reach agreement with Turkey on price and other issues within one or two months.”

He said the launch of phase two production at the Shah Deniz deposit would not be delayed. Socar currently estimates production will begin in 2016.

The giant Shah Deniz gas deposit, co-led by BP and StatoilHydro, has total estimated reserves of around 1.2 trillion cubic metres, and should produce 7.6 Bcm this year, compared with 6.2 Bcm in 2009.

Europe and the US are looking to Azerbaijan as a key potential supplier of gas for the Nabucco pipeline to transport Caspian and Central Asian gas via Turkey and the Balkans to central Europe, reducing Europe’s energy dependence on Russia.

But talks between Azerbaijan and traditionally close Muslim ally Turkey have been complicated in part by a dispute over Turkey’s decision last year to mend ties with Armenia. Azerbaijan went to war with Armenia in the early 90s to annex the newly independent Republic of Nagorno-Karabakh sandwiched between the two countries.

Azerbaijan has in recent months begun selling small volumes of gas to Russia and Iran, and warned terms being offered by Turkey for its gas were unacceptable.

Turkey has since stepped back from opening its border with Armenia, closed since 1993, in a bid to sooth relations with oil and gas exporter Azerbaijan.

Russia, pursuing the South Stream pipeline project as a rival to Nabucco, plans to purchase 1 Bcm of Azeri gas in 2010 and 2 Bcm in 2011, intensifying competition with the West.

Independent Azeri news agency Turan quoted Turkey’s ambassador to Azerbaijan, Hulusi Kilic, as saying the gas price had been agreed.

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