Azernews.Az

Russian giant, Gazprom, will begin talks with Azerbaijan on buying its natural gas in 2010. Alexei Miller, the company`s Chief Executive, signed a memorandum of understanding with Rovnag Abdullayev, the President of Azerbaijan`s state energy firm, SOCAR, about tackling negotiations on gas imports next year. The agreement was signed on Friday in Moscow.
Gas produced from the major Shahdaniz field in the Azerbaijan area of the Caspian Sea will be transported to Russia through a 200 km pipeline extending from the Baku coast of the basin to the Russian town of Novo-Filya. Russia has said it intended to upgrade a section of the existing gas pipeline.
The precise volume of supplies and the price to be charged have not yet been specified, but analysts suggest that Gazprom is expected to pay $340 per 1,000 cubic meters of Azerbaijani gas.
Azerbaijan`s exporting gas to its northern neighbor could adversely affect the implementation of the European Union-backed Nabucco pipeline project, analysts say. The EU pledged last week to allocate $265 million for the purpose.
However, the SOCAR president emphasized that the inked memorandum would not impede Azerbaijan`s participation in the Nabucco project, which remains on Baku`s agenda.
"We are interested in this project. Talks are ongoing with interested parties regarding both Nabucco and the Turkey-Greece-Italy line," Abdullayev said.
He said Baku was also taking interest in the trans-Adriatic pipeline and negotiating with its participants. "The main thing for us is to accomplish selling our gas, as a producer and supplier, by alternative routes and in better conditions, and discussions to that end are under way."
The 8 billion euro project seeks to deliver about 30 billion cubic meters of Azerbaijani and Central Asian gas per year to European markets through a 3,300-kilometer pipeline traveling via the territories of Azerbaijan and Turkey to Romania, Bulgaria, Hungary and Austria, while bypassing Russia. The first shipment of gas via the pipeline is expected in 2013 at the earliest.
Azerbaijan currently produces over 56 million cubic meters of gas per day, of which 18m cu. m. is exported to Turkey, while 3m cu. m. is sent to Georgia.
Shahdaniz launched production in 2006. The field holds estimated reserves of 2 trillion cubic meters of gas, according to official figures.

Nabucco under question mark?
An Azerbaijani analyst has backed Russia`s gas purchase proposal.
"If Gazprom buys Azerbaijan`s gas, this would be a commercially viable option for both countries," said Ilham Shaban, the head of the Oil Research Center.
He said there were several advantages for Azerbaijan in selling gas to Russia. First of all, the major pipeline that has not been filled since January 2007 will be re-commissioned.
"The pipeline`s remaining empty is costing a great deal to Azerbaijan, as its being at a standstill makes it prone to speedier corrosion. Thus, maintenance requires additional spending."
According to Shaban, if Gazprom and SOCAR reach agreement on gas sales, Azerbaijan`s state-controlled gas supplier Azerigas will make a profit and considerable amount of currency will flow into the country from the Azerbaijani state energy firm`s gas exports. "But first and foremost, Azerbaijan, as a newly-emerging exporter of gas, will gain the opportunity to expand the geographic scope of gas exports in a short time."
Further, Shaban regarded as illogical the allegations that Azerbaijan is turning down the Nabucco gas export project and other West-backed initiatives as well as taking a slant toward rival Russia.
"This is not the case at all, because if we take a close look at the signed memo, it becomes clear that this refers to the period after 2010, which overlaps with the second stage of the Shahdaniz project. According to the SOCAR president`s statement, this [gas exports] is envisioned for late 2014-early 2015."
Political analyst Rasim Musabayov says cooperation between Gazprom and SOCAR could bear political importance. Gazprom is a major player in Russia, and boosting ties with the gas behemoth might increase Azerbaijan`s leverage for influencing the ruling elite in the neighboring country, he said.
However, economist Natig Jafarli expressed a completely different opinion. He believes that by agreeing to sell gas to Russia, Azerbaijan has displayed its inability to withstand the powerful neighbor`s pressure.
"This is not merely an economic issue but also a political one. Azerbaijan has apparently succumbed to Russia`s pressure. Talks had been under way for more than half a year. Evidently, due to the fact that the mechanisms of influence at Russia`s disposal dwelled upon substantial arguments, Azerbaijan had to agree to this," Jafarli argued.
He said that although this is not being admitted, by deciding to cooperate with Russia, Azerbaijan essentially ruled out its role as a supplier for the Nabucco pipeline.
"Azerbaijan will not be able to supply gas to Russia, and, at the same time, transport gas via the Baku-Tbilisi-Erzurum conduit, provide it for Nabucco, and meet its domestic demand," the expert concluded.
Jafarli noted that while Moscow`s proposal to buy Azerbaijani gas for market prices is considered economically viable, it cannot, by far, be deemed as politically beneficial. Therefore, if gas exports materialize, Azerbaijan will actually become dependent on Russia.