Azerbaijan and Georgia reach agreement on Shah-Deniz pipeline

A representative of the Georgian International Oil Corporation (GIOC) told on August 20 that Georgia and Azerbaijan had been able to reach agreement on the construction of a pipeline for gas from the Shah-Deniz deposit. A deal was struck in Baku during talks between Azerbaijani government officials and a Georgian delegation headed by Foreign Minister Irakli Mengarishvili, the GIOC representative said. The GIOC representative told that the two sides would meet again in September to iron out the details.
He was speaking several days after Menagarishvili told that the deal could be signed as soon as Georgian President Eduard Shevardnadze was ready to do so. All relevant documents have been prepared, and the president is committed to paying a visit to Azerbaijan within the next few days for the signing, the Georgian foreign minister said. Shevardnadze had said on August 6 that he expected to visit Baku before the end of the month to finalize the accord on gas shipments and transits.

Tbilisi indicated last month that all obstacles to the accord had dissolved after the two sides reached an agreement on transit fees for shipments of natural gas from Shah-Deniz, an offshore field in Azerbaijan's sector of the Caspian Sea. Giorgi Chanturia, president of the GIOC, said in July that Baku had settled the dispute by agreeing to forego its share of transit fees. Azerbaijan will allow Georgia to collect its portion of the tariff, Chanturia said, noting that similar arrangements had been made for the planned Baku-Ceyhan oil line.
Optimism flagged, however, when Shevardnadze decided not to travel to Baku on July 27 for the signing as initially planned. The Georgian president cited domestic concerns -- including as the murder of Giorgi Sanaia, a popular journalist -- as the reason for his decision to remain home. However, some sources speculated that Shevardnadze had other reasons for cancelling and alleged that Tbilisi and Baku had once again fallen into a disagreement over the gas transit deal.

The cost of constructing the Shah-Deniz gas pipeline is expected to reach about $ 1 bn. The conduit will follow a 1,000 km route from Baku to Erzurum, following the path of the Baku-Ceyhan oil pipeline; BP-Amoco and Statoil, the operators of the Shah-Deniz field, have already begun working with Azerbaijan's national gas monopoly Azerigaz to conduct an engineering study for the project.
When finished, the pipe will be able to carry an initial 2 bn cmpy of gas, with throughput eventually rising to 16 bn cmpy. Officials in Tbilisi have said they hope some of the gas flowing through the pipeline will be delivered to Georgia for local use.