SOCAR: Turkey-Azerbaijan agreements on gas fully meet parties' interests

Azerbaijan and Turkey have agreed on the value of Azerbaijani gas and its transit through Turkish territory, a senior representative of the State Oil Company of Azerbaijan Republic (SOCAR) said.

The parties agreed on issues of cost of Azerbaijani gas to Turkey, as in the first, and in the second stage of development of the Azerbaijani gas condensate field Shah Deniz, the source said. The two sides also agreed on the value of the transit of Azerbaijani gas through Turkey.

"Yet, there is only agreement on the principles and specific numbers. [...] The agreements are in the interests of both Turkey and Azerbaijan, as well as the European gas consumers. We have agreed with Turkish counterparts the best figures, on sales and transit of gas," the source added.

The source formalizing agreements between the parties will be preceded by numerous documents - memos, contracts, transit agreements.

Azerbaijani gas is supplied to Turkey at $120 per 1,000 cubic meters. However, the cost of gas for consumers in turkey's domestic market is more than $300 per 1,000 cubic meters (data from the official website of the Turkish company Botas).

As stated in the contract with Turkey, the gas transit price from Shah Deniz can be reviewed after one year, which means a new price can be introduced April 15, 2008.

Turkey has repeatedly stated its readiness to pay all the difference, which arises in the case of an agreement between the parties at the new price for gas in the first stage. Gas sales to Turkey under the second phase of Shah Deniz will be carried out already at the rate of the new price.

Under the current contract, Turkey must receive 6.6 billion cubic meters of gas from Shah Deniz in the first stage of the field's development. Shah Deniz reserves are estimated at 1.2 trillion cubic meters.

The contract to develop the offshore Shah Deniz field was signed on June 4, 1996. Participants to the agreement are: BP (operator) - 25.5%, Statoil Hydro - 25.5%, NICO - 10%, Total - 10%, LukAgip - 10%, TPAO - 9%, SOCAR-10%.


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