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Azerbaijan signs gas sales agreements with European buyers

20 September 2013 11:49 (UTC+04:00)
Azerbaijan signs gas sales agreements with European buyers

By Aynur Jafarova

Azerbaijan on September 19 agreed to sell over 10 billion cubic meters of natural gas a year from the second phase of its Shah Deniz development to nine companies in the European Union, which is seeking to reduce reliance on Russian supplies.

The contracts were signed for 25 years between Azerbaijan's state energy company SOCAR and the European utilities, including Axpo Trading AG, Bulgargaz EAD, Depa, Gas Natural Fenosa, Hera Trading Srl, Shell Energy Europe, Enel SpA, EON SE and GDF Suez SA.

"This is an exciting day as it marks the beginning of a new era in Azerbaijan's oil and gas history," SOCAR President Rovnaq Abdullayev said at the signing ceremony in Baku, the Azerbaijani capital. "It marks the beginning of Azerbaijan's direct linkage with European markets that will diversify Europe's energy supplies."

Abdullayev said the Shah Deniz partners will receive $200 billion from the gas sales.

The EU is looking to the BP-led Shah Deniz deposit in Azerbaijan's section of the Caspian Sea and other fields in the region to cut dependence on Russian fuel. Shah Deniz, where partners also include Statoil, Total, Lukoil, NIKO and TPAO, is estimated to contain 1.2 trillion cubic meters of gas.

The $25-billion Shah Deniz project is expected to start producing 16 billion cubic meters of gas a year from 2018. Of the total volume, 6 billion will be exported to Turkey and 10 billion to the EU.

The fuel will be delivered to European markets via the Baku-Tbilisi-Erzurum link (also known as the South Caucasus Pipeline), and the planned Trans-Anatolia and Trans-Adriatic pipelines.

Bulgaria and Greece will buy 1 billion cubic meters a year each, SOCAR Vice President for Marketing and Investment Elshad Nasirov said. Italian companies will buy up to 8 billion cubic meters of gas a year, he said.

The fuel will be delivered to Bulgaria via a new interconnector, BP Azerbaijan Vice President for Shah Deniz Al Cook said.

Cook did not give an exact breakdown of volumes to be delivered to the companies, saying all agreed to buy "material" quantities.

"The gas contracts signed today are sensitive to market demands within Europe," Cook said. "The way we sell the gas recognizes the needs of the countries and the companies that we are selling gas to."

"I would like to re-iterate that we are very pleased by the outcome of many years of joint efforts that brings us closer to a final investment decision on the Shah Deniz 2 project," said Gordon Birrell, BP's regional president for Azerbaijan, Georgia and Turkey. "In a few years as the Shah Deniz partnership delivers the first gas some 4,000 km away into Europe through a series of inter-linked pipelines, Azerbaijan's vision of a southern gas corridor will become a reality."

Birrell said Europe gained a new diversified source of energy supplies. "And indeed, I believe the strong demand for Shah Deniz gas in Europe gives us confidence in the long-term development of Azerbaijan's gas resources," he said.

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