Gazprom to buy 0.5 bcm of Azerbaijani gas annually from 2010

BAKU, June 29 (RIA Novosti) - Gazprom will buy 500 million cubic meters of natural gas from Azerbaijan annually from January 1, 2010, CEO Alexei Miller said on Monday.

The Russian energy giant, which has not so far bought Azerbaijani gas, signed an agreement with the State Oil Company of Azerbaijan Republic (SOCAR) earlier in the day.

"Gazprom will buy Azerbaijani gas from January 1, 2010. Initially we will buy 500 million cubic meters of Azerbaijani gas," Miller said, without disclosing either the price or the pricing formula.

"The agreement signed today fixes a basic price that is commercially attractive to our Azerbaijani partners," the Russian businessman said.

The agreed volume of deliveries from SOCAR is less than one tenth of one percent of the 549.7 billion cubic meters of gas Gazprom itself produced last year.

Azerbaijan plans eventually to increase gas supplies to Russia, Azerbaijani President Ilham Aliyev said.

"We plan in the future to increase supplies as the volume of Azerbaijani natural gas production goes up," Aliyev said on Monday after talks with Russian President Dmitry Medvedev in Baku.

According to the Gazprom CEO, Azerbaijani gas to be pumped via a pipeline running between the two countries will be used in south Russian territories. He also pledged that similar volumes of gas would be reserved for European consumers.

Miller added that Gazprom was listed as a potential buyer of gas from the Shakh Deniz field with some privileges reserved for the company.

"We are confident that Gazprom has very good negotiating positions regarding long-term cooperation in the purchase of Azerbaijani gas," he said.

Speaking in early June at an oil conference in Azerbaijan's capital, Baku, U.S. Deputy Assistant Secretary of State for European Affairs Matthew Bryza said that in 2012-2015 Azerbaijan would supply Europe with 12 billion cu m of gas from its Shakh Deniz field alone, raising supplies to 15 billion by 2015, and increasing them further by 2015-2020.