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    Total, Socar Settles Price Dispute at Azeri Field


The French major had wanted to charge Azerbaijan more for gas from the field.

by: Dalga Khatinoglu, Ilham Shaban

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Total, Socar Settles Price Dispute at Azeri Field

France’s Total has settled “disputes” with Azerbaijan’s Socar over gas pricing at the Absheron field in the Caspian Sea and expansion of the project, a government source told NGW on December 10.

Total’s vice president Arnaud Breuillac recently met with Socar officials in Baku to discuss the project, which aims to recover 350bn m3 of gas.

The pair operate Absheron through a 50:50 joint venture, completing their first production well earlier this year. The well should flow 1.7bn m3 of gas and 700,000 mt of condensate annually, but is not expected on stream until 2021 – a year later than scheduled.

The partners have agreed that all gas from this initial phase of development will be sold in Azerbaijan, helping the country overcome a domestic supply squeeze. Azerbaijan agreed to pay more for Absheron’s gas than for supplies from the BP-led Shah Deniz project, the source said. Total then insisted that the price should be raised even more.

Azerbaijan, having already compromised with Total by allowing the French major to place a platform outside the Absheron contract area in shallow waters, refused to grant an additional price hike, according to the source.

“However, the sides reach some significant agreements,” the source told NGW. “The gas price remained unchanged but about 50bn m3 of the field’s reserves would be sold domestically and 300bn m3 in Turkey and EU markets.”

Total needs to submit documents in 2021 for Absheron’s second stage of development, which will add an extra 3.5bn m3 of annual production.

“Phase 2 gas is totally export-oriented, expected to flow to the Southern Gas Corridor (SGC) extension phase in the mid-2020s to be sold to Turkey and EU markets for 25 years,” the source said.

SGC is designed to pump 16bn m3/yr of gas to Turkey and EU starting next year from Azerbaijan’s Shah Deniz Stage 2 project. But its capacity could be doubled under a potential expansion.

Total and Socar has also made arrangements for the sale of condensate and oil from Absheron.

“Socar would receive all of the gas condensate and deliver crude oil instead to Total in Turkey’s Ceyhan port, based on a specific formula, which considers transit costs,” the source said.

Absheron holds 45mn mt of condensate.