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Thursday December 8 2022

Bcm politics in the age of diversified gas supply sources and routes [VIDEO]

4 June 2022 14:00 (UTC+04:00)
Bcm politics in the age of diversified gas supply sources and routes [VIDEO]

By Orkhan Amashov

Viewed by some think-tanks as a middle power punching above its weight, Azerbaijan is conscious that the substantial part of its clout on the international stage is inextricably connected with its energy export prowess. Each bcm delivered to the European market entails a corresponding share of influence and the ability to project power on a grander scale.

Not given to rodomontade, but with imperturbable snob-free confidence and a healthy appreciation of its worth, Azerbaijan is continuing to cement its place in the global market.

The Baku Energy Week (1-4 June) has provided its participants, observers, and the world at large with an excellent opportunity to throw a pervasively piercing glance at the South Caucasus nation's export capabilities and its place in the new world energy order.

Before December 2020, Azerbaijan's role in Europe's energy security architecture was potentially worthy, whereas, over the past year and five months, it has moved beyond a mere potentiality. With the Trans-Adriatic Pipeline (TAP) westernmost segment of the Southern Gas Corridor becoming operational, Baku's energy sources are now interwoven into the chain of the EU's critical supplies.

“The demand for Azerbaijani gas is growing, the potential is here, political will is here, we should not waste time,” declared President Ilham Aliyev most emphatically and in a no-nonsense manner that has long characterised him, whilst addressing the 27th International Caspian Oil and Gas Exhibition held on the sidelines of the Baku Energy Week.

The Azerbaijani leader could not have been clearer. At a time when the global energy architecture is being reconstructed and Europe has finally, this time apparently decisively, understood the perilous side of the overreliance on a supplier with whom it has chronically failed to maintain trustworthy relations, Baku’s critical role looms larger than ever.

Azerbaijani current gas export stands at 22 bcm per annum, and it is expected this year that the volume will reach 24 bcm. Out of this, 6 bcm goes to Turkiye, and 10 bcm to the EU via the SGC. This volume may appear inconsequential when compared with the 155 bcm per annum provided by Russia prior to the present escalation. Yet there are a couple of critical objections to the inconsequentiality concern.

First of all, it was Europe's currently acknowledged fundamental failure and short-sightedness that led them to rely on a single supplier for such a gargantuan volume. If Brussels aims to rectify itself and embark on a truly fresh journey, it is critical that, in a revised diversification agenda, no supplier should gain a similar proportion.

Secondly, Azerbaijan's 10 bcm is to be augmented. It is projected that the figure could and should be doubled or even, according to some, tripled in the fullness of time.

Thirdly, the nation’s gas potential is not limited to the Shah Deniz deposit. There is an Umid gas field, for instance, with estimated reserves ranging between 300-600 bcm.

Fourthly, Azerbaijan's role is bespoke and aimed at a specific segment of the EU market, namely the South-Eastern section of the continent. Currently, more than 8 bcm per annum goes to an Italian interconnector. If doubled, the volume could play an indispensable role for Bulgaria and Serbia, both of which have critical ties with Baku.

Given that Bulgaria's annual gas need is around 3.5.-3.7 bcm and Serbia's is 2.7 bcm, Azerbaijan, via the increase in export volumes, will have what it takes to provide sufficient security.

One particular segment reinforced during this week was Azerbaijan's renewable energy potential and export prospects. Baku is in tune with the spirit of the time. Renewable energy sources are not yet Azerbaijan’s forte, but measures have already literally been taken to create fertile ground for the development of the green energy sector. East Zangazur and Karabakh regions are central to this vision and, in the fullness of time, Baku aims to export renewable energy to its near neighbours.

What is abundantly clear is that whatever augmentation mode is pursued, there will be a need for a massive investment. The optimisation and extension of the SGC are possible through a collective decision requiring consensus between all stakeholders. Thus there is an indubitable political element, demanding will and resolve to step in financially.

President Aliyev has clarified a couple of times, both during his numerous interviews and in his latest address during the Baku Energy Week, that the gas business is constructed in a specific way. The key tenet is that "you first sell gas, sign the contract, then start to invest and extract". In other words, building infrastructure and new connectors comes first.

This means if the EU is truly interested in Azerbaijani gas, it should not merely engage in cheap fine talk, but share the risk and financial responsibility. The idea of a quick interim solution should be shelved, for natural gas is supplied on the basis of long-term contracts.

It is another question as to whether Europe is unreservedly honest in its quest to extricate itself from the clutches of the Kremlin-dominated energy web. The current measures and particularly the sixth package of the sanctions imposed by the EU bespeak nothing but resolute determination.

Specifically, the latest measures stand as a testament to the EU’s desire in terms of oil imports. By the end of 2022, Brussels envisions a near-complete ban on this component, yet when it comes to gas supplies, a more phased-out approach is likely to be maintained.

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