Gazprom plans to double the amount of gas that it buys from Azerbaijan in 2011, securing control over a larger share of Caspian resources amid growing competition from European buyers.
Gazprom said Thursday that it planned to buy 2 billion cubic meters of gas from Azeri state energy firm Socar in 2011. Deliveries this year will double to 1 bcm from the 500 million cubic meters initially agreed.
Chief executive Alexei Miller also said Gazprom was prepared to buy "as much gas as Socar can supply," reiterating a pledge first made publicly on Jan. 11.
"It's a long-term strategy to ensure that supplies reach Europe via Russia, not via any alternative pipelines," Eurasia Group analyst Ana Jelenkovic said.
Azerbaijan expects a significant increase in gas production when it launches the second phase of its Shakh Deniz project in the Caspian Sea. Europe wants to tap these resources to cut reliance on Russia, which supplies a quarter of its gas.
Azerbaijan has several options for selling the gas. It could become a key supplier to the Western-backed Nabucco pipeline, which would bypass Russia, but could also sell its gas via other routes to Europe, as well as Russia, Georgia or Iran.
"Ultimately, it is in Baku's interest not to have the bulk of its gas supplies move via Russia," Jelenkovic said. "But they are not going to shut doors on Russia at this point."
Azerbaijan plans to export more than 8 billion cubic meters of gas this year, meaning about one-eighth will be sold to Russia. Azerbaijan plans to produce 27.2 bcm of gas in 2010, Socar chief executive Rovnag Abdullayev has said.
The latest agreement to double 2011 imports was achieved during a meeting between Abdullayev and Gazprom chief executive Alexei Miller.
The gas is likely to come from the first stage of Shakh Deniz, a project co-managed by BP and StatoilHydro. The lucrative second phase of the project is not due to come on stream until later in the decade.
When it does, Azerbaijan could potentially have a further 16 bcm of gas per year to supply to the market. Socar is also a partner in Shakh Deniz, as well as LUKoil, France's Total and Iranian and Turkish state firms.
Gazprom quoted Miller in the statement as saying there were no upper limits to the amount of gas that Russia could buy from Azerbaijan. "He confirmed Gazprom's readiness to buy as much gas as Socar can supply," the company said.