Azerbaijan’s gas sales strategy at a crossroads

Supplies of gas to Turkey from the first phase of the Shah Deniz project in Azerbaijan were halted on 17 April. A 6.6 bcm/year sales contract expired, without the two sides reaching agreement on extending it. The context is a push by Botas of Turkey to increase imports of spot LNG and reduce dependence on pipeline gas delivered under long term contracts. This Comment considers the implications for Azeri gas production. While Turkish market conditions are changing, the costs of delivery to Europe are high, and prices in the domestic market low. All these factors may further frustrate timely exploration and development in the Caspian. This in turn could undermine prospects for expanding the Southern Gas Corridor to Europe in this decade.

By: Simon Pirani