Economic expert: Azerbaijan may consider possibility of exporting its gas to China

Day.Az: Azerbaijan launched gas supplies to Russia on Jan. 1, 2010. To what extent Azerbaijan can increase volume of gas supplied to Russia?

Azerbaijan will supply to Russia one billion cubic meters of gas this year. Medium-term contract for sale of Azerbaijani gas to Russia signed between SOCAR and Gazprom last autumn suggests that Azerbaijan will annually supply to Russia at least 500 million cubic meters of fuel.

Initially, after the signing of the contract it was expected to export exactly this volume, but as a result of negotiations and modernization of the pipeline, the volume declared for 2010 amounted to one billion cubic meters. The contract between SOCAR and Gazprom does not restrict the upper limit of supply. It all depends on demand for gas and its availability.

Can increase in Azerbaijan’s gas supply to Russia influence the Nabucco project?

The project Nabucco, which is actively lobbied by the European Union, is in no way connected with export volumes of Azerbaijani gas to Russia. This project has very different volumes, tasks, and Nabucco could be filled not only by Azerbaijani, but also Turkmen and other gases.

The main focus of the project Nabucco is also gas from Central Asia and the Middle East. In order to attract volumes of gas to the pipeline, one of the participants in the project, the German RWE said that the tariff for transporting gas through Nabucco will be lower, from 41 to 73 percent, compared with similar rates of other projects included in the "Southern Corridor".

RWE considers that assessment rates for the transportation of thousands of cubic meters of gas through the Nabucco pipeline for every 100 kilometers will be 1.7 euro, and the cost of shipping thousands of cubic meters of gas, for example, from the wellhead of the Azerbaijani gas field Shah Deniz to the world market for Nabucco was 77 euros.

In what new directions Azerbaijan can export its gas in 2010?

Besides Russia and Iran, this year Azerbaijan will continue to supply gas to Georgia and Turkey under previously signed contracts. Deliveries of gas from the Shah Deniz field  will be implemented through the South Caucasus gas pipeline as before.  

A few weeks ago, Azerbaijan and Iran signed a gas contract on supply Azerbaijani gas to the northern regions of Iran in winter. Do you think long-term cooperation between the countries in the gas sector is possible?

I think the long-term gas cooperation with Iran is possible. There are volumes of Azerbaijani gas, there is an infrastructure, there is a demand for fuel in Iran.

Modernization of gas infrastructure that exists between Azerbaijan and Iran will increase the capacity of transportation in a few times so that to supply about 1.8 billion cubic meters of Azerbaijani gas to Iran per year.

Iran has repeatedly declared that it intends to purchase up to five billion cubic meters of gas from Azerbaijan per year. Demand for gas in Iran is growing every year. For example, in 2008 gas consumption in this country totalled over 117 billion cubic meters or nearly four per cent higher than the same indicator in 2007.

According to SOCAR President Rovnag Abdullayev, Azerbaijan in future can connect to the project in Kazakhstan which provides for the supply of gas to China. Do you believe this is possible in 2010?

Over the past year and a half, Azerbaijan has received a lot of interesting proposals on supply of gas. One of these was Kazakhstan’s proposal to participate in exporting gas to China via "Kazakhstan-China" pipeline which is part of a system to transport gas from fields in Turkmenistan via Uzbekistan and Kazakhstan to China.

This proposal looks interesting, given the scale of the Chinese market and forecasts for gas demand in this country. Azerbaijan may consider the possibility of exporting its gas to China once there are effective proposals from the PRC on the price and volume of fuel. Thus, one can expect interesting business proposals from China and transit tariffs from Kazakhstan.

Azerbaijani gas exports to China can be carried out under "swap" terms. That is, Kazakhstan can export any gas to China for Azerbaijan in exchange for some amount of gas for Europe. It is also possible to build an underwater pipeline in the Caspian Sea, taking into account also the great experience of Azerbaijan on laying of submarine pipelines.

Demand for gas in China began to increase sharply since mid-1990s. In 1995, gas consumption in China was 17.7 billion cubic meters. Demand for gas in the country exceeded 80 billion cubic meters at the beginning of 2009.

According to forecasts of many international experts, demand for gas in China will continue to grow. It is assumed that in 2010 the demand for gas will increase to 150 billion cubic meters by 2020 - up to 280 billion cubic meters as a result of economic growth and industrial development.

N. Abdullayeva