Azerbaijan's efforts as diverse energy supplier make it reliable investment destination

As global warming, climate change, and other natural phenomena have an inevitable impact on the economy, it is a hard and long-term process to restore it by switching to alternative means or diversifying the economy. In the past, when talking about the successes achieved by Azerbaijan in the oil and gas sector, different opinions were voiced about the country's economic development. Even some think tanks, which turned Azerbaijan's dependence on oil and gas into an argument, made various predictions about the future economic stability of the country.

However, as the saying goes, “time heals everything”. In a short time, the realities emerged, and Azerbaijan, which is considered the economic tiger in the South Caucasus, was able to fully assume its obligations in the face of the demands of the time and even became a leading force in the elimination of the energy crisis of the old continent - Europe.

But all this is not a complete description of the economic potential of Azerbaijan. In parallel with this, many successful projects launched by Azerbaijan in the field of green energy show that there are greater prospects for the near future.

Able to keep pace with the rapidly changing times, Azerbaijan also plays a leading role in gas supply. The main line of this role passes through the Southern Gas Corridor (SGC) project. As a member of the TAP team, the SGC project, which is considered extremely important in this regard, introduces a new energy resource to Europe, namely, Azerbaijani gas.

During his speech at the 10th Southern Gas Corridor Advisory Council Ministerial Meeting and the 2nd Green Energy Advisory Council Ministerial Meeting held in Baku last week with the participation of more than twenty countries, the President of Azerbaijan, Ilham Aliyev, emphasised the steps taken regarding the diversification of energy supply through the SGC project.

“Today's geopolitical situation in Eurasia proves exactly what we needed to do. In case of Azerbaijan, the Southern Gas Corridor is absolutely a new route, with now many extensions and interconnectors. The Azerbaijani gas is a new source. So here, in this format, and in the project, which we initiated, we see full implementation of energy diversification issues,” President Ilham Aliyev said.

It should be recalled that until last year, Azerbaijan was supplying gas only from the Shah Deniz 1, 2, and 3 projects, and now, in addition to this, the Absheron gas-condensate field in the Azerbaijani sector of the Caspian Sea plays a huge alternative role. Currently, as the head of state noted, the first phase of the Absheron project has been approved, and Azerbaijan plans to produce 1.5 billion cubic metres of gas from this phase alone. As for the second phase, after the agreement, an additional 4-5 billion cubic metres, most of which are also to be channelled to international markets, are expected to be produced.

More gas means more European countries

When Azerbaijan announced that it would increase gas exports to Europe starting in 2022, a number of forces in the West began to take a sceptical approach to this. In 2023, Azerbaijan almost kept its promise. Azerbaijan's gas production and exports started to rise immensely. According to the operational data presented for 2023, Azerbaijan produced 48.3 billion cubic metres of natural gas last year. 12.9 billion cubic metres of gas were produced by "Azeri-Chirag-Guneshli", 26.2 billion cubic metres by "Shah Deniz", 0.8 billion cubic metres by "Absheron", and 8.4 billion cubic metres by SOCAR. Compared to the corresponding period in 2022, gas was produced with an increase of 3.2 percent, i.e., 1.5 billion cubic metres.

In addition to increasing the volume of gas production, Azerbaijan also added several European countries, including Hungary and Serbia, to the supply list. Currently, Azerbaijan supplies gas to eight countries, six of which are European countries. But this still does not mean the final figure: “The interconnector projects have been inaugurated last year in Europe. Firstly, they were generated by the Southern Gas Corridor project. And secondly, they will allow us to continue our efforts in order to embrace as many destinations in Europe as possible,” the President said.

Thus, it is clear from here once again that while the demand for Azerbaijani gas is rising, the diversification of supply is also expanding. Available resources and transportation capabilities also make it possible to connect to the Trans-Balkan gas pipeline through neighbouring Turkiye and, alternatively, many other pipelines.

Rumours came to naught about Azerbaijan’s gas resources

For many years, rumours in the media about the limited capacity of Azerbaijan's gas made many people think with hesitation. After that, the black PR, which was not based on any accurate calculations and aimed only at alienating foreign investment, allegedly said that Azerbaijan's gas reserves would run out soon. Of course, such predictions based on no more than rumours are not always true. Most importantly, Azerbaijan was able to prove the exact opposite by drawing conclusions from its successful strategic policy and accurate economic calculations.

