Azerbaijan to raise gas export price

Azerbaijan is about to raise the sales price for the gas produced from its biggest offshore field Shahdaniz, Minister of Energy and Industry Natig Aliyev says.

“Under the existing agreement, Azeri gas should be sold to Turkey for $120 per 1,000 cubic meters within a year since production begins. After that, the sales price is to be raised,” he told reporters on Monday.

Aliyev said the company in charge of selling gas has already launched talks on the matter. “I believe that Azerbaijan should start exporting its gas for market prices.”

The Shahdaniz field launched production in 2006. The field holds estimated reserves of 1.2 trillion cubic meters of gas. The resources are used both to meet domestic demand and for exports to energy-hungry European markets through the Baku-Tbilisi-Erzurum pipeline. The parties to the Shahdaniz Production Sharing Agreement are: BP (operator – 25.5%), Statoil (25.5%), Azerbaijan’s state oil company SOCAR (10%), Russian giant LUKoil (10%), NICO (10%), Total (10%), and TPAO (9%).

As for exports to neighboring Georgia, the minister said selling gas to the neighboring South Caucasus republic for only $120 per 1,000 cubic meters was no longer profitable as the price for gas in world markets was many times over the figure.

He said the Azerbaijani and Georgian governments were in talks on setting a new price for natural gas. Tbilisi is looking to pay $180-190, but Baku’s views are somewhat different.

“I can’t say anything specific about the price as of now. But what I can say is that both Azerbaijan and Georgia agree to raising the price, which will be suitable for both countries. As for the volume of supplies, it will depend on the fuel and energy balance of Azerbaijan and the new sales price. Georgia is seeking to import 1-1.5 billion cubic meters of gas a year, while we intend to sell only 500 million cubic meters.”

Aliyev reminded that the state oil company which extracts both oil and gas from the country’s vast energy fields will produce 8bn cu. m. of gas in 2008. 7bn cu. m. of the volume will be used to meet domestic demand, while the rest could be exported to Georgia.

The minister said there was no misunderstanding between Baku and Tbilisi in talks. He added that Azerbaijan was keen on both defending its own interests and assisting the neighboring country in preventing a predicament with energy supplies.*