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TURKEY - The Georgian Angle.

A 20-year agreement signed in early October 2001 by the governments of Georgia and Azerbaijan covered the transit, transportation and sale of Shah Deniz gas. This gave the go-ahead for the pipeline project.

The deal set the transit fee to be paid to Georgia at $2.50 per 1,000 cubic metres for the first five years of the agreement and accounted for a maximum of $5 per 1,000 cubic metres over the 20-year period, with Tbilisi to be paid initially in cash or in kind. (In July 2001 Azerbaijan, thinking it had reached agreement with Georgia on a lower transit fee, prepared to host a signing ceremony. However, a letter from the World Bank convinced Tbilisi that it should negotiated a higher tariff).

The agreement also gave Georgia the option to buy up to 500 MCM/year of the Shah Deniz gas at a price of $55 per 1,000 cubic metres over 20 years. (Georgia was then said to be paying $60 per 1,000 cubic metres for imported Russian gas).

The Price To Turkey: The price for Shah Deniz gas to be paid by Botas has been kept secret by both the Turkish company and the consortium. In March 2002, BP's President in Azerbaijan David Woodward was quoted as saying the price was "the lowest for gas delivered to the Turkish border" and that Shah Deniz will be able to compete with any alternative source.

On suggestions that the Shah Deniz-Turkey project could form part of a proposed trans-Caspian gas pipeline (TCGP) from Turkmenistan and other Caspian producers to Europe, Woodward was quoted as saying: "Ultimately, pipeline capacity may reach 24 BCM/year, but my personal view is that the TCGP will not be resurrected in the near future".

(Shell and a consortium of US companies have been the TCGP promoters in recent years, but the proposal was undermined by Turkmenistan's often shifting positions and a territorial dispute between Baku and Ashgabat).

The consortium dropped an earlier proposal for the Shah Deniz-Turkey system to include part of an existing gas pipeline which runs through Gazi, Magomed and Gazakh, from eastern Azerbaijan to its border with Georgia. That was because the old line's capacity was limited to 4 BCM/ year which was far short of the consortium's gas export requirements.

Uzbekistan Pipeline: On April 14, 1998, then Turkish Premier Mesut Yilmaz, visiting Tashkent, backed Uzbekistan's bid for a trans-Caspian oil and gas export pipeline system which had Washington's active support.

Uzbek President Islam Karimov called the proposed pipeline route, to run from Uzbekistan to Turkey via Turkmenistan and Azerbaijan, "the most important" one for his country.

Like its Central Asian neighbours, landlocked Uzbekistan is eager to have pipelines to export oil and gas to world markets. With the European market for gas to become nearly saturated by 2010, major western firms intent on exporting gas from Central Asia still consider Turkey as an important market.
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Publication:APS Review Gas Market Trends
Date:May 27, 2002
Previous Article:TURKEY - Azeri-Europe Gas Pipeline Via Turkey & Greece.
Next Article:TURKEY - Turkey Is Negotiating To Scale Down Gas Purchase Deals.

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