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European Union Energy Commissioner Gunther Oettinger on Wednesday welcomed an agreement in principle between Turkey and Azerbaijan on gas transit.
The dispute over transit conditions and prices has been a major impediment to progress on the €7.9 billion Nabucco pipeline project. Azerbaijan is considered one of the main sources for non-Russian gas diminishing EU dependence on Gazprom, Oettinger said in a statement.
Oettinger reminded that late last year, Azerbaijani President Ilham Aliyev threatened to seek alternative routes to get his country's gas to Europe. Aliyev then said that transit prices and conditions, then being offered by Turkey, were unacceptable.
"Turkey and Azerbaijan are our indispensable partners for the realisation of the Southern Corridor for gas," said Oettinger, who earlier visited Russia, Azerbaijan and Kazakhstan. "This agreement between such two important partners opens the way for a strategic allocation of gas that will underpin the Southern Corridor and provide energy security to Turkey and the EU," he added. The commissioner notes that by making a commitment to transit through Turkey, Azerbaijan is cementing itself as a leading partner to the EU in the Caucasus and Caspian regions.
Azerbaijani gas is central to the Nabucco project, now funded by the EU to the tune of €200 million. The pipeline consortium announced on April 23 the start to its ‘pre-qualification’ procurement phase. The six-company Nabucco consortium is thus opening the tender process for long lead items. Construction of the 31 billion cubic metre pipeline is still foreseen to start at the end of 2011, with the first gas flowing in 2014. The 3,300-km Nabucco gas pipeline runs from Turkey via Bulgaria, Romania and Hungary to a gas hub near Vienna.
Turkish Minister of Energy and Natural Resources Taner Yildiz announced Tuesday that Baku and Ankara had agreed in principle on transporting Azerbaijani gas to Turkey and further to Europe, and that both countries had taken concessional steps to reach agreement.
Three issues were on the negotiating table: the price of gas exported to Turkey during Phase 1 of developing Azerbaijan’s biggest gas field Shahdaniz, the price and volume of gas to be sold to Turkey during Phase 2, as well as the transit of fuel to Europe.
Under the agreement signed, the price of Azerbaijani gas sold to Turkey is $120 per 1,000 cubic meters -- considerably lower than those in world markets. Supplies to the neighboring country began in 2007. According to the gas supply contract concluded by Shahdaniz partners with Turkey, the price of Azerbaijani gas is to be reconsidered a year after the start of gas deliveries, i.e. the new price should have gone into effect on April 15, 2008.
Also, Baku sought to transport its gas produced during Phase 2 to Europe through Turkey and sell it for market-level prices, while Ankara offered to buy Azerbaijani gas and then sell it to European consumers on its own. This had caused a long-standing dispute between the two countries and diminished prospects for the Nabucco pipeline project, which aims to pump gas from the Caspian and Central Asia regions to energy-thirsty European markets.*