Baku 12° C
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This year, Azerbaijan and Turkey have renewed the Shah Deniz-1 gas contract, Azerbaijani Energy Minister Parviz Shahbazov said in his opening speech at the 1st Azerbaijan-Turkey Energy Forum in Baku.
Report quotes the minister as saying more than 10 billion cubic meters of natural gas will be exported to Turkey by the end of 2024.
After almost a year of intense negotiations, Azerbaijan and Turkey have finally concluded a new deal to replace the 20-year-old contract that had governed their gas trade expired in April.
The contract inked in 2001 saw Turkey import 6.6 billion cubic meters a year of gas from Azerbaijan’s Shah Deniz Caspian gas field, delivered through the South Caucasus or Baku-Tbilisi-Erzurum pipelines via Georgia.
In July, Turkey’s state energy regulator began opening auctions for daily, unused ‘spot capacity’ in the two pipelines that carry Azerbaijani gas to Turkey: the South Caucasus and TANAP. Although neither side is confirming details, it has become clear that the new agreement lasts until the end of 2024 only and will see Azerbaijan selling gas to Turkey effectively on a spot basis.
Turkey’s state gas importer Botas has been the sole bidder and has bid only for capacity in the South Caucasus Pipeline, suggesting that AGSC wants to hold the remaining spare TANAP capacity to allow for increased exports to Europe – a move which makes sound commercial sense given that European gas prices currently are high.
To date, Botas has booked around a third of daily spot capacity in the South Caucasus Pipeline through the end of this year, while its daily reservations for 2022 total 2.62 billion cubic meters, and for 2023 and 2024, 3.84 billion cubic meters – or around half of the 6.6 billion cubic meters a year it was importing under the old contract.
Turkey will continue to offer the unreserved capacity in monthly auctions as long as it is available, allowing Botas to increase imports if AGSC agrees to sell them the gas.
The year-long reservations give Baku some security in knowing the minimum volume of gas it will sell to Turkey for the coming three years, while continuing monthly and quarterly auctions allow Botas to increase the volume it imports in line with demand and broader market conditions.
Natural gas from Azerbaijan's Shah Deniz field is transported to Turkey via the South Caucasus Pipeline (Baku-Tbilisi-Erzurum) and TANAP. The first gas via the Baku-Tbilisi-Erzurum pipeline entered the Turkish market in 2007. The transportation of commercial gas to Turkey via TANAP began on June 30, 2018.
