UPDATE 2-Turkey and Azerbaijan sign MOU on natural gas

Mon Jun 7, 2010 7:23pm IST

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* Agreement opens way for Azeri exports to Europe

* Nabucco one step closer to securing gas

* Azerbaijan says plans to export 10 bcm gas to Europe

(Releads, adds details)

By Simon Cameron-Moore and Evrim Ergin

ISTANBUL, June 7 (Reuters) - Turkey and Azerbaijan signed on Monday a memorandum of understanding on natural gas, opening the way for Azeri gas exports to Europe and putting the EU-backed Nabucco pipeline one step closer to securing supplies.

The deal also gives Turkey the right to re-export natural gas from the second phase of production at Azerbaijan's offshore Shah Deniz gas field, boosting the EU candidate's role as an energy hub for European energy supplies.

Socar President Rovnag Abdullayev said Azerbaijan planned to send 10 billion cubic metres of gas from Shah Deniz II to Europe.

"This opens the way for the securing of supplies for projects like Nabucco, ITGI and TAP," said Turkish Energy Minister Taner Yildiz.

Like the 7.9 billion euro ($9.43 billion) Nabucco, pipelines like the Italy-Turkey-Greece Interconnector (ITGI) and the Trans-Adriatic Pipeline (TAP) also aim to bring Azeri gas into Europe.

Turkey and Azerbaijan have been negotiating since 2008 over the gas agreement, delaying the start date for the Shah Deniz second phase and boosting uncertainty around the availability of Azeri gas for Europe.

The 31 billion cubic metre capacity Nabucco project has yet to secure any gas supplies, leaving it vulnerable to Russia's rival South Stream project, which also plans to feed European markets.

Agreement over the cost to transit Azeri gas over Turkish territory would allow Nabucco shareholders to start negotiations with Baku over supplies for Nabucco, conceived to cut Europe's dependence on Russian gas.

Despite a current European gas glut, demand is expected to rise again around 2015.

Doubt was cast over the significance of Monday's signing last week when an Azeri official told reporters that while a deal was expected to be signed between the two countries, more detailed commercial and export details would be worked out over the next 6-8 months.

Negotiations had been complicated by political tensions over a bid by Turkey and Christian Armenia -- Azerbaijan's enemy in the conflict over rebel Nagorno-Karabakh -- to end a century of hostilities and mend ties. The rapprochement collapsed in April.

Besides Turkey's Botas, other Nabucco shareholders include Austria's OMV (OMVV.VI), Hungary's MOL (MOLB.BU), Germany's RWE (RWEG.DE), Bulgaria's Bulgargaz and Romania's Transgaz TGNM.BX. (Writing by Thomas Grove; editing by James Jukwey)

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