Russia to double Azerbaijan gas imports

KRASNAYA POLYANA, Russia, Jan. 25 (UPI) -- Azerbaijan said this week it has struck a deal with Moscow to double the amount of Caspian Sea natural gas exported to the Russian energy monopoly Gazprom.

The two sides announced the agreement Monday in Krasnaya Polyana, Russia, where Rovnag Abdullayev, president of the State Oil Company of Azerbaijan Republic, or SOCAR, praised the deal as a good one for his country.

"The agreement was undersigned on very favorable terms for us," Abdullayev told the Azerbaijani Press Agency.

The agreement raises the volume of Russia's gas purchases from 1.5 billion to 3 billion cubic meters per year.

While negotiating new pipelines to potentially lucrative European consumers, Azerbaijan's biggest gas export customers are currently its closest neighbors. Turkey buys about 6 billion cubic meters annually from SOCAR, followed by Georgia at 2 billion cubic meters and Russia at 1.5 billion cubic meters.

The doubling of sales to SOCAR's third-biggest customer was greeted with enthusiasm in Baku, the report said.

Abdullayev and Gazprom Chief Executive Officer Alexey Miller noted the deal calls for even more to be delivered in 2013.

"We have doubled the purchase of Azerbaijani gas for the second consecutive year," Miller said. "The Russian-Azerbaijani energy partnership is developing at a good pace and that demonstrates the mutual aspiration for further buildup of hydrocarbons supplies."

Miller agreed Baku was getting a good deal under the arrangement, lauding the agreement's lack of an upper purchase limit and asserting Azerbaijan makes more money selling gas to Russia than to Europe.

He said Azerbaijan's geographic proximity to Russia -- with its absence of transiting countries in between -- "make(s) natural gas exports to Russia most profitable for Azerbaijan."

Azerbaijan's gas exports to Russia have been steadily rising. Some 800 million cubic meters were supplied to Gazprom in 2010, with the figure rising to 1.5 billion cubic meters last year the two countries signed a five-year extension in September 2010.

The potential for much more Caspian Sea gas heading to Russia is also there, Russian trade representative to Azerbaijan Yuri Shedrin said in September.

The pipeline between the countries is able to transport up to 5 billion cubic meters of gas per year, he told the Baku news portal News.az.

"Azerbaijan needs to diversify its export routes since the domestic market cannot consume the extracted amounts. All the same, the Southern Gas Corridor, Nabucco, ITGI and TAP will be launched after 2016," he said, referring to planned pipelines to Europe. "Russia may take all volumes of Azerbaijani gas destined for export and we hope that they will grow."

The value of gas exports to Russia jumped to $286.6 million during the first seven months of 2011 compared with the year-earlier period -- an increase of $104.1 million. That represented 37.6 percent of Azerbaijan's total exports during the period.

However, all isn't well in the energy relations between the two countries: A dispute over the amount of Azerbaijani oil transiting through Russia to the Black Sea port of Novorossiysk has yet to be resolved.

Shedrin said the two sides are working on renegotiating a 1996 treaty governing oil flows through the route, which Baku sees as vital to its ability to distribute its Caspian Sea oil product abroad.

In 2010, SOCAR exported 2.24 million tons of oil through the Baku-Novorossiysk pipeline -- a drop of 239,000 tons from 2009.

"The possible amount of transportation of Azerbaijani oil through the pipeline, pumping rates and other issues will be discussed," he told reporters. "Azerbaijan will not pump 5 million tons of oil a year via Baku-Novorossiysk any time soon."