Nations aim to hammer out Azeri gas deal

By Guy Dinmore in Rome and Isabel Gorst in Moscow

Published: November 27 2008 22:55 | Last updated: November 27 2008 22:55

The governments of Italy, Greece, Turkey and Azerbaijan will meet in the coming weeks to try to hammer out an agreement on the export of Azeri gas to Europe via a planned pipeline across the Adriatic, official and industry sources said in Rome on Thursday.

Ilham Aliyev, president of Azerbaijan, met Silvio Berlusconi, Italian prime minister, in Rome following talks in Milan with Umberto Quadrino, chief executive of Edison, an Italian-French utility.

Edison is seeking final approval from all four governments on the supply of 8bn cubic metres of gas a year from Azerbaijan. Pipelines already exist to take the gas through Turkey and Greece and Edison intends to construct the missing link, known as ITGI, between Greece and Italy.

Edison quoted Mr Aliyev as saying that he considered the project as the “most realistic” of various proposed ventures, a reference to the Nabucco consortium that would take up to 31bn cubic metres of Caspian gas a year via Turkey, Bulgaria, Romania and Hungary to a hub in Austria.

Mr Aliyev is also being courted by Russia’s Gazprom to sell Azerbaijan’s surplus gas to Russia. Washington is pressing him to look towards Europe instead.

Turkey is cited by analysts in all four countries involved as being the main stumbling block to an accord, despite a recent visit by Mr Berlusconi. Turkey wants the option to increase the amount of gas it consumes from Azerbaijan to make up for expiring Russian contracts, and is asking for special transit terms.

The EU, keen to diversify its sources of gas away from Russia, says Turkey has no right to demand special transit terms.

Industry sources said the four governments would meet at a senior level, possibly prime ministers, in Turkey. An Italian government source said the level and venue were to be decided.

Mr Berlusconi, who wants to maintain Italy’s close business relationship with Russia, says the ITGI project is “complementary and not alternative to others”. Eni, the part state-owned Italian energy company, has a joint venture with Russia’s Gazprom to build a deep sea pipeline to take Russian gas across the Black Sea to Europe.

The original ITGI plan assigned 8bn cubic metres of gas a year to Italy and 1.5bn each for Turkey and Greece. The Azeri gas is intended to come from the second phase of the Shah Deniz field.

Copyright The Financial Times Limited 2008