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Russia, Azerbaijan agree new gas deal

Russia, Azerbaijan agree new gas deal

Russia's president on Monday clinched a major new natural gas deal with Azerbaijan, striking a blow to European efforts to reduce energy reliance on Russia.
Russian President Dmitry Medvedev traveled to the capital of Azerbaijan, Baku, along with the chief of Russia's state-run natural gas monopoly, Gazprom, to oversee the deal's signing.
Gazprom CEO Alexei Miller and Rovnag Abdullayev, head of State Oil and Gas Company of Azerbaijan, signed an agreement for Russia to buy 500 million cubic meters of gas annually starting next year.
Medvedev and his Azerbaijani counterpart Ilham Aliyev in televised comments hailed the agreement as an important step in bilateral relations.
Some Western observers suspect the deal is part of a Russian effort to corner regional energy supply, but President Medvedev said that Russia's deal with Azerbaijan has no political motives.
Miller announced last week that the company would sign an agreement on buying natural gas from the country's largest gas field, Shah Deniz.
When a second gas field at Shah Deniz comes online, Gazprom will get first refusal on the extra supplies if other companies make matching offers, Miller said, according to Russian news agencies. The contract foresees annual increases in supplies to Russia, Miller said.
The United States and Europe have courted Azerbaijan and its vast energy reserves as an alternative source of oil and gas. European officials are looking to build a major pipeline called Nabucco that would bring Caspian and Central Asian gas direct to Western markets. Moscow, meanwhile, has been lobbying for a pipeline via Russia named South Stream, which would tunnel under the Black Sea to reach southern Europe.
A new Russian deal with Azerbaijan could create fresh doubts over the Nabucco project's ability to get enough gas to make it worthwile.
Shirvani Abdullayev, Alfa Bank's top oil and gas analyst, said giving Gazprom priority for the Caspian Sea gas field would spell the end for Europe's Nabucco project.
"Nabucco was designed to use Shah Deniz gas," he said. "Now it is left without the source of gas."
Abdullayev said it was "unrealistic to think" that South Stream and Nabucco could co-exist. "The market does not need so much gas," he said.
Azerbaijan produced 23 billion cubic meters of gas in 2008, and Aliyev pledged in January that the country would double gas production in the next few years.
Russia is eager to corner the Caspian market after it secured most of the gas supplies from its energy-rich neighbor Turkmenistan several years ago. But Russia's relations with former-Soviet Turkmenstan have recently soured. Russia said it would be incurring losses if it continued to buy Turkmen gas at current prices.
The two countries are now in talks to review the terms of gas contracts.
In the meantime, Turkmenistan has shown interest in diversifying its exports to China and the West, which could help Europe find alternative suppliers.


Updated : 2021-04-12 05:07 GMT+08:00