Azernews.Az

BAKU – Turkey has begun repaying its outstanding debt for the imported gas produced from Shahdaniz, Azerbaijan’s biggest gas field in the Caspian Sea, after two years of intense talks between the two countries.

Turkey's state-run Botas company on Monday transferred part of the debt for the gas imported during Phase 1 of the project considering the new gas price agreed in mid-2010, an Azerbaijani government source told Turan news agency.

The first tranche of the arrears repaid to Azerbaijan made up $500 million, the source said. Botas intends to repay the second tranche worth the same amount in the coming days. Next year, the third tranche, worth around $400 million, will be transferred, which will completely clear Turkey’s debt.

Under the agreement signed in 2001, the price of Azerbaijani gas sold to Turkey was $120 per 1,000 cubic meters. Though supplies to the neighboring country were expected to begin in 2004, Azerbaijani gas reached the Turkish market in July 2007 -- by the time gas prices had surged in world markets.

Turkey was importing 5 billion cubic meters of gas per year from the South Caucasus republic. Until April 2008, the country was paying $120. According to the contract concluded by Shahdaniz partners with Turkey, the price of Azerbaijani gas was to be reconsidered since then.

After long-standing talks between Azerbaijan’s state energy firm SOCAR and the Turkish government, the two countries signed a new gas agreement this June during President Ilham Aliyev’s visit to Istanbul. As a result of negotiations, Turkey agreed to pay an additional $1.4 billion for the gas it imported between April 2008 and June 2010.