Azerbaijan’s blue fuel to ensure growth of export to Europe

By Gulgiz Dadashova

LNG and gas supplies from Azerbaijan will cover Europe’s gas demand, which will see rise after 2015.

In the 2014-2035 period, the average annual increase in gas demand will be 14 percent, returning to the 2012 level of demand, according to a joint study by the Institute for Energy of National Research University Higher School of Economics and the Energy Research Institute of the Russian Academy of Sciences.

The study notes that natural gas consumption in Europe has grown steadily over the last decade, except the period of crisis in 2009, and reached its peak in 2010 at a level of 597.9 billion cubic meters. During the next four years, the figure dropped by 23 percent. However, in the coming years, the study's authors expect an increase in demand.

The baseline scenario assumes the restoration of gas consumption in Europe, starting in 2015, after a long and sharp decline from previous years.

Consumption of natural gas by EU countries hit 369.90 million tonnes of oil equivalent in 2014, compared to 388.60 mtoe in 2013 and 393.50 mtoe in 2012, according to Euromonitor International.

Meanwhile, experts predict that domestic production in Europe will continue to decline, although at a slower pace than before, and in 2015-2025, it will be 40 billion cubic meters, as opposed to 90 billion cubic meters in the previous decade.

"The recovery in demand and production cuts will lead to a need to increase imports. The main increase in exports will be provided through LNG and gas from Azerbaijan. Russian supplies will gradually recover to around the 2013 level," experts predict.

The study further notes that one of the key priorities of European energy policy, which affects the consumption of all energy resources including gas, is the improvement of energy efficiency. A number of policy documents of the European Commission have called for the development the general trend of reducing the use of fossil fuels in favor of renewable energy sources (RES).

As a result of decline in total energy consumption in Europe and the decline in gas predetermines the further reduction of the total gas consumption in the region. However, during the post-crisis economic recovery and industrial growth, a temporary gas consumption increase up to 5-7 percent is possible, experts say.

However, the long-term trend [shows] a reduction in gas consumption in the industry, the study says.

Currently, the Southern Gas Corridor -- being realized thanks to huge efforts of the Azerbaijani government -- is the only alternative project to bring gas to Europe from a source other than Russia.

Azerbaijan’s proven gas reserves stand at 2.6 trillion cubic meters, while oil reserves amount to 2 billion tons. The Industry and Energy Ministry indicators ensure the future development of the gas industry in Azerbaijan for a period exceeding 100 years.

Azerbaijan seeks to become a net gas exporter through the recently discovered Babak, Umid, Absheron, and most important, the Shah Deniz, one of the world's largest natural gas discoveries of the past two decades.

The Shah Deniz reserves are estimated at between 1.5 billion barrels to 3 billion barrels of oil equivalent from 50 to 100 billion cubic meters of gas. The Shah Deniz field also contains gas condensate in excess of 400 million cubic meters.

The volume of the Umid field’s reserve exceeds 200 billion cubic meters of gas and 40 million tons of condensate, while the reserves of Babak is forecasted at about 400 billion cubic meters of gas and 80 million tons of condensate. Absheron field holds an estimated 350 billion cubic metres (bcm) of gas and 45 tonnes of gas condensate.

The $45 billion Southern Corridor project, signed in 2013, would deliver Caspian gas directly to Europe, starting in 2020. In 2018, the gas will reach Turkey and in early 2020 customers in Greece, Bulgaria and Italy will start receiving gas from Shah Deniz.

In the longer term, the pipeline also could bring Iranian or Turkmen gas to Europe, turning Azerbaijan into a key part of Europe’s strategy to diversify its energy supplies.

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