Shah Deniz Talks Hit a Snag
Talks between Turkey and Azerbaijan over natural gas sale contracts from the second development phase of the Shah Deniz field have hit a snag over jurisdictional issues and legal rights, a senior executive of the State Oil Company of the Azerbaijan Republic (SOCAR) has said.
Speaking to a group of Turkish reporters in Baku last week, Khalik R. Mammadov, vice president of SOCAR, and Vagif Aliyev, general manager of the investments division, said most of the details of the contract, including transit fees, volumes of gas and transportation options, have been finalized. Yet both said the disagreement over what legal jurisdiction will govern the deal still hangs in the air.
Stressing that the Shah Deniz II investment may amount to $25 to 30 billion with the construction of pipelines, Aliyev stated that an investment of this magnitude must be secure. One of the means to achieve such security is a solid legal jurisdiction to protect the interest of all partners. “The legal rules governing the deal could be British or Swiss,” he said. In addition to SOCAR, other partners developing the field are the UK’s BP, Norway’s Statoil, France’s Total, Lukoil, Iranian NIOC and the Turkish Petroleum Corporation (TPAO).
Turkey, a key country for carrying Azeri gas to Western markets with one of possible three routes, argues that it should have jurisdiction since most the pipelines traverse Turkish territory. SOCAR and the state-owned Turkish Pipeline Corporation (BOTAŞ) signed a memorandum of understanding in June 2010 for the sale of additional gas volumes and the conditions of purchase of volumes intended for the European market. “We have agreed with our Turkish partners on the main substantive issues during our talks,” said Aliyev, adding that “the only thing left for us to do is to convert all these details into a legally binding contract.”
The SOCAR executive predicted that the talks, suspended due to this year’s national elections in Turkey, would resume again soon. “We wanted to finalize the talks by the end of April or mid-May, but it did not happen. Hopefully we will pick up where we left off soon, Aliyev said. Noting that the prior agreement with BOTAŞ from Shah Deniz Phase 1, signed last year, was governed by British legal rules, he said a similar deal can be made for the Phase II gas supplies as well.
The agreement with Turkey has huge significance for Azerbaijan because all three consortiums competing to build the infrastructure to carry gas from Shah Deniz to Europe, Nabucco, the Interconnector Turkey-Greece-Italy (ITGI) and the Trans Adriatic Pipeline (TAP), look to Turkey for the construction of the pipelines or to link up their own pipelines with the existing ones that pass through Turkey. The development of Shah Deniz II is expected to complete by 2017.
Aliyev also underlined that SOCAR wants to open up to the Middle Eastern markets via Turkey. “We have already made preliminary inquiries with potential customer countries in the Middle East. Once Syria is stabilized, we will start selling natural gas to all customers in the Middle East,” he said. Last April, Azerbaijan signed a protocol on economic cooperation between Azerbaijan and Jordan, which included a framework for discussions about the export of an unspecified amount of Azerbaijani crude oil and natural gas to Jordan.
Since no pipeline exists for delivery of Azeri gas to customers in the Middle East, Turkey comes into play as a strategic partner. Turkey’s BOTAŞ plans to complete a route that will link Turkey to the Syrian city of Aleppo next year. That could allow SOCAR to sell gas to Jordan, Syria and even Israel. “Syria did express interest in building a pipeline to connect its grid to Turkey, while BOTAŞ has already completed some of the pipeline construction in border areas,” Aliyev said. He also predicted that Azerbaijan could sell gas to Greece via the established network between Turkey and Greece.
Source: Today's Zaman