Although the Azeri-Chirag-Guneshli deep gas project has been used as the sole source of oil production in Azerbaijan for many years, this huge project has already increased Azerbaijan's hopes in the field of gas production. As already noted by the head of state at the event, gas production is expected from the Azeri-Chirag-Guneshli field in the first quarter of next year. Studies confirm that the existence of huge gas reserves in this field can play a role of additional support for Azerbaijan's gas supply. For example, as a start, it is expected to produce about half a billion gas from this field. In the next stage, it is planned to increase this volume by four and five times and add it to the Shah Deniz and Absheron fields as an alternative.

Large commitments always require alternative plans and reliable resources. During the event, President Ilham Aliyev also emphasized the importance of the Umid gas condensate field. In 2009, it was discovered that there are approximately 30-40 million condensate reserves in this old and huge gas field, which was financed by SOCAR. Back in 2010, President Ilham Aliyev noted that this field will pave the way for greater hopes for the future. In the second phase of the Umid gas condensate field, it is expected that about three billion cubic metres of condensate will be produced within four years.

In response to all the rumours, it should be noted that these numbers are precisely calculated numbers as mentioned by the head of state, and these projects are expected to be realised by both SOCAR and investors on the mentioned dates.

The seriousness of all these calculations and given figures also strengthens investors' confidence in Azerbaijan.

“Azerbaijan, I think, already proved to be a reliable partner. Our word means the same as our signature. All the plans, which we've put in front of ourselves, I'm sure, will be implemented because only the performance of the last year demonstrates that.”

In the meantime, one of the most important points is that the Abu Dhabi National Oil Company (ADNOC), one of the giants of the United Arab Emirates, is a shareholder in the Absheron project of Azerbaijan. This is a clear example of Azerbaijan being a reliable partner and investment place in the eyes of not only Europe, which is energy dependent, but also the world’s giant oil producers.

Smooth transition from fossil fuel to green energy

Given the geopolitical and geostrategic situations, having a serious influence politically and economically in the South Caucasus region is not as simple as it can be expressed in words. Azerbaijan's transformation into an economic driver in the region is not only due to its unparalleled wealth, such as oil and gas. Here, a successful strategy and timely measures are extremely important.

Azerbaijan is able to take steps in accordance with the requirements of the time, which demonstrates that the country's economy is not based only on fossil fuels. At a time when the world is transitioning to green energy due to the global change in climate, Azerbaijan became one of the pioneers in this field, and thanks to its successful policy, it presented great results to the world in a short period of time.

It is no coincidence that this year Azerbaijan took on the mission of hosting the COP-29, known as a global climate event. Also, this year has been announced and declared the "Green World Solidarity Year" in Azerbaijan.

So, along with such initiatives, Azerbaijan also demonstrates its potential for renewable projects. In this regard, the opening of the first large solar power plant with a capacity of 230 megawatts built by MASDAR, one of Abu Dhabi's leading companies, in October of last year promises serious outputs for Azerbaijan in the next six years. As the head of state noted in his speech, this is only the beginning. According to the signed agreements and memoranda, Azerbaijan plans to produce 5,000 megawatts, or up to 5 gigawatts, of solar and wind energy by 2030.

In this field, Azerbaijan is taking serious steps towards the further expansion of the green energy project by cooperating with MASDAR of the UAE, ACWA of Saudi Arabia, and a number of other companies. Azerbaijan has renewable energy resources both on land and in the sea. For this reason, the Caspian Sea can be considered an important and huge resource as another driving force for these projects.

In addition, Azerbaijan's expansion of projects in the field of green energy can contribute to the Southern Gas Corridor project as an alternative. The energy that will be transmitted from the Caspian Sea to the Black Sea and from there to Europe under deep waters is literally a miracle in the field of energy supply.

Thus, this year, Azerbaijan opens a long and promising path towards green energy by hosting COP29. When Azerbaijan took this initiative in December of last year, some forces approached it with hesitation. Because those forces still thought that since most of Azerbaijan's economy depends on resources like oil and gas, it cannot take successful steps in the field of renewable energy. However, the mentioned figures and studies have eliminated all stereotypes, and today Azerbaijan is the most successful implementer of green energy projects, even the alternative energy provider of the countries on the old continent.