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Target for 2027: Aligning strategies between Azerbaijan, EU on gas resources

23 January 2024 08:30 (UTC+04:00)
Target for 2027: Aligning strategies between Azerbaijan, EU on gas resources
Nigar Hasanova
Nigar Hasanova
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Azerbaijan is set to fulfill its commitment to double gas exports to Europe by 2027, as confirmed by President Ilham Aliyev during the inauguration ceremony of the Bulgaria-Serbia interconnector gas pipeline in Niš, Serbia, on December 10. With a current trajectory, Baku aims to reach 20 billion cubic meters of gas exports annually by 2027, a significant leap from the over 8 billion cubic meters exported in 2021.

President Aliyev expressed confidence in achieving this ambitious target, stating that Azerbaijan is already making substantial progress. In 2022, gas exports to Europe are expected to reach about 12 billion cubic meters, accounting for half of Azerbaijan's total gas exports. Achieving this goal involves not only increasing gas production but also enhancing the capacity of the transit pipelines within the Southern Gas Corridor, the vital conduit delivering Azerbaijani gas from the Caspian Sea to European markets.

If we look at last year's figures, we can say that Azerbaijan achieved the desired growth in oil and gas production. Data released on December 13, 2023, shows production for January-November reaching 44 billion cubic meters, up 3.5 percent on the same period in 2022, with exports over the same period totaling 22 billion cubic meters, up 9.5 percent.

Some projects aimed at further boosting production are underway. As an example bp, which operates Azerbaijan's main Shah Deniz gas field and ACG oil field has begun drilling deep wells into what it hopes are major reserves beneath both existing fields, and Azerbaijan's state oil company SOCAR has hopes of boosting production from its Umid gas field.

Azerbaijan also initiated gas transportation to Europe through the Southern Gas Corridor on December 31, 2020. The Southern Gas Corridor transports gas from the Caspian Sea region to European countries via Georgia and Türkiye, with a project cost of 33 billion US dollars. It is expected that the capital costs for the Southern Gas Corridor will be fully recouped within 8–10 years.

Bulgaria, Greece, Romania and Hungary are already in line

While Azerbaijan already supplies gas to Italy, Bulgaria, Greece, Romania, and Hungary, new agreements with Serbia are set to begin in 2024.

In 2023, Azerbaijani gas is projected to supply close to 1 billion cubic meters to Bulgaria, contributing significantly to the country's energy needs.

It was reported that Azerbaijani gas accounts for 40.3 % of the Bulgaria's monthly consumption, and EWRC evaluated this as a positive factor for achieving favorable prices.

The Greece-Bulgaria Interconnector (IGB) has been pivotal in facilitating Azerbaijani gas supplies to Bulgaria, with plans to transport further gas via the Trans-Adriatic Pipeline (TAP). In Greece, cumulative gas exports from Azerbaijan reached almost 1.8 billion cubic meters in the first 11 months of 2023, providing a boost to the country's energy security.

Italy, major importer has recorded a significant increase in natural gas imports from Azerbaijan, reaching 881.2 million cubic meters in October 2023, compared to 800.5 million cubic meters in September, according to Eurostat, the European Union's statistical office. This notable surge represents a month-on-month growth of over 10 percent.
Over the first ten months of 2023, Italy's cumulative gas imports from Azerbaijan totaled 7.7 billion cubic meters, equivalent to a value exceeding 4 billion euros. In October alone, the value of these imports amounted to 364.2 million euros, indicating a substantial increase of almost 17.3 percent from the 310.6 million euros recorded in September.

Country enjoys large-scale exports thanks to number of closed deals

Romania also joined European countries importing Azerbaijani gas. The contract signed between the State Oil Company of Azerbaijan (SOCAR) and the Romanian Romgaz S.A. on the supply of Azerbaijani gas to Romania from April 1, 2023, to April 1, 2024, entered into force.

This agreement on the supply of gas from Azerbaijan to Romania in the amount of up to 1 billion cubic meters during 2023-2024 was signed on February 3 as part of the 9th meeting of the Southern Gas Corridor Advisory Council in Baku.

On December 16, 2022, SOCAR signed a spot short-term contract with Romgaz S.A. for the supply of up to 300 million cubic meters of gas from January 1 to April 1, 2023. The daily volume of supplies was up to 4.2 million cubic meters. The contract provided for the transportation of natural gas via the Interconnector Greece-Bulgaria (IGB) gas pipeline from the Komotini exit point in Greece of the Trans Adriatic Pipeline (TAP), further along, the Romanian part of the BRUA gas pipeline (Bulgaria - Romania - Hungary - Austria).

The Hungarian authorities, including Prime Minister Viktor Orban, significantly weighed in on the purchase of gas from Azerbaijan during discussions in Budapest on August 20, 2023.

According to Hungarian Foreign and Trade Minister Péter Szijjártó, the political agreement addresses the export of one billion cubic meters (bcm) of gas from Azerbaijan to Hungary, which will receive the first batch of commercial supplies containing 100 million cubic meters in the last quarter of 2023.

Moreover, the two countries also shook hands on the storage of 50 bcm of Azerbaijani gas in the reservoirs of Hungary.

The recent launch of the Serbia-Bulgaria Gas Interconnector further expands Azerbaijan's reach, with Serbia set to receive Caspian gas in early 2024. This development is crucial for Serbia's energy security, diversifying its energy supply and reducing dependence on Russian gas.

Serbia is expected to receive the first batch of Caspian gas via Bulgaria in early 2024. The projected capacity of the new pipeline allows supplies of 1.8 billion cubic meters of natural gas annually, providing an additional 80% capacity increase relative to Serbia’s current annual gas needs which stand at nearly 2.4 billion cubic meters per year. The gas from Azerbaijan will bring cleaner and cheaper energy for the citizens and economy of Serbia.
Head of the EU Delegation to Serbia Emanuele Giaufret said the commissioning of the gas pipeline represents an important milestone in strengthening Serbia’s energy security by diversifying the energy supply. According to him, the project will end Serbia’s dependence on Russian gas.

Azerbaijan's gas exports underscore its pivotal role in enhancing Europe's energy security

The European Union's active support for the Southern Gas Corridor, including financial backing for projects like the Trans-Adriatic Natural Gas Pipeline, underscores the region's commitment to diversifying its natural gas sources. Azerbaijan's strategic position as the sole Caspian country capable of delivering natural gas to Europe through the Southern Gas Corridor positions it as a key player in meeting the EU's increasing natural gas demand.

In conclusion, Azerbaijan's gas exports underscore its pivotal role in enhancing Europe's energy security and diversifying its natural gas sources, aligning with the EU's strategic objectives. As Azerbaijan continues to invest in production capacity and transit infrastructure, its significance in the European energy landscape is set to grow, contributing to a more resilient and sustainable energy future.

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