Russian giant to double gas imports from Azerbaijan

Gazprom of Russia clinched a deal today to double supplies from Azerbaijan in a bid to expand its control over gas produced by former Soviet republics and to undermine the European Union’s plans for an alternative gas pipeline.

Gazprom and the State Oil and Gas Company of Azerbaijan signed an agreement to boost Azerbaijan’s gas supplies to Russia to two million cubic metres next year, Gazprom said in a statement.

The Azeri company also committed to sell more than two million cubic metres of gas in 2012, Gazprom said. This will be four times as much as the amount Russia contracted in the first big gas deal with Azerbaijan in June last year.

The deal was signed after talks between Azeri President Ilham Aliyev and Russian President Dmitry Medvedev in Azerbaijan.

Mr Aliyev said Azerbaijan was hoping to further boost energy supplies to Gazprom. He said Azerbaijan’s known reserves amount to two billion cubic metres.

“We have enough gas for generations ahead,” he said.

The European Union was planning to use Azerbaijan’s vast energy resources as a key source of gas for a major pipeline project, Nabucco, to bring Caspian and Central Asian gas to Europe, bypassing Russia.

Moscow, meanwhile, has been lobbying for a pipeline via Russia named South Stream, which would tunnel under the Black Sea to reach southern Europe.

Today’s deal casts fresh doubts over Nabucco’s ability to get enough gas to make it worthwhile.

A Russian expert said the deal means a death sentence to Nabucco.

“Without Azeri gas Nabucco will not exist,” Konstantin Simonov, of the Moscow-based Fund of the National Energy Security, told RIA Novosti news agency.

Russia has been anxious to control gas flows from former Soviet neighbours in order to have flexibility in pricing its own gas exports.

Gazprom has been buying most of Turkmenistan’s gas in an effort to stop it becoming an independent exporter. But Turkmenistan has been steadily raising the prices, making these gas imports increasingly unprofitable.

China also made a dramatic entry into the competition for Central Asian gas last year, when a new pipeline joining Turkmenistan and China began operating in December.

Mr Medvedev today brushed off the accusations that Russia is trying to corner regional energy supply and deprive Nabucco of an important source of gas.

“We cannot and must not hamper other projects,” he said, quoted by RIA Novosti.

Mr Aliyev added that his country “has never viewed its activities in the gas industry as unfair competition”.