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. Last Updated: 07/27/2016

Azerbaijan, Georgia Sign Gas Pipeline Agreement

BAKU, Azerbaijan -- Azerbaijan and Georgia signed an agreement Saturday on the transit, transport and sale of natural gas, paving the way for a pipeline project from a giant Azeri BP-led offshore field to Turkey.

Azeri President Heidar Aliyev and Georgian President Eduard Shevardnadze signed the agreement, which agrees terms to transport gas from Azerbaijan through Georgia, in the Azeri capital, Baku.

"Transport of petroleum products to Turkey through oil and gas pipelines in this region has political significance. First of all, through them comes further integration between the West and East, and second, this is a firm guarantee of security and stability in our region," Aliyev said.

Construction on the $1 billion pipeline was originally scheduled for late 2001, but has been pushed back to mid-2002 Georgian officials say. When complete, it could ship 7.2 billion cubic meters of gas annually.

Aliyev said the first delivery of gas is expected to take place in 2004 from Azerbaijan's giant offshore Shakh Deniz field, estimated to contain 1 trillion cubic meters of natural gas.

BP and Norway's Statoil jointly own 51 percent of the Shakh Deniz gas field and are its operators.

Georgia will be paid $2.50 per 1,000 cubic meters of gas shipped through the Georgian section of pipeline in its first years of operation, said Natik Aliyev, president of Azerbaijan's state oil company. The tariff will increase to $5 gradually over the next 20 years. Georgia had hoped to be paid $5 to $10, while investors offered just $2 for the first five years.

Georgia can receive part of the payment in gas, but not exceeding 5 percent of the pipeline's annual output, the oil company president said.

From 2004, Georgia also plans to buy additional gas of up to 500 million cubic meters a year from Azerbaijan at an average price of $55 per 1,000 cubic meters.

(Reuters, AP)