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UPDATE 2-Azerbaijan says not given anyone priority for gas

Fri Jul 10, 2009 10:11am EDT

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* Azerbaijan says not given one country preference for gas

* Socar says supports Nabucco pipeline politically

* Turkey expects 60 pct of total pipeline tax revenues

(Adds details on 15 pct "net back", investments, revenue)

By Ayla Jean Yackley

ISTANBUL, July 10 (Reuters) - Azerbaijan has not given priority to one country for gas from its Shakh Deniz fields and supports the EU-backed Nabucco pipeline project, the president of the Azeri state-owned oil firm Socar said on Friday.

The comments cast doubt over a statement made by the head of Russia's state-run gas giant Gazprom (GAZP.MM) last month when he said Azerbaijan had promised Russia priority in buying gas from the second phase of the Shakh-Deniz deposit.

"We haven't given priority to any single direction, whether it's Russia or Nabucco. We have given political support to Nabucco, we are supporters of Nabucco and give it importance, but we have to look at the conditions," Socar's Rovnag Abdullayev told reporters at a news conference in Istanbul.

Both Russia's South Stream natural-gas pipeline project and the rival Nabucco have looked to Azeri gas supplies for throughput. Abdullyev said Azerbaijan will look at the feasibility, including prices, of both routes and other planned outlets for its fuel, including Iran.

Turkish Energy Minister Taner Yildiz told the same news conference that Ankara was still negotiating with the Nabucco consortium over the price of gas it wants to keep from the link.

Turkey, which has little hydrocarbon reserves of its own, wants a 15 percent "net back" of the planned pipeline's volume.

"On the 15 percent issue, the companies have guaranteed part of supply security, but we have not agreed on the price. We have presented our conditions, this a negotiating process," he said.

The problem looks as though it will continue to linger beyond a July 13 signing of an intergovernmental transit deal in Ankara between Nabucco's partners -- Austria's OMV (OMVV.VI), Bulgaria's Bulgargaz, Turkey's Botas, Germany's RWE (RWEG.DE), Hungary's MOL MOLB.BU and Romania's Transgaz TGNM.BX.

ENERGY HUB

The 7.9 billion euro Nabucco still faces uncertainty over financing and where it will procure enough gas to fill its 31 billion cubic metre (bcm) capacity.

Nabucco has EU and U.S. support as a way to reduce Europe's reliance on gas from Russia, which meets 25 percent of its needs. Russia has reduced flows to Europe in the past over pricing or political disputes with transit countries.

Turkey, the only non-EU country in the consortium, sees Nabucco as central to its efforts to become a hub between the energy-rich East and Western markets and vital to the EU's energy-security strategy, improving its bid to join the bloc.

Nabucco has said Azeri supplies could fill the link in its initial phase when it opens in 2014. Partners are also seeking gas from Iraq, Iran, Turkmenistan, Egypt, Algeria and Russia.

The pipeline will cross Turkey's southern and eastern borders at three points, said a Turkish official in Ankara who declined to be identified.

Turkey expects to attract 4.5 billion euros in investment during construction of the pipeline and create between 5,000 and 15,000 jobs, a Foreign Ministry official told Reuters in Ankara.

The country may also retain 60 percent, or up to 450 million euros annually, in tax revenue from the pipeline, depending on volumes, the official also said on condition of anonymity. Each country's tax revenue will be calculated based on how much of the pipeline traverses its territory, according to the agreement that will be signed next week.

Yildiz said 2,000 km (1,240 miles) of the 3,300-km pipeline will cross through Turkey.

Separately, Abdullayev said he believed Turkey and Azerbaijan would not go to international arbitration over disputed gas prices between the two countries, and Yildiz said he hope the two sides would reach an agreement on Friday.

Turkey and Azeribaijan have been negotiating the price the former pays for Azeri fuel. Yildiz said the talks are on 6 bcm from Shah Deniz I and 8 bcm from Shah Deniz II, the second phase of the Caspian Sea fields. (Additional reporting by Melis Senerdem, Zerin Elci and Orhan Coskun; editing by Philippa Fletcher)



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