Azerbaijan, Turkey have principal agreements on gas price: minister

The value of the gas has not been defined yet. Only principal agreements have been reached, he said.

He said Botas and SOCAR will hold next round of talks in Baku next week.

Under the contract, 6.6 billion cubic meters of gas will be transported to Turkey via Baku-Tbilisi-Erzurum per year as part of the Shah Deniz-1. Shah Deniz partners plan to achieve this volume in 2009.

Turkey buys Azerbaijani gas at $120 for 1,000 cubic meters. The contract also stipulates that the gas price can be considered a year after the supplies is launched. So, new prices (which the sides are negotiating) will be applied from April 15, 2008.

Gas price at $120 for 1,000 cubic meters is not realistic gas prices on world markets. Turkey sells gas at $400 per 1,000 cubic meters in domestic market.

The contract on development of off-shore Shah Deniz field was signed on 4 June 1996. The sides to the contract are ?? (operator - 25.5%), Statoil (25.5%), SOCAR (10%), LukAgip (10%), NICO (10%), Total (10%), and TPAO (9%). Field's reserves are estimated at 1.2 trillion cubic meters of gas. The daily production is 22 million cubic meters. The daily production will reach 27 million cubic meters soon due to launch of new well.

The gas production on this field began in December 2006. At present gas is transported to Georgia and Turkey via South Caucasus Pipeline. Azerbaijan is also a buyer of gas. The gas is exported via the Baku-Tbilisi-Erzurum gas pipeline.

Gas output from Shah Deniz is expected to reach 9 billion cubic meters in 2009 compared to 8.6 billion cubic meters last year. The gas will be sold to Azerbaijan, Georgia and Turkey under previously signed agreements. Within the framework of Stage Two of the project after 2014, production will increase to 20 billion cubic meters.

/Trend Capital/