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Turkey, Azerbaijan Sign Landmark Gas Transit Agreement

Turkey and Azerbaijan on Tuesday signed a long-awaited agreement to allow the transit of some 10 billion cubic meters of Azeri natural gas to Europe, resolving one of the final obstacles preventing the opening of a southern corridor to allow gas to flow from the Caspian to the EU.

A Turkish energy ministry spokesman said Tuesday the agreement has now been signed, although no details on the exact terms were available.

Azerbaijan's President Ilhan Aliyev arrived in Turkey early Tuesday to attend the groundbreaking ceremony for a new feedstock refinery being built in Ariaga and had been expected to sign the gas deal at a meeting with Turkish Prime Minister Recep Tayyip Erdogan.

Turkey and Azerbaijan have been in talks for nearly two years over a far-reaching new gas deal to allow for up to 10 Bcm/year of gas produced from the second phase of Azerbaijan's Shah Deniz field to be exported to Turkey and onto Europe.

In addition, Turkey had been hoping to take a further 6 Bcm/year of Azeri gas for its own needs and to finalize a new pricing agreement for existing contracts signed in 2001.

Under those contracts, Turkey takes up to 6.6 Bcm/year of gas from the first phase of the Shah Deniz field, which Turkey has been receiving since 2007.

A transit deal for Azeri gas to cross Turkey en route to Europe was a pre-requisite for any of the planned southern corridor gas pipelines.

On October 1, the BP-led consortium developing the second phase of Shah Deniz gas field received formal proposals from three planned export pipelines.

The contenders are: the 31 billion cubic meter/year Nabucco pipeline; the 10 Bcm/year Interconnector Turkey-Greece-Italy (ITGI) link; and the 10-20 Bcm/year Trans Adriatic Pipeline (TAP).

The Azeri government wants a dedicated pipeline through Turkey that will enable them to export gas not only from Shah Deniz 2 but from a cluster of other gas fields, some of which they believe can be brought online in much the same time frame as the giant phase two of Shah Deniz in 2017.

The three projects have upped the public relations offensive in recent weeks as the deadline nears.

But while Nabucco, ITGI and TAP have spent years trying to convince BP and Azerbaijan of their credentials, BP has also proposed a fourth plan should none of the three meet its needs.

The proposal, which emerged last month in Baku, is simply to supply Shah Deniz 2 gas through Turkey to exit points on Turkey's borders with Greece and Bulgaria and then rely on limited upgrades to existing pipelines -- and to current or planned EU local interconnectors -- to create a market in southeast Europe that will absorb all the 10 Bcm/year of Shah Deniz 2 European exports.

Source: Plats
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