Transit agreement between Azerbaijan and Turkey to propel gas supplies from Caspian region

Oil&Gas Materials 20 July 2011 15:46 (UTC +04:00)

Azerbaijan, Baku, July 19 /Trend, V.Zhavoronkova/

The gas transit agreement between Azerbaijan and Turkey will enable to move forward in the transportation of gas from the Caspian region to Europe, European expert on energy Samuel Lussac believes.

"This agreement [the transit agreement between Azerbaijan and Turkey] envisages resolving a number of issues and will enable to move forward in the export of Azerbaijani gas to Europe, but not only Azerbaijani gas, but also the Turkmen, and maybe even Kazakh gas," Lussac, a fellow at the Political Studies Institute, told Trend by telephone from Paris.

The transit agreement involves the sale of Azerbaijani gas directly to Europe through Turkey. This document can be considered the missing link in the chain of agreements on the organization of Azerbaijani gas supply, the expert said.

"This is definitely the missing link, because now we have an inter-governmental an agreement on the Nabucco project, we have an inter-governmental agreement between Azerbaijan and Turkey, but still there are many unresolved issues concerning the transit of Azerbaijani gas via Turkey," he said.

In addition, one of the major unresolved issues is still the details of gas transit, where there is a dilemma: whether to build a new pipeline through Turkey or to use existing means of transportation.

Also, he said it needs to agree upon prices and volumes of gas transportation.
"The question remains, how much Turkey will receive from the transport of Azerbaijani gas through its territory, and what volume it can transport," he said.

According to expert, the result of signing a transit agreement would justify a long period of time that was spent by the sides on its approval.

"It will be very pleased to see progress on this issue, because it [the transit agreement] will open a new era for Turkey and Azerbaijan, as well as for gas transit to Europe," said Lussac.
The main source for the supply of Azerbaijani gas to Europe via Turkey is the second stage of Shah Deniz field development, the first gas production within which is expected in 2017. About 10 billion cubic meters of gas can be exported to Europe per year.

Concluding a transit agreement with Turkey is necessary to transport Azerbaijani gas, particularly from the Shah Deniz field to Europe. Today SOCAR negotiates with potential buyers and transporters of Azerbaijani gas. However, the contracts, as well as permissions for the launch of the second stage of development of Shah Deniz can be expected only after the signing of a transit agreement with Turkey.

Peak production from the Shah Deniz project is forecasted at over 9 billion cubic meters of gas and 50,000 barrels of condensate per day. According to forecasts, within the second phase of the field's development gas production may be increased to 25 billion cubic meters per year.
Shah Deniz reserves are estimated at an amount of 1.2 trillion cubic meters of gas.
The contract to develop the offshore Shah Deniz field was signed June 4, 1996. Participants to the agreement are: BP (operator) - 25.5 percent, Statoil - 25.5 percent, NICO - 10 percent, Total - 10 percent, LukAgip - 10 percent, TPAO - 9 percent, SOCAR-10 percent.

Nabucco project belongs to the Southern Corridor, which is one of the priority energy projects for EU. It is designed to diversify routes and sources of supply and thereby increase the energy security of the EU.

The Southern Corridor also includes: Trans Adriatic Pipeline (TAP), White Stream and ITGI (Turkey-Greece-Italy pipeline).