Azerbaijan strengthens its global standing as reliable energy supplier [COMMENTARY]

By Nazrin Abdul

The commencement of commercial natural gas production from Azerbaijan's Caspian Sea sector, particularly the "Absheron" gas-condensate field, marks a significant advancement in the nation's energy sector. This development represents a critical step in diversifying Azerbaijan's economy, which has consistently demonstrated robust energy security. It highlights the discovery of substantial new gas reserves, representing the second major find following the "Shah Deniz" field.

The first phase of the "Absheron" project has already been approved, with annual production from the field expected to reach 1.5 billion cubic meters. Following an agreement on the second phase, an additional 4-5 billion cubic meters will be produced, with most of it destined for international markets.

In 2023, the European Union and Azerbaijan signed a Memorandum of Understanding on strategic energy partnership, which is being effectively implemented. According to this memorandum, Azerbaijan is expected to double its gas exports to Europe by 2027.

Azerbaijan exports natural gas to Europe via the Southern Gas Corridor. The Trans-Adriatic Pipeline (TAP), which constitutes the European segment of this corridor, has a transmission capacity of 12 billion cubic meters per year. From January to June 2024, Azerbaijan exported 6.4 billion cubic meters of natural gas to Europe, marking a 12.3% increase compared to the same period in the previous year.

Azerbaijan remains a key alternative source for new gas imports to Europe.

In his comment to Azernews, economist Vugar Bayramov highlighted that Azerbaijan's gas exports to Europe have been increasing significantly since the end of 2020.

"On December 31, 2020, Azerbaijani gas entered the European Union for the first time. Since then, Azerbaijan has progressively increased its blue gas exports to Europe. Specifically, around 9 billion cubic meters were exported in 2021, 11.4 billion cubic meters in 2022, 12 billion cubic meters in 2023, and exports are expected to reach 13 billion cubic meters in 2024. Alongside the Shah Deniz field, Azerbaijan plans to produce gas from the Absheron field and five other fields, with significant potential in these additional fields".

According to the expert, these developments will directly impact production: "It is expected that this will significantly enhance the export capacity of gas from these fields."

Vugar Bayramov emphasized Azerbaijan's substantial export potential, which will facilitate increased blue gas shipments to the European market. He noted, "Given Azerbaijan's considerable export opportunities, there is potential to boost production, thereby allowing for greater blue gas exports to Europe. Azerbaijan remains the primary alternative source of new blue gas imports for Europe. The development of new fields strengthens this alternative, enabling even more access to the European market."

Azerbaijan has largely funded the Shah Deniz gas project and the Southern Gas Corridor through its own resources and loans.

The expert highlighted the critical role of financing in these developments: "Attracting finance is crucial. Azerbaijan has funded the export of Shah Deniz blue gas and the Southern Gas Corridor with its own capital and loans. Initially estimated to cost $45 billion, the project's cost was later reduced to $40 billion and then to $38 billion due to regional currency devaluations and cost savings."

Bayramov emphasized the need for continued investment: "The Southern Gas Corridor was realized through significant funding, particularly loans, and it is essential to increase financial support from Europe. Investment is needed to boost blue gas production, especially as Europe aims to increase the share of green energy. In this context, investments should focus on both traditional energy sources and blue gas to meet demand."

Bayramov asserted that Azerbaijan is uniquely positioned to meet Europe's growing blue gas needs: "Azerbaijan has the capacity to transport more blue gas to Europe, and increased European investment is crucial for long-term blue gas imports."
He added that enhanced European investment would enable Azerbaijan to export more liquefied gas than currently projected. "Contracts and investments are critical. The principle of 'more investment for more gas' should guide European Union policies."
Currently, Azerbaijan has nine gas export partners, seven of which are European countries, expanding the geography of gas supply to Europe.

On March 1, 2024, during the 10th meeting of the Southern Gas Corridor Consultative Council and the 2nd meeting of the Green Energy Consultative Council, President Ilham Aliyev discussed future energy plans, including developments at the "Azeri-Chirag-Gunashli" and "Umid" fields.

"First of all, we anticipate beginning the production of natural gas from the Azeri-Chirag-Guneshli deep gas project in the first quarter of next year. This project is promising due to its large reserves. The 'Azeri-Chirag-Guneshli' fields have been a major source of our oil exports for many years. We have now agreed with our partners to initiate exploration, which will provide an additional boost."

During his speech, President Ilham Aliyev indicated that production would start at approximately half a billion cubic meters, with expectations for this volume to increase 3-4 times within a few years.

This new resource, alongside the volumes from the "Shah Deniz" and "Absheron" fields, will enhance our supply. Additionally, we have plans for the development of the second phase of the Umid gas-condensate field, which could potentially yield 2-3 billion cubic meters of gas within 3-4 years," President Ilham Aliyev added.

These steps to diversify Azerbaijan's economy are enhancing the country’s reputation. As President Aliyev noted, longstanding rumors that Azerbaijan does not have enough gas to meet the growing needs of European consumers have proven to be completely unfounded. He emphasized that such claims were part of a campaign against Azerbaijan, aimed at undermining its potential and misleading the international community and consumers.

Azerbaijan’s substantial investments in the Shah Deniz gas project and the Southern Gas Corridor have demonstrated its dedication to enhancing energy infrastructure and securing international partnerships. President Ilham Aliyev's recent announcements regarding future projects emphasize the country’s strategic focus on expanding its gas production and addressing European energy needs.

Overall, Azerbaijan’s ongoing developments in the energy sector not only bolster its economic diversification but also strengthen its global standing as a reliable energy supplier. The country’s proactive measures and strategic investments challenge outdated perceptions and highlight its capacity to support Europe’s evolving energy landscape.