June 26, 2012 / 5:46 PM / 8 years ago

UPDATE 1-Turkey, Azerbaijan sign accord on $7 bln gas pipeline

ISTANBUL, June 26 (Reuters) - Turkey and Azerbaijan signed an inter-governmental agreement on Tuesday on the $7 billion Trans-Anatolian natural gas pipeline project (TANAP), planned to carry Azeri natural gas across Turkey to Europe.

Turkish Prime Minister Tayyip Erdogan and Azeri President Ilham Aliyev signed the deal at an Istanbul ceremony to launch a project, set to be completed in six years, to pipe 16 billion cubic metres of gas a year from Azerbaijan’s Shah Deniz II field.

“Today’s signing is the most important step in completing the legal framework for this project,” Erdogan said in a speech at a signing ceremony. “This project won’t just deepen ties between our countries, it will create an organic tie between Azerbaijan and Europe via Turkey.”

Turkey has a 20 percent stake in TANAP, while Azerbaijan’s state oil company SOCAR holds 80 percent. In March, a Turkish Energy Ministry official said Turkey may raise its 20 percent stake in the project.

Construction is expected to start at the end of 2013 or in early 2014, and the project’s first phase is seen ready in 2018.

Under the project, some 10 bcm of gas is planned to be shipped to Europe, while Turkey will get the remaining 6 bcm. The project is designed to be expandable to 30 bcm and ultimately 60 bcm.

Erdogan said the link will initially carry fuel from Shah Deniz II, then from other Azeri sources.

“Additionally, gas from the other side of the Caspian could be directed to the TANAP pipe, transiting via Azerbaijan,” Erdogan said.

Analysts have said TANAP could undermine efforts to bring online the 7.9 billion euro Nabucco pipeline project, which aims to ship 31 bcm a year of Caspian and Middle Eastern gas to Europe.

Turkish officials have said Turkey will continue to be a part of Nabucco.

Austrian energy group OMV is counting on a shorter version of the Nabucco pipeline to win the business of carrying gas to Europe from Azerbaijan, Chief Executive Gerhard Roiss told Reuters earlier this month. (Reporting by Evren Ballim; writing by Daren Butler and Ayla Jean Yackley; editing by Keiron Henderson)

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