Turkey considers gas agreements as opportunity to strengthen energy security

Azerbaijan, Baku, Aug. 10 / Trend A. Badalova /

A transit agreement between Azerbaijan and Turkey is a prerequisite for the Shah Deniz-II consortium, which will decide on its preferred transit project, Eurasia Energy Observer magazine editor-in-chief Andrej Tibold said.

"If no agreement is signed before the end of the year, then the development of Shah Deniz-2 could be postponed, though this would not be in the interest of the shareholders", Tibold said.

The reality, nevertheless, remains that all parties involved will have to continue negotiations to ultimately reach an agreement, Tibold said.

"Officially, Turkey and Azerbaijan are close to reaching a comprehensive agreement on transit fees, volumes, and the transport options of Azeri gas through Turkey", Tibold said.

"The most recent statements from both sides suggest that a final agreement is expected in September. A comprehensive transit agreement is of course a prerequisite for the Shah Deniz-II consortium to decide upon the transit project of its preference before the end of the year.

European companies interested in Azeri gas plan to make the Shah Deniz-II consortium some concrete offers for the purchase of gas volumes by October. This suggests that they are anticipating a final transit agreement to be reached between Turkey and Azerbaijan before then. However, similar announcements have been made in the past. It remains to be seen if an agreement will actually be signed in September."

The consortium developing the Azerbaijani gas condensate "Shah Deniz" field expects specific proposals from various pipeline projects from before October 1, 2011.

A plausible reason for why an agreement has not been signed up until this date has much to do with the nature of the negotiations, Tibold said.

"Obviously, both sides are trying to get the best possible deal out of it for themselves", Tibold said. "Azerbaijan has an increasing interest in reaching the European market, for which it needs transit through Turkey, which it also has a strong interest in reaching an agreement with in the near future.

Turkey, however, is very much aware of its growing geostrategic importance as a transit country not just for Caspian gas, but for Russian and Middle Eastern gas as well. Therefore, Turkey has more maneuverability in negotiations with Azerbaijan and can afford to bargain for more favorable conditions. Turkey also has time on its side."

"In a world where hydrocarbon resources will become increasingly scarce and prices are rising, Turkey, obviously, has a strong interest in securing stable and affordable supplies of oil and gas to its fast growing economy," Tibold said.

"Since it is relatively poor in hydrocarbon reserves of its own, it sees an opportunity in securing a stable supply, partially from the suppliers that use Turkey for transit. Therefore Turkey regards transit agreements with countries like Russia, Azerbaijan, and Iran as an opportunity to strengthen its own energy security. Since the stakes are high, these negotiations move forward slowly."

A signed transit agreement with Turkey is necessary to transport Azerbaijani gas, in particular from the Shah Deniz field to Europe. At present, SOCAR is negotiating with potential buyers and transporters of Azerbaijani gas.

Azerbaijan and Turkey plan to reach a transit agreement on Azerbaijani gas supplies to Europe in September 2011, Turkish Ambassador to Azerbaijan Hulusi Kilic said earlier.

Azerbaijan and Turkey plan to hold a new round of talks on the gas agreements package in late August.

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