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Turkey suspends gas imports from Azerbaijan within the framework of the Shah Deniz-1 project

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Last week, Turkey suspended the import of pipeline gas supplies from Azerbaijan within the framework of the Shah Deniz-1 project. 

According to Habertürk, supplies of Azerbaijani gas have been suspended due to the expiration of the contract. So far, the parties have not been able to agree on a new agreement, therefore, the supply of Azerbaijani gas via the Baku-Tbilisi-Erzurum pipeline has been suspended. However, Turkey continues to receive Azerbaijani gas through another gas pipeline – TANAP, which was put into operation on June 30, 2018.

On March 12, 2001, during the official visit of Azerbaijani President Heydar Aliyev to Turkey in Ankara, two documents were signed regulating the export of Azerbaijani gas to Turkey: an intergovernmental agreement on the purchase and sale of Azerbaijani gas, as well as a similar intergovernmental agreement (gas supplier) and the State Pipeline Company BOTAS (gas buyer).

According to the signed documents, the Turkish side pledged to purchase 89.2 billion cubic meters of natural gas from Azerbaijan within 15 years starting from 2004. The lower limit of the purchase price of gas was determined at $ 70 per 1,000 cubic meters, and the upper limit was $ 120.

However, due to the complexity of the development of the field, the export of Azerbaijani gas to Turkey was only started in early summer 2007. Therefore, the term of the contract has been adjusted for 2021.

Because the price for gas in the contract was not fixed and was determined in terms of the ratio of prices for oil products (diesel and fuel oil on the local market), the price range of $ 70-120 soon lost its value as well.

In addition, in the agreement within the framework of Shah Deniz-1, the Turkish side had its own minimum obligations: it had to import 6.3 billion cubic meters of gas annually. Until 2011, Turkey did not adhere to these obligations and, as a result, it had to pay fines to the mining companies.

It should be noted that the technical operator of the Shah Denizproject is the British company BP. It fulfills its obligations: gas is produced and supplied to customers. There are no problems here. 

The problem is connected precisely in the part where the questions of commerce begin. SOCAR is the commercial operator of the Azerbaijan Gas Supply Company (AGSC), a structure created for the sale of gas from the gas field. This structure has even classified the information to the public to whom it sells gas under contracts. For this reason, they did not even inform the Azerbaijani public that in the first quarter of 2021, how much gas was supplied from Shah Deniz to the domestic market of Azerbaijan.

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