Expert upbeat about Azerbaijan’s energy potential amid upcoming Baku Energy Forum

Azernews' exclusive interview with leading energy expert Ilham Shaban on the upcoming Baku Energy Forum, Azerbaijan's energy potential, and its role as a gas exporter to the world market.

- Baku Energy Forum will be held in Azerbaijan on June 2-3, what should be expected from the forum, and what issues will be discussed?

The detailed agenda of the forum can be seen on the website of Iteca Caspian, but I will describe it briefly. Usually, there are Russian and Kazakh guests here. It is very rare when someone from Turkmenistan arrives to join the forum. It is the same with Iran, I rarely saw anyone coming to the forum and talking about their projects. Usually, 90 percent are Azerbaijani projects.

On the other hand, at the conference, the service companies make presentations on their achievements - how to increase oil and output, how to extract hydrocarbons from difficult formations, or reduce the cost of underground workover. There are a couple of presentations of this kind.

The main thing is the promotion of Azerbaijan - its role, projects, etc. So here the main sponsors are always Azerbaijan’s Ministry of Energy, the State Oil Company of Azerbaijan, and the golden sponsor BP. Now what can be expected to be discussed at this forum is gas issues. In this background, everyone will be saying something- the state department representative from the U.S., British guests, a European guest, and others. Additionally, we will see two new participants, Masdar and ACWA Power, who will set a new tone for the green energy industry, because they have projects here, as this year, they started building plants that will generate electricity by the end of next year or early 2024.

- Against the background of the recent events in the world, how is Azerbaijan's role in the world market changing? In addition, Europe is now looking for ways to diversify gas supplies, to what extent is Azerbaijan ready to increase gas supplies to Europe?

In 2021, if we don't count the last day of 2020, Azerbaijan proved itself to be a very disciplined supplier and player in the world market. Azerbaijan sent more gas to Europe than it was planned. In the first year, Europe planned to import only 5 billion cubic meters of gas from Azerbaijan but ultimately received 8.1 billion cubic meters. And Azerbaijan is going to increase the volume by some 25 percent this year. If we take into account the latest statement of Azerbaijani Energy Minister Parviz Shahbazov, it is more than 10 billion cubic meters. It shows how much Azerbaijan contributes to the energy security of Europe in really difficult moments.

Europe, especially the countries that are now most exposed to the crisis, e.g., Bulgaria, may be able to cope fully with Azerbaijani supplies as early as next year.

Already in February, the European Commissioner for Energy announced in Baku that by the middle of this year Europe will indicate what volumes European countries need and will sign a long-term supply contract with Azerbaijan. And this is what Azerbaijan needs to form a project on what capacity to build platforms for the second phase of Absheron field development. It is possible to build platforms with a capacity of 5 billion, 7 billion, and even 10 billion cubic meters, it all depends on how much Azerbaijani gas the European importers will be ready to import under the long-term contracts, and whether they are ready to import exactly Azerbaijani gas at the expanded volumes of the TAP pipeline. As, that would contradict the third energy law, i.e. the European legislation. According to that act, only 50 percent of the expandable part of TAP may be Azerbaijani gas, and the other 50 percent must come from other sources.

That's why Azerbaijan and Europe are now clarifying these points. To decide how much Azerbaijan should invest in the development of its fields, it needs to know how much Europe will import. It's clear that the pipeline will be expanded by 10 billion cubic meters, but will Europe be ready to import all 10 billion cubic meters from Azerbaijan, or will Europe keep insisting that a maximum of 5.5 billion cubic meters can come from Azerbaijan and the remaining volumes should come from different sources? And where the rest of the volumes will come from, whether it will be Iranian or Turkmen or Russian gas, is up to the Europeans.

-Again, against the background of gas shortages and tensions between Europe and Russia, can Iranian and Turkmen gas go to Europe through the Azerbaijani infrastructure?

The transit of Iranian gas to Europe via Azerbaijan does not sound very logical. Why should Iran send its gas to Europe through Azerbaijan, thereby increasing the length of supply? That is, they have to lay a new pipe through Astara for about 5 billion cubic meters to join the Southern Gas Corridor in the territory of Azerbaijan. And the fact that the Iranian gas can join the territory of Turkey is not a question for Azerbaijan, it is already a transit of Turkey. Iranian gas can be sent through Turkey because there is a pipeline with a projected capacity of 14 billion cubic meters from Iran to Turkey. But again, Iran is subject to sanctions, both European and American. This is a question for importers whether they will want to buy Iranian gas or not.

As for the Turkmen gas, Azerbaijan can transport about 1 billion cubic meters through its territory, and there is a relevant pipeline with a capacity of 1 billion cubic meters for that. Let’s assume Azerbaijan will be able to upgrade it to 2 billion cubic meters. So it will be a pure swap deal, which means that there will be no molecular Turkmen gas in the pipeline, but it will be only on a juridical level. But who needs to want it? Not us but the seller Turkmenistan and the buyer Europe. We are making a purely technical issue. So far we do not see any negotiations between the seller and the buyer, these are purely political statements.

-Now Azerbaijan is aimed at the transition to green energy - how do you assess the progress already achieved in this sector also what are the prospects for the development of this sphere in Azerbaijan?

To judge the progress in the green energy sector now is possible only by looking at the statistics of the State Statistics Committee. If we compare the statistics since 2020, of course, there is little progress, which is good. In Azerbaijan, if counting as alternative energy - the sun, wind, and household waste of Balakhani Tamiz Shahar, a little more than 350 million kWh of electricity is generated. And the volume of commercial energy in the country is 24 billion kWh, i.e. at the moment, the production of alternative energy is very small. But we can expect real growth in this sphere in 2024 when the first large power plants from alternative sources will produce electricity at full capacity. It is said that these plants will produce billions of kWh of electricity, I do not know how true this will be, it will depend on the situation because neither the sun nor wind can be ordered.

Interviewed by Ayya Lmahamad