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Nazrin Abdul

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Despite the European Union’s accelerated energy transition, natural gas continues to play a stabilising role in the bloc’s energy mix. According to Eurostat, the EU’s inland demand for natural gas increased by 0.6% in 2024 compared to 2023, reaching 12.8 million terajoules. While modest at the aggregate level, this increase masks sharp divergences among member states.

Southern and Northern European countries recorded the strongest growth in consumption, with Greece (+31.3%), Finland (+9.5%) and Lithuania (+9.2%) leading the way. These increases largely reflect fuel-switching from coal, weather-related demand, and the need for flexible generation amid intermittent renewable output.

By contrast, significant declines were observed in Portugal, Malta and Croatia, highlighting the uneven pace of structural adjustment across the EU.

Germany, Italy and France remained the EU’s largest gas consumers in 2024, underscoring the continued importance of gas for industrial output, heating, and power generation in Europe’s core economies. This sustained demand in major markets reinforces the relevance of secure pipeline gas supplies, even as overall consumption gradually trends downward.

Looking ahead, the International Energy Agency (IEA) projects that OECD Europe’s natural gas demand will contract by 8-10% between 2024 and 2030. Crucially, this decline is not driven by supply insecurity, but by structural changes - particularly the rapid expansion of renewable energy capacity and improved energy efficiency.

The power sector is expected to account for the bulk of the decline, with gas-to-power demand projected to fall by around 25% by 2030, equivalent to roughly 30 billion cubic meters. Renewable electricity generation in Europe is forecast to increase by more than 40% over the same period, progressively displacing gas-fired generation.
At the same time, gas demand in industry and the broader energy sector is expected to remain relatively resilient. Lower LNG prices and the need for stable baseload energy could even lead to a slight uptick in consumption in these segments. This suggests that while Europe’s gas market is shrinking in volume terms, it is becoming more selective - prioritising reliability, flexibility and price competitiveness.

Europe as a premium market for Azerbaijani gas

Against this backdrop, Europe remains a strategically attractive market for Azerbaijan. President Ilham Aliyev has repeatedly emphasised that Azerbaijan is the only country in the South Caucasus that not only possesses significant energy resources but also exports them regionally and beyond. Today, Azerbaijan supplies natural gas to 16 countries, 10 of which are EU member states, giving it the widest geographical coverage of pipeline gas exports globally.

From Baku’s perspective, the European market offers two key advantages. First, it provides long-term demand stability supported by institutional frameworks and intergovernmental agreements. Second, it remains a premium-priced market compared to alternative destinations, enhancing the commercial viability of Azerbaijan’s upstream investments.

For Europe, Azerbaijani gas strengthens diversification efforts by reducing dependence on a narrow group of suppliers and by offering pipeline-based deliveries that complement LNG imports. This balance is particularly valuable during periods of market volatility or infrastructure bottlenecks.

Energy cooperation between the EU and Azerbaijan is anchored in the July 2022 Memorandum of Understanding signed by European Commission President Ursula von der Leyen and President Ilham Aliyev. The agreement envisages doubling Azerbaijani gas supplies to Europe by 2027 and positions Azerbaijan as a key partner in the EU’s diversification strategy.

EU officials have consistently described Azerbaijan as a reliable and predictable supplier. Beyond gas, cooperation is expanding under initiatives such as EU4Energy and the Global Gateway, which aim to promote energy efficiency, cross-border connectivity, and investment in energy and digital infrastructure. These frameworks indicate that Brussels views energy ties with Azerbaijan not as a short-term crisis response, but as part of a broader, long-term partnership.

Azerbaijan currently exports gas to Europe via the Trans Adriatic Pipeline (TAP), the final segment of the Southern Gas Corridor. TAP’s existing capacity of 10 billion cubic meters per year can be expanded to 20 billion cubic meters, providing a clear pathway for scaling up exports without building entirely new routes.

In 2025, Azerbaijan produced 51.5 billion cubic meters of natural gas, with the Shah Deniz field accounting for more than half of total output. Gas exports reached 25.2 billion cubic meters, of which 12.8 billion cubic meters were delivered to Europe. The start of additional long-term transmission capacity under a new Gas Transportation Agreement in 2026, along with new deliveries to Austria and Germany, further expanded Azerbaijan’s footprint in the European market.

While Europe’s overall gas consumption is set to decline over the coming decade, the importance of secure, competitively priced and politically reliable supplies is not diminishing. On the contrary, as the market contracts, supplier quality matters more than volume alone.

In this evolving landscape, Azerbaijan is well positioned as a medium-scale but strategically significant supplier that aligns with the EU’s diversification, security and transition objectives. EU–Azerbaijan energy cooperation is therefore likely to remain not only relevant, but increasingly strategic - bridging Europe’s short- to medium-term energy needs while supporting a gradual shift toward a low-carbon future.