Azerbaijan develops oil & gas sector alongside expanding potential in green energy

The transformation of the Azerbaijani economy over the past three decades, driven largely by the strategic initiatives of visionary leaders, has been remarkable. Central to this transformation has been the visionary leadership of Heydar Aliyev, the architect and founder of the independent Azerbaijani state. His foresight and strategic decisions, particularly exemplified by the signing of the "Contract of the Century" in September 1994 in Baku, marked a pivotal moment in the nation's oil strategy. Under President Ilham Aliyev's successful policies, these traditions are evolving further.

The signing of the "Contract of the Century" positioned Azerbaijan as the first state in the CIS region to achieve significant consensus with major Western oil companies. This agreement laid the foundation for international cooperation in the Caspian Sea, particularly in the development and utilization of the "Azeri-Chirag-Gunashli" fields within Azerbaijan's sector of the Caspian.

Subsequently, under the direct initiative of Heydar Aliyev, the Baku-Tbilisi-Ceyhan pipeline project was launched. This ambitious project not only aimed to transport 50 million tons of Azerbaijani oil annually but also solidified political decisions to designate it as the main export pipeline. The definitive allocation of the pipeline's main export role was formally established during the Trabzon Summit of the Presidents of Azerbaijan, Georgia, and Turkiye on April 26, 1998.

The successful implementation of these projects is evidenced by the increasing volume of investments in the oil and gas sector. In the first half of this year, investments in the oil and gas sector amounted to 2996.2 million manat. According to the State Statistics Committee, investments in the country's oil and gas sector increased by 4.5% in January.

It should be noted that during the corresponding period of 2023, this indicator was at the level of 2 billion 809 million manat. In January-June of the current year, Azerbaijan transported 19,238.6 thousand tons of oil through oil pipelines, which is 2.1% less compared to the previous year.

According to the State Statistics Committee, 75.2% of the transportation was carried out through the Baku-Tbilisi-Ceyhan oil export pipeline (BTC), and during the reporting period, 14,468.7 thousand tons of oil were transported through this pipeline, which is 3.7% less compared to the previous year.

During the reporting period, 81.4% of the oil transported through the BTC pipeline, or 11,773.9 thousand tons (a decrease of 6.3%), was Azerbaijani-produced oil, while 18.6% or 2,694.8 thousand tons (an increase of 9.8%) came from Turkmenistan and Kazakhstan.

It is worth noting that last year, 39,753.2 thousand tons of oil were transported through main oil pipelines, which is 5.2% higher compared to the previous year. 75.9% of the transportation was carried out through the Baku-Tbilisi-Ceyhan oil export pipeline (BTC), and during the past year, 30,191.6 thousand tons of oil were transported through this pipeline, which is 1.49% higher compared to the previous year.

During the reporting period, 82.6% of the oil transported through the BTC pipeline, or 24,950.9 thousand tons, was Azerbaijani-produced oil, while 17.4% or 5,240.7 thousand tons (an increase of 2.7%) came from Turkmenistan and Kazakhstan.

It should be noted that the Baku-Tbilisi-Ceyhan (BTC) pipeline currently transports mainly oil produced from Azeri-Chirag-Gunashli and condensate from Shah Deniz in Azerbaijan. Starting from the Sangachal terminal near Baku, it passes through Azerbaijan, Georgia, and ends at the Ceyhan marine terminal on the Turkish coast of the Mediterranean Sea. In addition, BTC also transports other regional crude oil and condensate volumes from the Caspian (Kazakhstan, Turkmenistan, and SOCAR's volumes outside ACG).

It is also important to note that out of the total length of 1768 km of the laid pipeline, 443 km pass through Azerbaijan, 249 km through Georgia, and 1076 km through Turkiye.

During the same period of this year, an increase was also observed in the transportation of natural gas through Azerbaijan's main gas pipelines. Specifically, 20,540.7 million cubic meters of gas were transported through Azerbaijan's main gas pipelines. The increase observed in gas transportation through main gas pipelines during the reporting period was 1.3% compared to the corresponding period of the previous year.

It is reported that 55.6% of the gas transportation was carried out through the South Caucasus Pipeline (SCP). Through this pipeline, 11,418.9 million cubic meters of gas were transported. It is worth noting that last year, Azerbaijan transported 39,806.9 million cubic meters of gas through main gas pipelines, with an increase of 4.6% compared to the previous year's indicator.

54.8% of the gas transportation was carried out through the South Caucasus Pipeline (SCP). During the reporting period, 21,800.1 million cubic meters of gas were transported through this pipeline (a 4.8% increase compared to the 2022 indicator).

It should be noted that the South Caucasus Pipeline transports gas produced from the Shah Deniz gas-condensate field in Azerbaijan to Georgia and Turkiye. The South Caucasus Pipeline was commissioned at the end of 2006 and gas from the Shah Deniz field began to be transported as part of Phase I. Starting from the summer of 2018, gas from the expanded South Caucasus Pipeline associated with Phase II of the Shah Deniz field has been delivered to Turkiye via the expanded Trans-Anatolian Pipeline (TANAP).

As a major partner of the European Union in the Southern Caucasus region, Azerbaijan plays a decisive role in delivering the gas resources of the Caspian Sea to the European Union market through the Southern Gas Corridor. In this regard, the Southern Gas Corridor is the largest infrastructure project that can meet the EU's demand for gas and play a significant role in its energy security. The expanded Southern Gas Corridor pipeline that passes through Azerbaijan and Georgia to the Turkish border stimulates employment opportunities and economic growth in transit countries. In addition, the revenue from gas exports will contribute to the socio-economic development of Azerbaijan, financing infrastructure projects and improving public services. In this sense, plans to increase gas exports to Europe through the Southern Gas Corridor are of great importance for the region's energy security.

Today, Azerbaijan plans to export not only oil, natural gas, and electricity to Europe but also hydrogen, including green hydrogen. Natural gas is considered a cleaner alternative to coal and oil, emitting fewer greenhouse gases and pollutants. By applying advanced gas production technologies and strict environmental regulations, Azerbaijan takes on the responsibility to minimize the environmental impact of gas production and transportation. If the EU's demand for natural gas continues to increase in the coming years, this will be of special importance.