Growing interest in Azerbaijani gas in Europe
The European Union is interested in transporting Azerbaijani gas through Russian pipelines via Ukraine. EU and European government officials are negotiating with Ukrainian counterparts to extend the agreement on Russian gas transit to member countries through Ukraine until 2025, Bloomberg reports.
Interest in Azerbaijani gas continues to grow, as evidenced by recent deals with Hungary and plans for cooperation with Uzbekistan. Hungary's state-owned energy company MVM has acquired a 5% stake in the production sharing agreement for the offshore Shah Deniz gas condensate field from the Azerbaijani company Southern Gas Corridor CJSC (SGC). Additionally, the Hungarian company has acquired another 4% stake in Azerbaijan Gas Supply Company Limited, which is involved in the sale of natural gas from Shah Deniz.Azerbaijan and Uzbekistan plan to jointly extract and export gas. The parties are negotiating an agreement under which the state company Uzbekneftegaz will join the Shah Deniz project being implemented by Azerbaijan's SOCAR. These negotiations are taking place as Uzbek authorities are concerned about declining gas production volumes in the country. According to official data, Uzbekistan's gas production volume decreased by 5 billion cubic meters in 2023 compared to 2022, a 10% drop. Energy Minister Jurabek Mirzamakhmudov noted that this is due to the depletion of existing fields and technological losses, most of which are attributed to Uzbekneftegaz.
Uzbekistan's Minister of Investment, Industry, and Trade Laziz Kudratov reported that discussions on Uzbekneftegaz's involvement in gas extraction projects in Azerbaijan are in their final stages. This involves a stake in the Shah Deniz project. Tashkent hopes that the agreement with Baku will be signed during Azerbaijani President Ilham Aliyev's upcoming state visit to Uzbekistan.
Germany is also showing significant interest in Azerbaijani gas. Michael Hilmer, Vice President of the German company Uniper, stated that despite the transition to green energy, Germany remains focused on natural gas supply issues. "After many European countries, including Germany, abandoned Russian gas, an energy crisis arose on the continent, and prices increased sevenfold. Therefore, there is a huge demand for Azerbaijani natural gas in Europe. In 2013, our company signed an agreement with SOCAR to purchase gas from the Shah Deniz field in the Azerbaijani sector of the Caspian Sea. There remains a huge demand for natural gas in German households. With the contract signed with SOCAR, we are diversifying our gas imports," he noted.
Azerbaijan, rich in oil and gas resources, has expanded its "blue fuel" exports to Europe in recent years. Experts note that the country "makes a significant contribution to Europe's energy security" and "is redrawing the energy map of Eurasia." Europe, experiencing a "gas crisis" due to the war in Ukraine, is seeking ways to diversify its energy resources. This, in turn, has increased interest in Azerbaijan among stakeholders of the Southern Gas Corridor. The total length of all parts of the SGC will be 3,500 km from Baku to southern Italy via Georgia, Turkey, Greece, and Albania.
On July 18, 2022, a Memorandum of Understanding was signed between Azerbaijan and the European Union on a strategic partnership in energy. Initially, Azerbaijan supplied natural gas only to Georgia and Turkey. Currently, Azerbaijan has contracts to supply gas to seven countries, five of which are European. At present, about 50% of Azerbaijan's foreign gas supplies go to European countries.
EU leaders regard Azerbaijan as a reliable partner and a "pan-European" gas supplier. Currently, Azerbaijan has contracts to supply gas to Italy, Greece, Bulgaria, Romania, and Hungary. Additionally, there is a group of countries that want to buy gas from Azerbaijan: Serbia, Albania, Bosnia and Herzegovina, Montenegro, Croatia, Slovakia, and North Macedonia.
Azerbaijan increased its natural gas exports to Europe from 8 billion cubic meters in 2021 to 11.8 billion cubic meters in 2023. According to the memorandum with the EU, Baku should increase natural gas supplies to Europe to 20 billion cubic meters by 2027.
In 2023, Azerbaijan ranked among the leading gas suppliers to Europe and Turkey. According to a report by Turkey's Energy Market Regulatory Authority (EPDK), Azerbaijan was in the top three gas suppliers to Turkey, selling 10.257 billion cubic meters of gas, which accounts for 20.32% of all gas received by Turkey from all suppliers.
According to the EPDK, the volume of gas supplied from Azerbaijan to Turkey in 2023 exceeded the 2022 figure by 17.8%. This indicates a significant increase in supplies and the strengthening of Azerbaijan's position in the Turkish gas market.
Despite the high level of supplies from Azerbaijan, Russia became the leader in gas supplies to Turkey last year, accounting for 42.27% of the total volume of gas purchased by Turkey. Algeria ranked second with an 11.86% share, while other suppliers include Iran, Qatar, and other countries.
Azerbaijan's successes in the gas supply market highlight its important role in ensuring the energy security of the region and Europe as a whole. The increase in supply volumes and stable cooperation with Turkey and other countries demonstrate Azerbaijan's potential as a key player in the energy market.
Azerbaijan continues to strengthen its position in the global energy market, confirming its significance as a reliable gas supplier for Europe and other regions. Cooperation with various countries and growing gas exports indicate the country's significant potential and its important role in ensuring global energy security.
(If you possess specialized knowledge and wish to contribute, please reach out to us at opinions@news.az).
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