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Wednesday, December 14, 2005

Gazprom to sign deal with Azerbaijan to sell gas at market price

MOSCOW, December 14 (RIA Novosti) - Gazprom plans to sign a contract with Azerbaijan in the near future to supply Russian natural gas to the former Soviet country at "European" price levels, the company said Wednesday.The company said that an agreement on the change was reached at a meeting Wednesday between Gazprom Chief Executive Alexei Miller and Azerbaijan's first deputy prime minister, Yagub Eyubov."During the talks, the terms for supplies of Russian gas to Azerbaijan in 2006 were discussed. The two sides agreed to switch to European price levels, taking into account transportation expenses, and to specify the volume of natural gas to be supplied in 2006," Gazprom said in a statement.Domestic demand for gas in Azerbaijan totals 9.5-10 billion cubic meters per year, with gas accounting for 45% of the country's fuel mix. The country's domestic gas production is around 5.5 billion cu m per year. Gazprom supplies Azerbaijan with 4.5 bln cu m of gas per year under a five-year contract with the country's state-owned oil firm Socar. That contract expires at the end of 2008.The move to switch to "international" gas prices is the latest in a series of attempts by Gazprom to increase revenues from its exports to CIS countries. The company is locked in an ongoing gas price dispute with Ukraine. Deputy Chairman Alexander Ryazanov said earlier Wednesday that Gazprom planned to increase gas prices to Ukraine to $220-$230 per 1,000 cu m. He said in November that a hike for the Baltic states would be around 50%, to $120-$125 per 1,000 cu m, in 2006. Ryazanov also said that exports to Georgia and Armenia would be charged at $110 per 1,000 cu m, while prices to Moldova would rise to $150-$160 per 1,000 cu m.

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