TURKEY - Azeri-Europe Gas Pipeline Via Turkey & Greece.

A 1,050 km pipeline to Turkey from the Shah Deniz field, a giant in the Azerbaijan's sector of the Caspian Sea which has recoverable reserves of 700 BCM of gas and 300m tons of condensate, will be extended to supply Greece and other European markets. Construction of the pipeline will begin in the second half of 2002, with initial work to start in July, and should be completed by 2005. The pipeline should supply Turkey and Europe with up to 330 BCM of Shah Deniz gas, with the system's capacity eventually to reach 16 BCM/year.

Under a contract signed on March 1, 2001, between a BP-led consortium and Botas, Turkey will import 89.2 BCM of this gas over 15 years. But as it downgraded Turkish demand forecasts in 2001 because of the recession, Botas has reached agreement with the consortium to delay the project a bit for the gas to be supplied from 2005, and not from 2004 as was originally planned. According to the new Botas schedule, Turkey will take 2 BCM in 2005, 3 BCM in 2006, 5 BCM in 2007 and 6.6 BCM/year from 2008 to 2020.

The pipeline's first phase will run 490 km across Azerbaijan and through two 280-km sections via Georgia and Turkey. It will involve a 42-inch pipe to run parallel to the Baku-Tbilisi-Ceyhan crude oil system, and this phase will cost $1 bn according to estimates by the consortium. The consortium will spend another $1.6 bn in developing the Shah Deniz field, which will be producing both gas and condensate. The condensate will be exported separately by the Shah Deniz consortium, with some of the liquid to be consumed in Azerbaijan.

The cost of the later phases of the pipeline, which are to include a section from Turkey's western border to the Greek market, will be estimated in the light of sales and purchase agreements to be reached between the consortium and European buyers.

The Shah Deniz group's shareholders are BP (25.5%), Statoil (25.5%), Socar (10%), TotalFinaElf (10%), Iran's OIEC (10%), and TPAO (9%).

In late April 2002 negotiations were held in Baku between a Greek delegation and the consortium. In March 2002, Botas and its Greek counterpart signed a $300m agreement to build the first ever pipeline between the two traditionally hostile neighbours to carry gas from Iran and Azerbaijan to Europe through Turkey and Greece.